Cybercrime has become a costly problem, with economies worldwide estimated to have lost $5.5 trillion in 2021, almost double the previous year’s losses, according to Statista. This trend is projected to double again, reaching nearly $10 trillion by 2028.

The rise in cyber threats has been a major driver of the cybersecurity sector’s growth, which saw a 12.5% increase in the first quarter of this year compared to the same period last year, as reported by market research firm Canalys. Companies are now investing more in cybersecurity to protect themselves from reputation-damaging and costly data breaches.

Palo Alto Networks, a leading cybersecurity company, recently reported stronger-than-expected quarterly earnings and expects a compounded annual growth rate of 17%-19% over the next three years. This positive news caused the company’s stock to surge by nearly 15% and has gained almost 75% this year, outperforming the broader tech sector.

CrowdStrike or Palo Alto Networks?

Despite the potential impact of high interest rates, companies still have a strong demand for cybersecurity products and services due to the organic nature of the threats they face. As a result, Stephen Weiss, chief investment officer of Short Hills Capital, believes that cybersecurity is a necessary investment. However, he advises caution when considering buying CrowdStrike at its current share price, as it may be overvalued.

Joe Terranova, senior managing director at Virtus Investment Partners, who owns shares in CrowdStrike, Palo Alto, and Fortinet, shares Weiss’ sentiment. He believes that cybersecurity is a long-term investment regardless of interest rates and regrets selling his CrowdStrike shares too early. Terranova sees both Palo Alto and CrowdStrike as key holdings in his portfolio and has recently increased his positions in both companies.

ETF Play

For investors who prefer not to invest in individual stocks, Bryn Talkington, managing partner at Requisite Capital Management, suggests using cybersecurity exchange-traded funds (ETFs) to gain exposure to the sector. She specifically mentions the Global X Cybersecurity ETF (ticker: BUG) as a smart way to have a concentrated portfolio without being affected by individual company performance.

Talkington views cybersecurity as a long-term investment story but acknowledges the need to navigate economic cycles. While economic slowdowns may impact customer spending, she believes they won’t undermine the overall growth of the industry.