Tag Archives: hack

3 Unique ETFs Beating The Market

With the domestic economy recovering slowly but steadily and interest rates expected to remain low in near future, the overall backdrop for U.S. stocks remains positive. But as the bull market approaches its seven year anniversary, the easy money in stocks has already been made. Global growth worries, lackluster earnings, valuation concerns, China stock market turmoil and uncertainty relating to the Fed will also continue to weigh on the market. It is thus no surprise that the broad market continues to trade sideways with lackluster returns year-to-date. But some stocks have delivered outsized returns this year. Similarly some innovative ETFs following specialized strategies or tracking high growth areas have been rewarding their investors with stellar returns in 2015. Considering their outperformance potential, these could be held as satellite holdings in the portfolio, in order to spice up overall returns. A Shining Biotech Star: The ALPS Medical Breakthroughs ETF (NYSEARCA: SBIO ) Biotechs have been leading the bull market for the last 6-7 years. After this massive surge, valuations look lofty now by many measures, but there are still many reasons to be positive on the sector. Surging M&A activity, positive drug trial results and steady growth in the number of drugs being approved by the FDA have further boosted investor optimism and will continue to support these stocks. This fund tracks the Poliwogg Medical Breakthroughs Index. It invests mainly in mid and small cap stocks with market cap between $200 million and $5 billion. The index screens the U.S. listed biotech and pharma companies with one or more drugs in Phase II or Phase III FDA clinical trials. The index also screens for liquidity (average daily trading volume more than $1 million) and sustainability (cash for at least 2 years at their normal burn rate). Per ALPS, due to “patent cliff”, many blockbuster drugs from the 1990s and 2000s have been losing patent protection and large drug companies are struggling to replenish their pipelines. Further, due to time-consuming procedure and an alarming rate of failure for drug development, the bigger firms usually rely on new therapies processed by smaller firms that spend a lot more on R&D compared to their larger peers. This fund holds 75 stocks with Anacor Pharma (NASDAQ: ANAC ), Receptions and Horizon Pharma being the top 3 holdings. The product charges 50 bps in fees. Company specific risk is limited due to modified market cap weighting with maximum 4.5% of assets. The product launched in December last year and has gathered about $200 million in assets so far. SBIO has soared almost 52% this year. Foil Hackers with the PureFunds ISE Cyber Security ETF (NYSEARCA: HACK ) Our world is becoming increasingly digital-bringing us many exciting opportunities and possibilities–but also creating enormous challenges. Abundance of digital information and sophisticated tools available to process and share this information make it very hard to ensure data security in this interconnected world. That is why cybersecurity threats and cyberattacks are on the rise. Consequences of hacking can be huge. Further, the threat landscape has been evolving; hackers could steal not only financial data but also critical and sensitive information that could be used for criminal or extremist activities. Per Deloitte’s Q2 CFO survey, “CFOs in North America view cyberattacks as a serious threat, but many have doubts about their organization’s level of preparedness.” Surging demand for protection against these cyber threats will continue to drive demand for spending on cybersecurity. This ETF provides exposure to a diverse group of hardware and software companies in the cybersecurity industry. The product charges an expense ratio of 75 basis points. It made its debut in November last year and has already managed to gain almost $1.4 billion in assets, thanks mainly to some high profile cyberattacks of late. The ETF holds 32 securities in its portfolio and is well spread out across holdings, due to modified equal weighting methodology. Investors should however note that some of these cybersecurity stocks have been quite hot lately, leading to valuation concerns but given surging demand for these services, the ETF could be an excellent longer-term holding for investors who can ride out shorter-term volatility. The ETF is up more than 17% year-to-date. 2015 has turned out to be a pretty good year so far for hedge funds after many years of underperformance. Gains this year have been driven partly by the booming M&A activity, particularly in the healthcare sector and savvy stock selection. Most investors would like to invest like George Soros, Carl Icahn and John Paulson but the $2.9 trillion hedge fund industry is accessible only to very wealthy investors. Further, hedge fund investing is expensive as they usually charge an annual asset management fee of 2% and a performance fee of 20% of fund’s profits (2 and 2 fees). Fortunately for ordinary investors, there are some ETFs that provide access to investing secrets of such gurus, without charging the hefty fees that their funds charge. This ETF is based on the AlphaClone Hedge Fund Long/Short Index. The index uses AlphaClone’s proprietary “Clone Score” methodology to aggregate the hedge funds ideas on a quarterly basis. Clone scores, which are calculated bi-annually, are based on hedge funds managers’ performance. Index constituents are equally weighted but can have overlap bias. The index also has a hedge mechanism built in, which is triggered on or off when the S&P 500 index crosses its 200 day moving average at any month end. If the market goes down, the index goes from long-only to market hedged (50% short exposure to S&P 500). Launched in May 2012, this product has been able to attract about $195 million in assets so far. It has 86 holdings currently with Apple (NASDAQ: AAPL ), Valeant Pharmaceuticals (NYSE: VRX ) and Celgene Corp (NASDAQ: CELG ) being the top holdings. ALFA is slightly pricey, charging 95 basis points in expenses. It is up more than 8% year-to-date. Over the past three years, ALFA has climbed by 75% compared with 61% for the SPDR S&P 500 Trust ETF ( SPY). Link to the original post on Zacks.com

