Cybersecurity

  • Cybersecurity spending could grow 12-15% per year and reach $1 trillion cumulatively over the next five years.

  • Cybersecurity is one of the few sectors largely immune from the rising trade risk.


Cybersecurity Spending on the rise


Cybercrime is creating unprecedented damage to both private and public enterprises and driving up IT security spending. The latest forecast from Gartner Inc. estimates that worldwide information security (a subset of the broader cybersecurity market) spending will grow 7 percent to reach $86.4 billion (USD) in 2017 and will climb to $93 billion in 2018. That forecast doesn’t cover various cybersecurity categories including IoT (Internet of Things), ICS (Industrial Control Systems) and IIoT (Industrial Internet of Things) security, automotive cybersecurity, and others.


Cybersecurity is one of the fastest-growing sub-groups in the broader technology universe. The market size estimate for cybersecurity in 2017 was around $120 billion, up from just $3.5 billion in 2004.


Looking further ahead, Cybersecurity Ventures predicts global spending on cybersecurity products and services will exceed $1 trillion cumulatively over the next five years. Taken as a whole, there could be a 12-15 percent year-over-year cybersecurity market growth through for the next 5 years.



Investing in cybersecurity


Cybersecurity is one of the few sectors largely immune from the rising trade risk.

Investors should keep an eye out for the security players with consistent earnings growth. The “best in breed” cybersecurity players at the forefront of developing the next-generation firewalls and securing company networks should experience strong growth in the years ahead.

The cybersecurity sector is not homogenous. Many cybersecurity companies post robust revenue growth but remain unprofitable due to high stock-based compensation (SBC) expenses, rising marketing and R&D costs, and tough price competition. To circumvent this issue, our preferred way to play this theme is through a mutual fund. In fact, there is a strong need for active managers (Pictet Security: PSECUSP LX) to pick out security players with consistent earnings growth.


Investors looking for a simpler play on the cybersecurity sector can consider buying the ETFMG Prime Cyber Security ETF (NYSEMKT:HACK), which owns a basket of popular cybersecurity stocks.


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