WisdomTree Cybersecurity Fund

WCBR

Market cap $150M

WisdomTree Cybersecurity Fund ETF is upgraded to a buy, supported by strong technical momentum and favorable seasonality trends. WCBR benefits from sector growth, with CrowdStrike as its largest holding, despite recent volatility and high portfolio concentration risks. Valuation remains a concern, with a high P/E ratio and a PEG ratio above three, but technical patterns suggest a potential breakout to $41.

The cybersecurity sector is set for explosive growth, but WCBR's performance is not the industry's greatest. WCBR offers solid diversification and a lower expense ratio, but suffers from low liquidity and a smaller fund size. CIBR, while tracking a narrower scope index, has delivered superior returns and boasts much higher trading volume and assets under management.

AI remains the most prominent theme in the technology sector. But that doesn't diminish the relevance of other important tech growth outlets, including cybersecurity.

I maintain a hold rating on WCBR due to its high valuation and mixed technical situation despite bullish seasonal trends. WCBR has underperformed the S&P 500 since mid-Q1 2023, with notable setbacks from Palo Alto Networks and CrowdStrike. The ETF's high concentration risk, low average daily volume, and high bid/ask spread suggest cautious trading with limit orders.

With the increasing adoption of AI in everyday activities, the risk of cyber-attacks also surges, increasing the need to raise investments in cybersecurity. Look at ETFs to capitalize.

Broadly speaking, cybersecurity equities are languishing this year. Throw in investors' intense focus on artificial intelligence (AI) stocks and it's understandable that some market participants aren't paying attention to cybersecurity opportunities.

Cybersecurity is crucial in a world reliant on technology, with vulnerabilities threatening businesses and governments. The WisdomTree Cybersecurity Fund offers focused access to high-growth cybersecurity companies, led by Team8, a global venture group. The fund's holdings include top cybersecurity companies like HashiCorp, Palo Alto Networks, and Datadog, with global exposure and peer comparison to First Trust NASDAQ Cybersecurity ETF.

Wall Street has experienced a robust upswing in May but few investing areas have fallen short of the broader market rally.

Increasing adoption of AI makes companies more vulnerable to cyber-attacks, with attacks increasing about twofold since the pandemic. Look into Cybersecurity ETFs to capitalize on the momentum.

Revenue growth and profitability are important factors to consider when evaluating software companies, as they can impact the potential for future investment returns.