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4 Mutual Funds to Pick as Cloud Computing Explodes
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Cloud computing has been one of the fastest-growing segments of the technology sector and the pandemic has been a boon for the space. With companies forced to keep offices closed and promote working from home, cloud computing has become a necessity for many. So far, only 33% of the workload uses cloud technology, according to Dan Ives, senior technology analyst of Wedbush. Ives forecasts that by 2022, it may hit 55%. However, vaccine rollout and economic reopening may reverse the work-from-home trend.
Cloud computing services, given their flexible costs, scalability, and efficiency, have grabbed attention of companies which were earlier hesitant in transitioning to the digital world. Cloud system infrastructure services spending is expected to see exceptional growth to reach $81 billion by 2022. The company forecasts the segment to grow from $44 billion in 2019 to $63 billion in 2020.
Initial public offerings are also boosting the space. On Apr 21, UiPath made its debut on the NYSE and rose 23%, bringing in $1.34 billion. Last year, cloud database vendor Snowflake raised $3.9 billion in September 2020 and Qualtrics, which pulled in $1.78 billion this January.
Additionally, Gartner forecasts global end user spending on public cloud services to grow to $332 billion in 2021, at an annual rate of 23.1%. In fact, emerging technologies such as containerization, virtualization and edge computing are becoming more mainstream and driving additional cloud spending and will continue even after the pandemic is over. With business intelligence (BI) embedded SaaS applications, companies can now perform rich data visualization and get critical data insights and the amount of time required has fallen drastically.
The major boost to cloud computing is also expected to come from companies that will be building and bridging their technical skills gap by educating employees regarding the cloud services by using different tools. Notably, augmented reality (AR) plays a critical role in this upgradation.
4 Top Picks
We have, therefore, selected four mutual funds that carry a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy) and invest in companies that could gain most from the advancement and investments in cloud computing. These funds have returned more than 30% to investors on a year-to-date basis. In addition, the minimum initial investment is within $5,000.
We expect these funds to outperform peers in the future. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance but also on the likely future success of the fund.
The question here is why should investors consider mutual funds? Reduced transaction costs and diversification of portfolio without several commission charges that are associated with stock purchases are primarily why one should be parking money in mutual funds (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).
Fidelity Select Technology Portfolio (FSPTX - Free Report) aims for capital appreciation. The fund invests primarily in equity securities, especially common stocks of companies that are engaged in offering, using, or developing products, processes, or services that will provide or will benefit significantly from technological advances and improvements.
This Zacks Sector – Tech product has a history of positive total returns for more than 10 years. Specifically, FSPTX has returned 29.8% and 31.3% in the past three and five years, respectively. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
FSPTX is a non-diversified fund and has an annual expense ratio of 0.71%, which is below the category average of 1.05%. Some of the fund’s top cloud computing stock holdings are Nvidia, Microsoft, Cloudflare and Salesforce.
Franklin DynaTech Fund Advisor Class (FDYZX - Free Report) aims for capital appreciation. The fund invests primarily in equity securities, especially common stocks of companies that the fund manager believes are leaders in innovation and takes advantage of new technologies.
This Zacks Sector – Tech product has a history of positive total returns for more than 10 years. Specifically, FDYZX has returned 26.81% and 26.9% in the past three and five years, respectively. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
FDYZX has an annual expense ratio of 0.60%, which is below the category average of 1.01%. Some of the fund’s top cloud computing stock holdings are Microsoft, Amazon, DocuSign and ServiceNow.
T. Rowe Price Global Technology Fund (PRGTX - Free Report) aims for long-term capital growth. The fund invests most assets in the common stocks of companies that its managers expect will generate majority of revenues from the development, advancement and use of technology.
This Zacks Sector – Tech product has a history of positive total returns for more than 10 years. Specifically, PRGTX has returned 27% and 28.5% in the past three and five years, respectively. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
PRGTX is a non-diversified fund and has an annual expense ratio of 0.88%, which is below the category average of 1.05%. Some of the fund’s top clouds computing stock holdings are ServiceNow, Alibaba, Workday and Salesforce.
Janus Henderson Global Technology and Innovation Fund Class T (JAGTX - Free Report) aims for long-term growth of capital. The fund invests majority of assets in securities of companies that the fund managers believe will significantly benefit from advances in technology.
This Zacks Sector – Tech product has a history of positive total returns for more than 10 years. Specifically, JAGTX has returned 27.8% and 30.1% in the past three and five years, respectively. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
JAGTX has an annual expense ratio of 0.92%, which is below the category average of 1.05%. Some of the fund’s top cloud computing stock holdings are Microsoft, Tencent Holdings, Adobe and salesforce.com.
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Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing mutual funds, each week.
