Two Cybersecurity Investments to Buy Based on CIA Insights

Paul Dykewicz

Two cybersecurity investments to buy based on insights shared by a typically secretive Central Intelligence Agency (CIA) leader could produce profitable trades while helping to strengthen the U.S. national defense.

The two cybersecurity investments to buy each allow investors to tap into the CIA’s and the Department of Defense’s growing interest in cybersecurity amid adversarial foreign governments and terrorist groups seeking to identify and to exploit U.S. weaknesses. The CIA views partnering with the private sector as “really critical,” especially as China has committed to achieve global superiority in artificial intelligence by 2030, said Jennifer Ewbank, the CIA’s deputy director of digital innovation, in a recent webinar of Billington CyberSecurity.

China has emerged as America’s most important and difficult cyber challenge, said Ewbank, who is responsible for speeding up the development and integration of digital and cyber capabilities across all the CIA’s mission areas.  She took the helm at the CIA’s Directorate of Innovation a couple of years ago, after the agency created its first new directorate in more than 50 years during 2015. Ewbank oversees the agency’s chief information officer (CIO), chief information security officer (CISO) and its chief data officer, as well as helps to spearhead the reengineering of the entire intelligence enterprise at the CIA.

“It is a pivotal moment in the intelligence business,” Ewbank said.

ETF Featured in Two Cybersecurity Investments to Buy Due to CIA Insights

Investors interested in profiting from cybersecurity stocks that benefit from rising interest at the CIA and the Department of Defense to enhance America’s national defense have several exchange-traded funds (ETFs) to choose from, said Bob Carlson, who heads the Retirement Watch investment newsletter. Unfortunately, none of those ETFs has a particularly long history, he added.

Pension fund and Retirement Watch chief Bob Carlson answers questions from columnist Paul Dykewicz.

The oldest of those funds is iShares Cybersecurity and Tech (IHAK), said Carlson, who also serves as chairman of the Board of Trustees of Virginia’s Fairfax County Employees’ Retirement System with more than $4 billion in assets. The fund has been around since mid-2019, charges the lowest fees of any of its competitors and has done quite well since inception, Carlson counseled.

The ETF seeks to track the performance of the NYSE FactSet Global Cyber Security Index. The index is global and includes companies from both developing and emerging economies, Carlson continued.

Chart courtesy of www.stockcharts.com

Two Cybersecurity Investments to Buy Based on CIA Insights: IHAK

Companies in the index can be involved in cybersecurity hardware, software, products and services. Roughly 80% of the fund is in U.S.-based companies, while its holdings on average are mid-cap growth stocks.

The fund recently held 52 stocks, with 42% of the ETF’s assets coming from its 10 largest positions. Top holdings include Citrix Systems, Inc. (NASDAQ: CTXS), Fortinet Inc. (NASDAQ: FTNT), DocuSign (NASDAQ: DOCU), Juniper Networks (NYSE: JNPR) and Palo Alto Networks Inc. (NASDAQ: PANW).

IHAK is up 3.36% in the last three months, 11.50% so far this year and 10.21% in the past 12 months through Dec. 28. The fund did even better in 2020 by soaring 51.21%.

Three ETFs are Too New to Include in Cybersecurity Investments to Buy

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The competing ETFs all began in very late 2019 or early 2020, Carlson commented. There is not much information with which to make a definitive decision about them, he added.

They are ProShares Ultra Nasdaq Cybersecurity (UCYB), Simplify Volt Cloud & Cybersecurity Disruption (VCLO) and WisdomTree Cybersecurity (WCBR). For the past three months through Dec. 28, UCYB jumped 15.51%, VCLO rose 17.13% and WCBR climbed 2.53%. 

As with all new funds, these ETFs need to establish a track record of positive returns and develop sufficient volume to give investors the freedom to buy or sell when desired, without facing a financial hit to do so. None of the three newest funds instilled much confidence in Carlson at this early stage in their existence.

Amazon Added into Two Security Investments to Buy Based on CIA Insights

Seattle-based online retailer Amazon.com Inc. (NASDAQ: AMZN) gained a place among the two cybersecurity investments to buy, even though it is best known for its global online sales leadership. Amazon.com recently secured a Bank of America Global Research buy rating and an upgraded price target of $4,450 from $4,250.

However, Amazon ended up in the firing line recently when a scathing letter came from Sen. Elizabeth Warren of Massachusetts and other influential Democrats in Congress who claimed the company sacrificed worker safety in pursuit of profits when tornadoes tore apart its warehouse in Edwardsville, Illinois. Amazon’s prospects still appear favorable, despite a terrifying tornado on Dec. 10 killing six of its warehouse workers.

BofA rated Amazon.com as the top choice for 2022 among the FANG stocks of Meta Platforms Inc. (NASDAQ: FB), formerly Facebook; Amazon; Netflix Inc. (NASDAQ: NFLX); and Alphabet (NASDAQ: GOOGL). One reason is that Amazon underperformed in 2021 and now may be poised for a comeback.

Two Cybersecurity Investments to Buy Based on CIA Insights

As the calendar moves to the summer and fall of 2022, expect strength in e-commerce as online penetration gains renewed momentum, BofA wrote. The outlook for Amazon should improve during 2022 to allow the stock to finish much better than it starts the new year, BofA added. 

The investment firm predicted Amazon will gain a lift from supply chain improvements and infrastructure investments. Plus, Amazon Web Services is an existing partner with the CIA and its role in serving the agency may grow.

Tom Lash, the federal portfolio director of Amazon Web Services, participated in the same webinar as the CIA’s Ewbank and remarked that key areas of interest for the company include cybersecurity, the cost of optimizing cloud technology and the agility and speed of proposing and testing potential solutions.  

