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🔒The One Thing Companies Can't Cut...
Published 9 days ago • 3 min read
I heard something exciting on the Motley Fool Money podcast (also shared below and starts at 19:45) by financial planner and market commentator Malcolm Etheridge that I want to share with you.
Malcolm doesn't own Alphabet/Google (GOOG) stock. Why? Google is basically an advertising company in tech clothing. I checked their latest earnings report, and wow - 74% of their revenue comes from ads. That's $66.9 billion out of $90.2 billion in Q1 2025!
Alphabet Q125
Think about what happens in a recession. What's the first thing companies slash? Their ad budgets. That makes companies like Nexstar Media (NXST) and Google vulnerable when times get tough.
But, Malcolm pointed out one budget line item that businesses almost NEVER cut: cybersecurity.
He compared it to car insurance - something you legally can't drive without. In today's world, businesses can't operate without cyber protection. Small, medium, or large - doesn't matter. You can't run a business without protecting your data and systems.
For us regular investors, picking individual cybersecurity companies can be tricky. How do we know which ones have durable competitive advantages? That's where ETFs come in handy.
Malcolm mentioned two good options: BUG (Global X Cybersecurity ETF) and CIBR (First Trust NASDAQ Cybersecurity ETF). I checked out CIBR since it has a slightly higher dividend yield.
CIBR currently has 37 holdings, with top spots going to CrowdStrike (CRWD, 8.6%), Broadcom (AVGO, 7.7%), and Palo Alto Networks (PANW, 7.5%). Most holdings are in software and IT services companies.
CIBR on SeekingAlpha.com
When an ETF says a company has an 8.6% weighting, that means 8.6% of the ETF's total assets are invested in that stock. As an investor, you own a little piece of everything in the fund.
Here's something cool: When companies are added to these indexes, their stock price often jumps because ETFs have to buy shares. When companies are dropped, their price might dip as ETFs sell. That's why stock prices sometimes move just on index news!
While cybersecurity spending is more recession-resistant than advertising, nothing's bulletproof. In a bad downturn, companies might delay upgrades or choose cheaper options.
But with the average cost of a single data breach now at $4.48 million (up 10% from last year), companies can't afford to skimp on protection. That's why cybersecurity might be a smart area to look at if you're worried about a recession.
Malcolm's car insurance comparison makes sense. Nobody cancels their auto insurance when money gets tight, and businesses can't drop their cyber protection either.
That's all for today! Hope this gave you something to think about for your investment portfolio.
As always, this newsletter is just me sharing my thoughts as a fellow investor. Always do your research before investing.
That's it, and I'd love for you to reply and share if cybersecurity is something you're interested in investing in. I'll respond to every reply!
😁THANK YOU to all who responded to the last newsletter!!
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Each week you'll learn how to be a better dividend investor and follow the journey of a welder with a passion for passive income to $1,000,000 and beyond.
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