Cybersecurity Stocks To Outperform, It's The 'One Line Item That No Company In The World Is Cutting': Josh Brown

Ritholtz Wealth Management’s Josh Brown expects cybersecurity stocks to act defensively in current market conditions and outperform throughout the remainder of the year.

What To Know: The cybersecurity sector has been outperforming the broader tech index so far in 2025. Brown believes the outperformance is due to the idea that no one can risk lowering cybersecurity spend because of the potential consequences.

“This is the one line item that no company in the world is cutting. I don’t give a sh-t how bad the recession gets. This is out-of-business risk,” Brown said Tuesday on an episode of The Compound’s “What Are Your Thoughts?”

Economist predictions over whether there will be a recession in 2025 vary, with some estimates putting the chances at 30-35%.

Brown noted that 23andMe Holding Co ME recently filed for bankruptcy after suffering a data hack. The company said it experienced weak demand for its products after a cyber threat negatively impacted its reputation. 23andMe shares are down nearly 70% so far this week.

“Literally, this is a public company out of business because of a data breach,” Brown said.

Related Link: 23andMe’s Bankruptcy Sparks Privacy Concerns Over Genetic Database Of 15 Million Customers

As a result, cybersecurity stocks are trading at a premium right now and are actually acting defensively in portfolios, Brown explained. He expects that trend to remain in place throughout the rest of the year as cybersecurity companies may lose share to one another, but overall demand for cybersecurity is not going to shrink, he said.

The five largest U.S. cybersecurity stocks are up approximately 12% year-to-date on average. Brown’s top cybersecurity pick is CrowdStrike Holdings Inc CRWD, which got upgraded by BTIG earlier this week.

The analyst firm noted that the company has much better visibility on forecasts now that the 2024 IT outage is in the rear-view mirror. BTIG sees potential for growth to reaccelerate in the second half of 2026.

Brown noted that software stocks have outperformed the broader tech sector over the past six months, and that cybersecurity stocks have outperformed software, creating a “hierarchy” in technology.

“These stocks, in a sea of red tech, they really stand out. And I think that can continue to be the case throughout the year,” Brown said.

The First Trust NASDAQ Cybersecurity ETF CIBR was down 1.85% at $65.55 at the time of publication, per Benzinga Pro.

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