Future Outlook For First Trust Nasdaq CEA Cybersecurity ETF (NASDAQ:CIBR)

Introduction

I give First Trust Nasdaq CEA Cybersecurity ETF (CIBR) a buy rating. Working as a software engineer, I see the constant need for cybersecurity. The Bureau of Labor Statistics believes that the field will grow 28% from 2016 – to 2026. With a field growing this quickly, opportunities will arise for many companies to grow just as quickly. As a result, it is a good idea to buy into the sector.

CIBR is a global ETF that seeks to track the performance of the NASDAQ CTA Cybersecurity Index. Inclusion criteria for this index are:

• To be included in the index, a security must be listed on an index-eligible global stock exchange and classified as a cybersecurity company as determined by the Consumer Technology Association (CTA).
• Each security must have a worldwide market capitalization of $250 million, have a minimum three-month average daily dollar trading volume of $1 million, and have a minimum free float of 20%.

Companies that meet the above are then weighted based on a modified weighting system on a company’s market cap that limits the maximum amount of weighting that a single company can hold.

Top Holdings

Currently, the top holdings of CIBR are:

The top holdings and percent allocation will change as time progresses.

For further reading on each company, click the ticker to be taken to the stock’s page on Seeking Alpha.

Why Invest in an ETF?

ETF stands for Exchange Traded Fund. An ETF is one stock compromised of many other stocks chosen and weighted according to strict standards. An ETF is very similar to a mutual fund but instead of buying and selling from an owner at the end of the day, the fund is traded between investors on an exchange throughout the day.

John C. Boogle, the founder and former CEO of Vanguard, created the first index fund. Since then, many investors have invested in the revolution he began within the investing world that has spread from funds that track indexes to funds that track specific niches to funds that invest for a purpose such as sustainability. Regardless of the fund’s purpose, a fund allows an investor an easy way to diversify across the given purpose. For our ETF, CIBR enables an investor to invest in the Cyber Security sector as a whole easily.

Market Trends

Five-year stock chart of CIBR:

CIBR has had a very electric past five years that the bull market has in part propelled. Because of how quickly the field is growing, I expect good returns to continue to come.

Cyber Security Field

One thing that most people agree upon is that our world will only become more and more digital. Some believe that is through the metaverse, others believe it is through tech-heavy cars such as Tesla (TSLA), but almost everyone believes that it is the case. With all this new technology, there is far more technology to hack. Because of this increased threat, the field to prevent this hacking grows. The Bureau of Labor Statistics believes that the field will grow 28% from 2016 – to 2026. That growth rate makes it one of, if not the quickest, growing industries. If this field is growing so fast, it is reasonable to think that many companies have high growth potential.

Risks

The general market is very uncertain and may be heading into a bear market which should cause everyone to lower their return expectations. This ETF closely follows only a few companies. If one or more of these companies were to perform poorly, it would drag down the whole ETF. Finally, with the world in a chip shortage, this could affect these companies for the foreseeable future.

Conclusion

I like this sector and believe it is the future. CIBR is an easy vehicle to invest in it. Because the Cyber Security field is such a quickly growing field, I think it is a field where many companies will grow quickly. Whether you want to invest in this specific ETF, CIBR, or at least the companies within it, warrant a look from all investors.