A Game-Changing Opportunity in Our Increasingly Digital World

When I first started my career on Wall Street, it was common for offices to have dedicated server rooms. They were specially built with cooling systems and back-up generators... not to mention heavily locked doors.

But all of that came at a cost. The room was huge, taking up valuable real estate in the building. In addition, the equipment needed to be monitored and replaced. And back-up power systems aren't cheap to build or maintain.

Those efforts required a team of technology staff. The additional employees came along with benefits, bonuses, and intellectual property risk.

Cloud storage changed the game...

Thanks to massive server farms, companies can now store and manage information off-site. Instead of corporations having to buy and update servers on their own, they rent them from someone else.

This also means businesses don't have to invest in the latest, greatest technology to gain a competitive edge. Management teams can pay someone else to do it for them. And if one cloud platform doesn't have the tools they need, they can find a competing service that does.

These improvements are incredible. But they have also brought about a new risk. Today, I'll share what it is... and what it means for investors.

Cloud storage offers plenty of benefits. But it also comes with a major drawback... security.

Most information is now stored in one central location. So nefarious individuals have jumped on the opportunity to profit. They know if they can break through these server farms' vault doors – digitally, that is – there's a veritable gold mine waiting on the other side.

Check Point Software put out a massive study on this in 2017 – the first of its kind, covering 850 businesses around the world. It found that every organization that permitted the use of mobile devices for work experienced some form of cyberattack... but they didn't always know it. Each company suffered 54 mobile malware attacks on average.

According to Ralph Echemendia, founder and CEO of Seguru, the average time spent by a hacker within a company's system before detection is 229 days.

Problem solvers are all trying to build a scalable "silver bullet" to stop hacking. But a singular solution doesn't work. The industry is evolving into a multi-layered approach. That means it either takes multiple tools or one-stop-shop service providers to fix the solution.

Simply put, businesses must spend more on cybersecurity protection. It improves efficiency, too...

According to cybersecurity-benefits provider InfoArmor, it takes 100 to 200 hours on average to resolve a case of identity theft if a hacked individual does not have coverage. Protecting employees keeps them working instead of spending all their time and resources trying to solve a problem. Services like these pay for themselves quickly.

So, companies will increasingly want to invest in cybersecurity protection for their employees... They want to protect their data and keep business humming along.

According to global research and advisory firm Gartner, worldwide spending on risk-management technology and information security is expected to grow 12.4% to $150.4 billion by the end of this year. For 2022, the firm thinks that number could swell another 13.3% to $170.4 billion.

One way to bet on this trend is the ETFMG Prime Cyber Security Fund (HACK)...

The fund invests in global companies related to cybersecurity. The index members either provide security services directly or deliver the key hardware and software products involved.

Since the fund launched in November 2014, it has soared 154% on a total-return basis (dividends included). And it returned 41% last year alone, with industry spending up 6.4%. Take a look...

Still, year to date, HACK is only up about 7%. That's despite the increase in cybersecurity spending this year and next.

This tells me more upside lies ahead. And considering the high-profile cyberattacks we've seen this year on companies like fuel provider Colonial Pipeline and beef processor JBS, businesses are highly motivated to buy protection.

If we look at history as our guide, HACK could see gains of roughly 35% over the next 18 months. Not bad when you consider the S&P 500 Index averages a 7.5% return on an annual basis.

We've seen the price of progress as our digital world expands. But these new challenges also mean the cybersecurity business is likely to take off in a big way... giving us an incredible opportunity to profit. Don't miss out.

Good investing,

C. Scott Garliss

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Further Reading

"Federal Reserve Chairman Jerome Powell has a knack for creating market sell-offs," Scott writes. And even though the central bank is likely to tighten monetary policy in the future, we could see a continued rally in stocks from here... Get the full story: Why Powell's Words Could Be a Buying Opportunity (Yes, Really).

The markets have recently given us a signal that this group of stocks has major upside potential ahead. And catching this breakout before it happens can lead to solid outperformance... Read more here: Capturing Double-Digit Upside in a Forgotten Foreign Market.

Market Notes
AMERICA'S LARGEST BANK PAINTS A BULLISH ECONOMIC PICTURE

Today’s chart is more proof of improving economic conditions…

Longtime readers know that we often look at America’s “financial backbone” to gauge the health of our economy. For example, when big banks are doing well, it’s because folks are busy earning, spending, and investing. And today’s company shows consumers are staying afloat…

JPMorgan Chase (JPM) is America’s biggest bank. It has $3.7 trillion in assets and handles everything from credit cards and consumer loans to investment banking and asset management. Right now, CEO Jamie Dimon says JPMorgan’s second quarter shows an improving economy… Net charge-offs – which is the amount of debt that’s unlikely to be paid back to the company – were down 53%. And since customers are having no issues making their payments, JPMorgan was able to release $3 billion in reserves for credit losses.

As you can see, JPM has been on a steady climb higher over the past year. Shares are up roughly 70% and recently hit a fresh all-time high. With America’s largest bank thriving today, it’s clear the economy is humming along…