Looking for broad exposure to the Technology - Cloud Computing segment of the equity market? You should consider the First Trust Cloud Computing ETF (SKYY), a passively managed exchange traded fund launched on 05/27/2011.
Passively managed ETFs are becoming increasingly popular with institutional as well as retail investors due to their low cost, transparency, flexibility and tax efficiency. They are excellent vehicles for long term investors.
Sector ETFs are also funds of convenience, offering many ways to gain low risk and diversified exposure to a broad group of companies in particular sectors. Technology - Cloud Computing is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 1, placing it in top 6%.
Index Details
The fund is sponsored by First Trust Advisors. It has amassed assets over $3.11 billion, making it one of the larger ETFs attempting to match the performance of the Technology - Cloud Computing segment of the equity market. SKYY seeks to match the performance of the ISE Cloud Computing Index before fees and expenses.
The ISE Cloud Computing Index is a modified market capitalization weighted index designed to track the performance of companies actively involved in the cloud computing industry.
Costs
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive counterparts if all other fundamentals are the same.
Annual operating expenses for this ETF are 0.60%, making it on par with most peer products in the space.
Sector Exposure and Top Holdings
It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has heaviest allocation in the Information Technology sector--about 83.70% of the portfolio. Telecom and Consumer Discretionary round out the top three.
Looking at individual holdings, Oracle Corporation (ORCL) accounts for about 4.47% of total assets, followed by International Business Machines Corporation (IBM) and Arista Networks, Inc. (ANET).
The top 10 holdings account for about 38.03% of total assets under management.
Performance and Risk
Year-to-date, the First Trust Cloud Computing ETF return is roughly 21.73% so far, and is up about 45.08% over the last 12 months (as of 10/22/2024). SKYY has traded between $70.93 and $106.84 in this past 52-week period.
The ETF has a beta of 1.08 and standard deviation of 31.74% for the trailing three-year period, making it a medium risk choice in the space. With about 64 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Cloud Computing ETF holds a Zacks ETF Rank of 1 (Strong Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, SKYY is a great option for investors seeking exposure to the Technology ETFs segment of the market. There are other additional ETFs in the space that investors could consider as well.
Global X Cloud Computing ETF (CLOU) tracks INDXX GLOBAL CLOUD COMPUTING INDEX and the WisdomTree Cloud Computing ETF (WCLD) tracks BVP NASDAQ EMERGING CLOUD INDEX. Global X Cloud Computing ETF has $340.57 million in assets, WisdomTree Cloud Computing ETF has $411.26 million. CLOU has an expense ratio of 0.68% and WCLD charges 0.45%.
Bottom Line
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.
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Get it free >>First Trust Cloud Computing ETF (SKYY): ETF Research Reports
International Business Machines Corporation (IBM) : Free Stock Analysis Report
Oracle Corporation (ORCL) : Free Stock Analysis Report
Arista Networks, Inc. (ANET) : Free Stock Analysis Report
Global X Cloud Computing ETF (CLOU): ETF Research Reports
WisdomTree Cloud Computing ETF (WCLD): ETF Research Reports
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
