Amid a spate of cyber crimes and large-scale corporate hacks this year, cybersecurity investments, including the WisdomTree Cybersecurity Fund (WCBR) are receiving renewed attention.
Those assets are proving responsive. For example, WCBR is higher by more than 25% over the past 90 days and that recent bullishness could be a starting point for even more upside. With more companies bringing staffers back to offices, cybersecurity spending is expected to jump.
“Enterprises, or corporate computing networks, will need to bolster protection for laptops and mobile devices. They’ll also have to strengthen their on-premise equipment, cloud-based applications and data,” reports Daren Fonda for Barron’s.
WCBR, which debuted in January, follows the WisdomTree Team8 Cybersecurity Index. The fund holds 25 stocks, including several that are credible return-to-office plays, including Palo Alto Networks (NASDAQ: PANW). That company provides security systems for on-sight computing networks – a high-growth, lucrative market, particularly as offices and corporate campuses normalize following the coronavirus pandemic.
“The company is also investing and gaining traction in cloud security. BTIG analyst Gray Powell estimates that Palo will deliver 20% annualized revenue growth over the next few years. At 18 times estimated 2023 free-cash flow, it’s cheaper than higher-growth stocks in the space, he says,” according to Barron’s.
Palo Alto Networks is the sixth-largest holding in WCBR, commanding a weight of 5.29%, according to WisdomTree data.
Zscaler (ZS), WCBR’s ninth-largest holding, is another component that could propel the fund higher. That company’s focus is cloud security – a market that’s booming as more companies embracing cloud technologies.
“Wall Street expects new bookings for its services to grow 43% year over year for the company’s quarter ending in July, reaching $278 million. Beefing up cloud security will be a top spending priority for corporate IT departments this year as computing networks and apps continue shifting to the cloud,” reports Barron’s.
Zscalers offers some durability, and could be one of WCBR’s more attractive holdings, even if companies are forced to keep staffers working remotely due to the delta variant of COVID-19.
Investors could be patient and wait for a retreat in cybersecurity stocks to embrace WCBR, or they might get involved with the fund today in advance of the next cyber attack.
“The cybersecurity sector looks vulnerable to a pullback, especially if the market punishes high-growth, high-multiple tech stocks broadly. Then again, it may only take another ransomware or other type of major hack for the sector to surge—regardless of whether the victim is in the office, working remotely or somewhere in-between,” concludes Barron’s.
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