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.
An increasingly popular option among retail and institutional investors, passively managed ETFs offer low costs, transparency, flexibility, and tax efficiency; they are also excellent vehicles for long term investors.
Additionally, sector ETFs offer convenient 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 7, placing it in top 44%.
Index Details
The fund is sponsored by First Trust Advisors. It has amassed assets over $2.66 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
Expense ratios are an important factor in the return of an ETF and in the long term, cheaper funds can significantly outperform their more expensive counterparts, other things remaining the same.
Annual operating expenses for this ETF are 0.60%, making it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 0.07%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, 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 86.80% of the portfolio. Telecom and Consumer Discretionary round out the top three.
Looking at individual holdings, Mongodb, Inc. (MDB) accounts for about 4.06% of total assets, followed by Oracle Corporation (ORCL) and Amazon.com, Inc. (AMZN).
The top 10 holdings account for about 36.07% of total assets under management.
Performance and Risk
The ETF return is roughly 11.89% so far this year and is down about -31.18% in the last one year (as of 03/30/2023). In that past 52-week period, it has traded between $55.50 and $93.67.
The ETF has a beta of 1.05 and standard deviation of 33.12% for the trailing three-year period, making it a medium risk choice in the space. With about 68 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Cloud Computing ETF holds a Zacks ETF Rank of 2 (Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, SKYY is an excellent 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 $568.02 million in assets, WisdomTree Cloud Computing ETF has $635.63 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
Amazon.com, Inc. (AMZN) : Free Stock Analysis Report
Oracle Corporation (ORCL) : Free Stock Analysis Report
MongoDB, Inc. (MDB) : 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.