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4 Mutual Funds to Pick as Cloud Computing Explodes
Cloud computing has been one of the fastest-growing segments of the technology sector and the pandemic has been a boon for the space. With companies forced to keep offices closed and promote working from home, cloud computing has become a necessity for many. So far, only 33% of the workload uses cloud technology, according to Dan Ives, senior technology analyst of Wedbush. Ives forecasts that by 2022, it may hit 55%. However, vaccine rollout and economic reopening may reverse the work-from-home trend.
Cloud computing services, given their flexible costs, scalability, and efficiency, have grabbed attention of companies which were earlier hesitant in transitioning to the digital world. Cloud system infrastructure services spending is expected to see exceptional growth to reach $81 billion by 2022. The company forecasts the segment to grow from $44 billion in 2019 to $63 billion in 2020.
Initial public offerings are also boosting the space. On Apr 21, UiPath made its debut on the NYSE and rose 23%, bringing in $1.34 billion. Last year, cloud database vendor Snowflake raised $3.9 billion in September 2020 and Qualtrics, which pulled in $1.78 billion this January.
Additionally, Gartner forecasts global end user spending on public cloud services to grow to $332 billion in 2021, at an annual rate of 23.1%. In fact, emerging technologies such as containerization, virtualization and edge computing are becoming more mainstream and driving additional cloud spending and will continue even after the pandemic is over. With business intelligence (BI) embedded SaaS applications, companies can now perform rich data visualization and get critical data insights and the amount of time required has fallen drastically.
The major boost to cloud computing is also expected to come from companies that will be building and bridging their technical skills gap by educating employees regarding the cloud services by using different tools. Notably, augmented reality (AR) plays a critical role in this upgradation.
4 Top Picks
We have, therefore, selected four mutual funds that carry a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy) and invest in companies that could gain most from the advancement and investments in cloud computing. These funds have returned more than 30% to investors on a year-to-date basis. In addition, the minimum initial investment is within $5,000.
We expect these funds to outperform peers in the future. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance but also on the likely future success of the fund.
The question here is why should investors consider mutual funds? Reduced transaction costs and diversification of portfolio without several commission charges that are associated with stock purchases are primarily why one should be parking money in mutual funds (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).
Fidelity Select Technology Portfolio (FSPTX - Free Report) aims for capital appreciation. The fund invests primarily in equity securities, especially common stocks of companies that are engaged in offering, using, or developing products, processes, or services that will provide or will benefit significantly from technological advances and improvements.
This Zacks Sector – Tech product has a history of positive total returns for more than 10 years. Specifically, FSPTX has returned 29.8% and 31.3% in the past three and five years, respectively. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
FSPTX is a non-diversified fund and has an annual expense ratio of 0.71%, which is below the category average of 1.05%. Some of the fund’s top cloud computing stock holdings are Nvidia, Microsoft, Cloudflare and Salesforce.
Franklin DynaTech Fund Advisor Class (FDYZX - Free Report) aims for capital appreciation. The fund invests primarily in equity securities, especially common stocks of companies that the fund manager believes are leaders in innovation and takes advantage of new technologies.
This Zacks Sector – Tech product has a history of positive total returns for more than 10 years. Specifically, FDYZX has returned 26.81% and 26.9% in the past three and five years, respectively. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
FDYZX has an annual expense ratio of 0.60%, which is below the category average of 1.01%. Some of the fund’s top cloud computing stock holdings are Microsoft, Amazon, DocuSign and ServiceNow.
T. Rowe Price Global Technology Fund (PRGTX - Free Report) aims for long-term capital growth. The fund invests most assets in the common stocks of companies that its managers expect will generate majority of revenues from the development, advancement and use of technology.
This Zacks Sector – Tech product has a history of positive total returns for more than 10 years. Specifically, PRGTX has returned 27% and 28.5% in the past three and five years, respectively. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
PRGTX is a non-diversified fund and has an annual expense ratio of 0.88%, which is below the category average of 1.05%. Some of the fund’s top clouds computing stock holdings are ServiceNow, Alibaba, Workday and Salesforce.
Janus Henderson Global Technology and Innovation Fund Class T (JAGTX - Free Report) aims for long-term growth of capital. The fund invests majority of assets in securities of companies that the fund managers believe will significantly benefit from advances in technology.
This Zacks Sector – Tech product has a history of positive total returns for more than 10 years. Specifically, JAGTX has returned 27.8% and 30.1% in the past three and five years, respectively. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
JAGTX has an annual expense ratio of 0.92%, which is below the category average of 1.05%. Some of the fund’s top cloud computing stock holdings are Microsoft, Tencent Holdings, Adobe and salesforce.com.
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Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing mutual funds, each week.
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