Seeking Solace in an Equal-Weight Cybersecurity ETF

This article is the fifth in a series exploring equal-weight ETFs.

After a plethora of cybersecurity-related incidents perpetrated by both state and non-state actors around the globe against the United States, Europe and beyond, the importance of cybersecurity defenses and countermeasures in both national and corporate security has been thrust into the limelight.

As a result, cybersecurity likely will remain a hot issue that the public and private sectors will have to address for some time to come. Cybersecurity stocks previously appeared mainly in exchange-traded funds (ETFs) that are dedicated to technology or software stocks, but ETFMG Prime Cyber Security ETF (NYSEARCA: HACK) is believed to be the first equal-weighted ETF solely devoted to the growing technology field of cybersecurity.

HACK tracks a tiered and equal-weighted index that targets companies that provide cybersecurity technology and services. The ETF categorizes the companies as developers of hardware or software and providers of cybersecurity services. Also, while this is an equally weighted fund, HACK’s portfolio is slightly different than the standard definition of “equally-weighted ETF.” Each of the fund’s segments is weighted proportionately by its market capitalization in comparison with the cumulative market capitalization of both segments.

Currently, the fund’s top holdings include Cloudflare Inc. (NYSE: NET), Cisco Systems Inc. (NASDAQ: CSCO), Darktrace PLC (OTCMKTS: DRKTF), Palo Alto Networks Inc. (NYSE: PANW), BlackBerry Ltd. (NYSE: BB), Fortinet Inc. (NASDAQ: FTNT), Splunk Inc. (NASDAQ: SPLK) and Tenable Holdings Inc. (NASDAQ: TENB).

This fund’s performance has been relatively strong, even when including the damage done by the COVID-19 pandemic. As of Oct. 19, HACK has risen 1.66% in the past month and 8.86% for the past three months. It is currently up 14.31% year to date.

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The fund has amassed $2.44 billion in assets under management and has an expense ratio of 0.60%.

In short, while HACK does provide an investor with a way to profit from cybersecurity stocks, this kind of ETF may not be appropriate for all portfolios. Thus, interested investors always should conduct their due diligence and decide whether the fund is suitable for their investing goals.

As always, I am happy to answer any of your questions about ETFs, so do not hesitate to send me an email. You just may see your question answered in a future ETF Talk.

Jim Woods

Jim Woods is a 20-plus-year veteran of the markets with varied experience as a broker, hedge fund trader, financial writer, author and newsletter editor. Jim is the editor of Intelligence Report, Successful Investing, the Bullseye Stock Trader, and The Deep Woods (formerly the Weekly ETF Report). His books include co-authoring, “Billion Dollar Green: Profit from the Eco Revolution,” and “The Wealth Shield: How to Invest and Protect Your Money from Another Stock Market Crash, Financial Crisis or Global Economic Collapse.” He’s also ghostwritten many books and articles, as well as edited content for some of the investment industry’s biggest luminaries. His articles have appeared on many leading financial websites, including StockInvestor.com, InvestorPlace.com, Main Street Investor, MarketWatch, Street Authority, Human Events and many others. Jim formerly worked with Investor’s Business Daily founder William J. O’Neil, helping to author training courses in the CANSLIM stock-picking methodology. The independent firm TipRanks rates Jim the No. 3 financial blogger in the world (out of more than 6,000). TipRanks calculates that, since 2012, he's made 361 successful recommendations out of 499 total, earning a success rate of 72% and a +15.3% average return per recommendation. He is known in professional and personal circles as “The Renaissance Man,” because his expertise includes such varied fields as composing and performing music; Western horsemanship, combat marksmanship, martial arts, auto racing and bodybuilding. Jim holds a BA in philosophy from the University of California, Los Angeles, and is a former U.S. Army paratrooper. A self-described “radical for capitalism,” he celebrates the virtue of making money from his Southern California horse ranch.