The Second Cyber Security ETF Has Arrived

Summary Cyber security stocks have been a popular technology play this year. First Trust comes out with new cyber security ETF, the second offering in the space. Focus on the First Trust NASDAQ CEA Cybersecurity ETF. By Todd Shriber & Tom Lydon Confirming that cyber security is one of this year’s hottest investment themes, First Trust, the sixth-largest U.S. issuer of exchange traded funds, introduced on July 7th, the First Trust NASDAQ CEA Cybersecurity ETF (NasdaqGM: CIBR ) , the second cyber security ETF to come to market since November. The first is the well-entrenched, fast-growing PureFunds ISE Cyber Security ETF (NYSEArca: HACK ) , an ETF that needed less than eight months of trading to eclipse $1 billion in assets under management. HACK, the household name among cyber security ETFs, entered trading Tuesday with nearly $1.2 billion in assets under management . CIBR will track the Nasdaq CEA Cybersecurity Index, which “is designed to track the performance of companies engaged in the cybersecurity segment of the technology and industrials sectors. It includes companies primarily involved in the building, implementation, and management of security protocols applied to private and public networks, computers, and mobile devices in order to provide protection of the integrity of data and network operations,” according to a statement issued by First Trust. Amid a spate of public and private sector data breaches, the most recent afflicting personal data of federal employees, cyber security stocks are getting increased attention and, more importantly, are surging. Although it has given back some gains in recent weeks, HACK is up 12.4% year-to-date, more than triple the 3.9% gained by the Nasdaq Composite. “Cybersecurity is gaining global attention following recent high profile security breaches,” notes First Trust . “The opportunity for cybercrime is expected to grow and may cost the global economy as much as $575 billion annually. As cybercrimes continue to increase, the global cybersecurity market is forecast to grow at a compound annual growth rate (CAGR) of 10.3% from $95.6 billion in 2014 to $155.74 billion in 2019.” CIBR’s underlying index, which began trading on June 23, is home to 34 companies, including AhnLab, Akamai (NASDAQGS: AKAM ), Check Point Software (NASDAQGS: CHKP ), Cisco Systems (NASDAQGS: CSCO ), CyberArk (NASDAQGS: CYBR ) and FireEye (NASDAQGS: FEYE ), according to Nasdaq data . Companies must have a minimum market value of $250 million, a minimum three-month daily dollar trading volume of $1 million and a minimum free float of 20% to be eligible for the index. CIBR and HACK may not be alone in the cyber security ETF space for long as Direxion has plans to introduce leveraged bearish and bullish versions of HACK . Cyber Security Estimated Spending Growth Chart Courtesy: First Trust Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More…) I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Should Investors Take A HACK At This Idea?