Chart courtesy of www.stockcharts.com

Tom Lash is the director of the national security and federal delivery organization for Amazon Web Services. In that role, he has been responsible for contract distribution of its federal portfolio.

Three key priorities for the CIA include its missions on cybersecurity, enterprise ID and open-source information collection around the world. The CIA aims to harness the power of data, raise the digital acumen of its workforce and strengthen its partnership with the private sector, Ewbank said.

The CIA also has set a goal to enable artificial intelligence, machine learning and recognize cybersecurity as a critical part of the CIA’s mission, Ewbank said.

To try to keep up with the technology advances occurring in China, the United States is emphasizing partnerships with other agencies, allied governments and private industry.

Passage of DoD Funding Bill Moves Money Another Step Closer to Enhanced Cybersecurity

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President Biden signed a new law on Monday, Dec. 27, for a national defense bill almost reaching $770 billion to strengthen America’s national security. The bill gained bipartisan support to provide the DoD with $740 billion in funding, rather than President Biden’s requested amount of $715 billion for the Pentagon.

However, the bill currently only authorized the money, without Congress yet appropriating the funds. The National Defense Authorization Act for Fiscal Year 2022 is intended for the 12-month period that would start Oct. 1.  

“The national defense bill is critical to maintaining our competitiveness on the global stage — particularly as other nations, like the Chinese government, look to expand their influence,” said Sen. Gary Peters, D-Michigan, a former Lieutenant Commander in the U.S. Navy Reserve and a key member of the Senate Armed Services Committee. “I’m pleased this bipartisan bill was signed into law.”

Sen. Peters, as Chairman of the Homeland Security and Governmental Affairs Committee, supported strengthening national cybersecurity defenses and holding foreign adversaries and cybercriminals accountable for targeting American networks. Peters helped to secure a provision that would authorize additional staffing for the Office of the National Cyber Director — a new role intended to coordinate implementation of national cybersecurity policy and strategy. 

The bill also aims to secure critical infrastructure against cyber-attacks, such as those on oil pipelines and wastewater treatment plants that have disrupted lives and livelihoods across the nation. A provision of the legislation would require the Cybersecurity and Infrastructure Security Agency to ensure it can better identify and mitigate threats to critical infrastructure like pipelines, water and electric utilities.

America Averages a Record 267,000 Cases of COVID-19 for Past Seven Days

The United States averaged a record 267,000 cases of COVID-19 for the past seven days, ending Tuesday, Dec. 28. The holiday season of 2021 marks the second straight year that COVID-19 has interfered with the travel plans of families and their friends seeking to gather. Thousands of flights have been cancelled due to rising COVID cases, especially with airline workers calling in sick.

Scientists have found that the new Omicron variant of COVID-19 is spreading even faster than other coronavirus strains, including the highly infectious Delta variant. However, the severity of the Omicron variant compared to Delta version may not be nearly as severe, according to early studies.

Omicron recently has become the dominant variant of COVID-19 in the United States. That version of the coronavirus is blamed for causing Mid-Atlantic areas such as Washington, D.C., Maryland and Virginia to break records for daily cases already this week. 

COVID-19 Risk Remains a Big Worry as Cases and Deaths Climb

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The new Omicron variant of COVID-19 and the highly transmissible Delta variant are heightening concerns in the United States and other parts of the world. Public health experts and government leaders advocate increased vaccinations and booster shots, as well as indoor mask wearing.

The Centers for Disease Control and Prevention (CDC) has data that show the variants are boosting the number of people receiving COVID-19 vaccinations. But close to 62 million people in the United States remain eligible to be vaccinated but have not seized the opportunity, said Dr. Anthony Fauci, the chief White House medical adviser on COVID-19.

As of Dec. 29, 242,813,374 people, or 73.1% of the U.S. population, have received at least one dose of a COVID-19 vaccine, the CDC reported. People who are fully vaccinated total 205,420,745, or 61.9% of the U.S. population, according to the CDC.

COVID-19 deaths worldwide, as of Dec. 29, topped the 5.4 million mark to hit 5,414,873, according to Johns Hopkins University. Worldwide COVID-19 cases have soared past 282 million, climbing to 282,848,767 on that date.

U.S. COVID-19 cases, as of Dec. 29, hit 53,172,397 and had caused 820,870 deaths. America has the dubious distinction as the nation with the most COVID-19 cases and deaths.

The two cybersecurity investments to buy based on the CIA’s insights could be among the market’s success stories in 2022. The CIA and DoD officials have not been shy about indicating their need to partner with private security to protect against rising cybersecurity threats.

Paul Dykewicz, www.pauldykewicz.com, is an accomplished, award-winning journalist who has written for Dow Jones, the Wall Street Journal, Investor’s Business Daily, USA Today, the Journal of Commerce, Seeking Alpha, GuruFocus and other publications and websites. Paul, who can be followed on Twitter @PaulDykewicz, is the editor of StockInvestor.com and DividendInvestor.com, a writer for both websites and a columnist. He further is editorial director of Eagle Financial Publications in Washington, D.C., where he edits monthly investment newsletters, time-sensitive trading alerts, free e-letters and other investment reports. Paul previously served as business editor of Baltimore’s Daily Record newspaper. Paul also is the author of an inspirational book, “Holy Smokes! Golden Guidance from Notre Dame’s Championship Chaplain,” with a foreword by former national championship-winning football coach Lou Holtz. The book is great as a gift and is endorsed by Joe Montana, Joe Theismann, Ara Parseghian, “Rocket” Ismail, Reggie Brooks, Dick Vitale and many others. Call 202-677-4457 for multiple-book pricing.

 

 

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