20 cybersecurity stocks Wall Street believes can rise up to 79% over the next year

Cybersecurity is more important than ever, especially in a world already affected by supply disruptions and bottlenecks due to the coronavirus pandemic. The newest major ransomware attack against Colonial Pipeline Co., is an eye opener as it resulted in the shutdown of the 5,500 mile Colonial Pipeline system and could drive gasoline prices soar.

Beyond COVID-19, we are all at risk of losing the security of personal information as hackers keep finding new ways to take advantage of networks, software, and the multitude of evolving technology services.

Below is a screen of 20 cybersecurity companies that Wall Street analysts estimate for big gains in the stock markets over the next year.

Cybersecurity ETFs

Many information technology companies offer various services, which may or may not include software or hardware to improve network security. There is no obvious industry group for a wide stock screen.

To search for a list of preferred cybersecurity / network security / internet security stocks, we started by listing all of the stocks held by four major exchange-traded funds:

  • The first Trust Nasdaq Cybersecurity ETF
    CIBR, -0.88%
    Assets under management are $ 3.58 billion and the annual cost is 0.60% of assets. The fund holds 40 stocks, mostly software and network companies, but has an “expanded focus” on other industries such as aerospace and defense, according to FactSet. It’s focused; The 10 largest holdings make up 47% of the portfolio. The ETF is rated two (out of five) stars by Morningstar.

  • The ETFMG Prime Cyber ​​Security ETF
    HACK, -1.05%
    has assets of $ 2.04 billion at an expense ratio of 0.60%. The ETF holds 59 stocks in a modified equilibrium scheme, so it is not very concentrated. The top 10 make up 28.5% of the portfolio. According to FactSet, HACK has “a unique, cybersecurity-centric view of the technology sector that gives it a small-cap bias”. The ETF only has a one-star rating from Morningstar.

  • The Global X Cybersecurity ETF
    BUG, -0.97%
    has $ 639 million in net worth, 0.50% expense ratio, and no Morningstar rating because it is less than three years old (it was founded in October 2019). The fund holds 40 stocks worldwide with weight caps that limit its focus on large-cap companies. But it’s still highly concentrated, with the top 10 holdings making up 61% of the portfolio. Fortinet Inc.
    FTNT, -3.53%
    9.2% alone, followed by Palo Alto Networks Inc.
    PANW, -0.29%
    at 7.3% and CrowdStrike Holdings Inc.
    CRWD, -0.85%
    at 7.1%.

  • The iShares Cybersecurity & Tech ETF
    IHAK, -1.09%
    The company has $ 458 million in assets, an expense ratio of 0.47%, and was founded in June 2019. The fund holds 42 shares in companies that have been selected to generate at least 50% of their income from security-related hardware or services, weighted by market capitalization. It’s concentrated, with the top 10 making up 44% of the portfolio.

As for Morningstar’s low ratings for CIBR and HACK, these funds haven’t been terrible performers over the past three years, but they lagged the SPDR S&P 500 ETF
SPY, -0.99%.
There performance looked even worse compared to the Invesco QQQ Trust
QQQ, -2.53%
(which tracks the Nasdaq 100 index) and the full Nasdaq Composite Index
COMP, -2.55%


Cybersecurity stocks screen

When you add the holdings of the four funds and remove duplicates, you get a list of 56 stocks covered by at least five analysts surveyed by FactSet and with a market capitalization of at least $ 1 billion.

Here are the 20 majority buy or equivalent ratings that have the highest 12 month implied upside potential based on consensus price targets. You need to scroll through the table to see all the data:

Three of these stocks are particularly popular with MarketWatch readers based on the flow of traffic to their listing pages. All three retired this year after incredible returns in 2020:

  • DocuSign Inc.
    DOCU, -2.70%
    are down 13% in 2021 after tripling in 2020.

  • Cloudflare Inc.
    NET, -3.84%
    is down 10% this year after increasing 345% last year.

  • CrowdStrike Holdings is down 11% in 2021 after rising 325% in 2020.

As always, only preferred stocks are highlighted on a screen. You should do your own research to form your own opinion about an investment before jumping in.

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