It seems like you can’t go a week without headlines about a data-security breach; the world is seemingly full of black-hat hackers using their extensive knowledge to break into networks for malicious intent. Whether it’s the WannaCry ransomware attack from last May or the Equifax data breach of this fall or the next as-yet-unnamed event, cybersecurity stocks tend to rise in the aftermath, as market participants anticipate a potential increase in revenues and earnings. Next time there’s a large hack, you might want to check out the ETFMG Prime Cyber Security ETF (HACK).

ETFMG Prime Cyber Security

ETFMG Prime Cyber Security ETF tries to be a pure play on this niche industry. With hackers demonstrating their vast ability to shut down and disrupt financial markets, weapons defense systems, infrastructure and individual devices, the cyber security industry has been growing, and there’s no reason to expect that to stop.

The increasing number of cyber-security threats nearly guarantee that HACK provides long-term growth potential. Although the fund tracks stocks of companies with operations in the cyber security industry, it provides diversified exposure. The ETF invests in stocks in the software, computer services, telecom equipment, business support services, Internet, defense and electronic equipment industries, and holds a lot of mid- and small-cap names like Splunk (SPLK), Juniper Networks (JNPR) and FireEye (FEYE), with just a smatter of big names like a Cisco Systems (CSCO).

How it reacts to hacks

Obviously, each incident is different, but the ETF typically moves after big hacking news, and you can see it gap up. Check out HACK on the 30-minute chart after the WannaCry ransomware attack news started hitting the wire.

Source: TradingView

Final thoughts

ETFMG Prime Cyber Security provides specialized exposure to a niche industry; that makes it appropriate as a long-term hold, but also gives is significant potential as a trading opportunity when catalyst events are in the headlines.


Taylor Conway is the lead day trader at PennyPro.com. He is a short-term day trader of stocks and ETFs.

Taylor Conway

Taylor’s Shadow Trader system allows his subscribers to tap into the hidden corners of Wall Street and to capitalize on “dark pool” trading activity. This powerful "follow the big money" strategy uncovers large trade activity that most regular investors have no access to, but that Taylor’s subscribers receive alerts about. Starting with a small account and trading part time, Taylor rapidly built his personal trading millions using his own proprietary trading systems. Sharp, savvy, and highly driven, Taylor looks for profits in any market condition, bull or bear.

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