The latest case of cyber espionage has resulted in the theft of personal information of more than 4 million government employees. The sophistication, scale and frequency of cyber-attacks has only increased, and threats are becoming more and more complicated. Let’s get a lay of the land of companies that are poised to help put down such criminal behavior, and how investors can play this secular theme. You may be surprised by our favorite idea in this space. “The new generation of cyber-attacks on organizations, including large and small enterprises and governments worldwide, is characterized by an unprecedented escalation in the complexity and scale of advanced malware created by criminal organizations and nation-states. These modern attacks are built on dynamic, stealthy and targeted malware that penetrates defenses in multiple stages and through multiple entry points of an IT network. These highly targeted, “single-use” cyber-attacks easily circumvent legacy security solutions that rely on pattern-matching detection technologies. Additionally, because legacy solutions reference outdated signatures of past threats, they also generate a high number of false-positive alerts.” – FireEye (NASDAQ: FEYE ) Annual Report, 2014 The statistics are striking. According to a 2011 survey of ~580 US IT experts by research center Ponemon Institute, an estimated 90% of organizations have at one time suffered a cybersecurity breach. Believe it or not, the Pentagon said in a 360+ page report that as of 2014, nearly every US weapons program that was tested showed ” significant vulnerabilities ” to cyberattacks. The news reminds us of the 1980s flick WarGames . It flat-out irks us that there’s a chance that hackers can access US weapons programs. Just this week, US officials announced that it believes China was behind a breach affecting the information of at least 4 million federal employees. This was allegedly the second intrusion by the country in the past few months, and the largest breach of federal employee data in some time. Russia has also been tied to cybercrimes against White House computers. It appears the US is fighting yet another war – not one with guns, and bullets but one against cyber adversaries. The plot of that 1980s teenage Matthew Broderick movie can’t happen in real life, can it? The world is simply not prepared for the latest round of criminal activity… in cyberspace. The sophistication, scale and frequency of cyberattacks, coupled with the complexity of new technologies from cloud computing and virtualization to enterprise mobility and social networking have made it incredibly difficult to keep important information and data safe. Reports from the Snowden documents, for example, contend that China stole “many terabytes” of data about Lockheed Martin’s (NYSE: LMT ) F-35. China’s new J-31 Gyrfalcon does look a lot like the F-35. In 2014 alone, there were 20 major data breaches , with Home Depot (NYSE: HD ), Target (NYSE: TGT ), and JPMorgan (NYSE: JPM ) perhaps making the biggest headlines, but even companies such as Staples (NASDAQ: SPLS ), Bebe (NASDAQ: BEBE ), and Sony (NYSE: SNE ) were impacted. Sony’s network was taken hostage by a grinning skull . Some estimates peg the cyber security market to surpass $150 billion by 2019 from under $100 billion today, but the reality is that the changing and evolving landscape could make this figure much larger. Traditional players such as Hewlett-Packard (NYSE: HPQ ), Cisco (NASDAQ: CSCO ), Check Point Software Technologies (NASDAQ: CHKP ), Computer Sciences Corp. (NYSE: CSC ), IBM Corp. (NYSE: IBM ), Booz Allen (NYSE: BAH ), Lockheed Martin, Northrop Grumman (NYSE: NOC ), Trend Micro ( OTCPK:TMICY ), Fortinet (NASDAQ: FTNT ), Barracuda Networks (NYSE: CUDA ), and Symantec Corp. (NASDAQ: SYMC ) will be vying for share. But there are others as well. FireEye, Palo Alto Networks (NYSE: PANW ), Imperva (NYSE: IMPV ), VASCO Data Security (NASDAQ: VDSI ), Zix Corp. (NASDAQ: ZIXI ), Qualys (NASDAQ: QLYS ), Proofpoint (NASDAQ: PFPT ), AVG Tech (NYSE: AVG ), and CyberArk Software (NASDAQ: CYBR ) will be looking to capture a piece of the pie (potential industry earnings). Many of these firms are losing money hand over fist at the moment. From an investment standpoint, it’s simply too early to pick the long-term winners. But even if we we’re pinned down to selecting just one or two potential winners, we’d maintain that the best consideration for investment exposure to rapidly expanding cybersecurity demand is via the PureFunds ISE Cyber Security ETF (NYSEARCA: HACK ), which seeks to track the investment results of the ISE Cyber Security Index (the ETF’s holdings can be downloaded here ). Our investment thesis on HACK rests not on identifying which company will capture the greatest share of industry earnings, but on the view that spending on cybersecurity will increase considerably more than current expectations – a far “safer” bet. Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More…) I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.