The incessant news reports about serious cyberattacks would be monotonous, if the stakes weren't so enormous. These attacks are occurring with greater frequency and brazenness, with no regard for national borders.
Latest case in point: Microsoft announced last week that it would start notifying users of its online services if they have been victims of state-sponsored hacking attempts, joining the growing ranks of Internet companies that are beefing up their security measures.
Reuters reported last week that Microsoft executives had recently discovered but downplayed state-sponsored breaches to its Hotmail accounts. The software giant is now attempting to rectify its security flaws, as well as the public relations damage.
The perpetual fight against cybercrime is the sort of inexorable trend on which long-term investors should focus. However, if you're concerned about market volatility in 2016, there's one investment that allows you to profit from the growing problem of cybercrime, without exposure to the ups-and-downs of individual stocks. We examine this opportunity below.
This rising incidences of hacking, cybercrime and industrial espionage are creating robust demand for corporate online security. Proprietary information is a major competitive asset, but data security systems are riddled with vulnerabilities, especially as the workforce becomes more mobile and supply chains more global.
Throughout 2015, attacks allegedly emanating from China against the U.S. have placed cyber security on the political front burner and spawned a war of words between the leaders of the world's two largest economies.
The phenomenon of cybertheft is exacerbated by the growing involvement of organized crime. Many financial losses have been traced back to the bank accounts of specific criminal organizations, especially in Russia and Eastern Europe. These tech-savvy gangsters won't whack you; they'll hack you.
As these attacks increase in sophistication and intensity, you can turn this global threat into an investment opportunity that plays out for decades.
PureFunds ISE Cyber Security ETF (HACK)
If you're a conservative investor looking to make money from the fight against hackings, your best bet is PureFunds ISE Cyber Security ETF.
Founded in November 2014, this exchange-traded fund is the world's first cyber security ETF. The index tracks the performance of companies around the world that are direct service providers for cyber security. It seeks performance that generally mimics the price and yield performance of the ISE Cyber Security Index. More than 78% of the fund's companies are based in the world's technology leader, the United States.
HACK divides its holdings among those that design and sell cybersecurity hardware and software, and those that provide cybersecurity not as a product but as a continuing fee-for-service.
With net assets of $1.1 billion and a weighted average market cap of $9.94 billion, HACK's top holdings are a "who's who" of cyber security, including Cisco Systems, Science Applications International, Qualys, Fortinet, Proofpoint, Palo Alto Networks, and Juniper Networks.
These are all major technology companies with strong balance sheets, low debt, entrenched products, and track records of multi-year earnings growth.
The fund's trailing 12-month price-to-earnings (P/E) ratio is 28, compared to 29 for the Technology Select Sector SPDR ETF and the SPDR S&P 500 ETF.
The fund boasts a one-year total return of 5.01%, compared to a decline of 0.76% for the S&P 500. The expense ratio is 0.75%, roughly in line with the average for ETFs.
HACK is a smart, long-term bet on the unstoppable trend of cybersecurity. If you're looking for other new ideas in the technology sector, I've found a small tech company that has the potential to surge at least 100% in 2016. This is a growth story with major momentum, so it's important to learn the full details as soon as possible inside my free report. Make sure you click here now to learn more.