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Is First Trust Cloud Computing ETF (SKYY) a Strong ETF Right Now?
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A smart beta exchange traded fund, the First Trust Cloud Computing ETF (SKYY - Free Report) debuted on 05/27/2011, and offers broad exposure to the Technology ETFs category of the market.
What Are Smart Beta ETFs?
The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.
A good option for investors who believe in market efficiency, market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns.
If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.
By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.
This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.
Fund Sponsor & Index
Managed by First Trust Advisors, SKYY has amassed assets over $3.54 billion, making it one of the largest ETFs in the Technology ETFs. Before fees and expenses, SKYY seeks to match the performance of the ISE Cloud Computing Index.
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.
Cost & Other Expenses
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 cousins, other things remaining the same.
Operating expenses on an annual basis are 0.60% for SKYY, making it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 1.24%.
Sector Exposure and Top Holdings
Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it's still important for investors to research a fund's holdings.
SKYY's heaviest allocation is in the Information Technology sector, which is about 85.10% of the portfolio. Its Telecom and Consumer Discretionary round out the top three.
Taking into account individual holdings, Pure Storage, Inc. (class A) (PSTG - Free Report) accounts for about 4.58% of the fund's total assets, followed by Arista Networks, Inc. (ANET - Free Report) and Oracle Corporation (ORCL - Free Report) .
SKYY's top 10 holdings account for about 35.43% of its total assets under management.
Performance and Risk
Year-to-date, the First Trust Cloud Computing ETF has lost about -34.73% so far, and is down about -36.54% over the last 12 months (as of 06/30/2022). SKYY has traded between $61.99 and $119.56 in this past 52-week period.
The ETF has a beta of 1.09 and standard deviation of 31.58% for the trailing three-year period, making it a medium risk choice in the space. With about 72 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Cloud Computing ETF is an excellent option for investors seeking to outperform the Technology ETFs segment of the market. There are other ETFs in the space which investors could consider as well.
Global X Cloud Computing ETF (CLOU - Free Report) tracks INDXX GLOBAL CLOUD COMPUTING INDEX and the WisdomTree Cloud Computing ETF (WCLD - Free Report) tracks BVP NASDAQ EMERGING CLOUD INDEX. Global X Cloud Computing ETF has $653.88 million in assets, WisdomTree Cloud Computing ETF has $660.02 million. CLOU has an expense ratio of 0.68% and WCLD charges 0.45%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Technology ETFs.
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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Is First Trust Cloud Computing ETF (SKYY) a Strong ETF Right Now?
A smart beta exchange traded fund, the First Trust Cloud Computing ETF (SKYY - Free Report) debuted on 05/27/2011, and offers broad exposure to the Technology ETFs category of the market.
What Are Smart Beta ETFs?
The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.
A good option for investors who believe in market efficiency, market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns.
If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.
By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.
This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.
Fund Sponsor & Index
Managed by First Trust Advisors, SKYY has amassed assets over $3.54 billion, making it one of the largest ETFs in the Technology ETFs. Before fees and expenses, SKYY seeks to match the performance of the ISE Cloud Computing Index.
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.
Cost & Other Expenses
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 cousins, other things remaining the same.
Operating expenses on an annual basis are 0.60% for SKYY, making it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 1.24%.
Sector Exposure and Top Holdings
Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it's still important for investors to research a fund's holdings.
SKYY's heaviest allocation is in the Information Technology sector, which is about 85.10% of the portfolio. Its Telecom and Consumer Discretionary round out the top three.
Taking into account individual holdings, Pure Storage, Inc. (class A) (PSTG - Free Report) accounts for about 4.58% of the fund's total assets, followed by Arista Networks, Inc. (ANET - Free Report) and Oracle Corporation (ORCL - Free Report) .
SKYY's top 10 holdings account for about 35.43% of its total assets under management.
Performance and Risk
Year-to-date, the First Trust Cloud Computing ETF has lost about -34.73% so far, and is down about -36.54% over the last 12 months (as of 06/30/2022). SKYY has traded between $61.99 and $119.56 in this past 52-week period.
The ETF has a beta of 1.09 and standard deviation of 31.58% for the trailing three-year period, making it a medium risk choice in the space. With about 72 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Cloud Computing ETF is an excellent option for investors seeking to outperform the Technology ETFs segment of the market. There are other ETFs in the space which investors could consider as well.
Global X Cloud Computing ETF (CLOU - Free Report) tracks INDXX GLOBAL CLOUD COMPUTING INDEX and the WisdomTree Cloud Computing ETF (WCLD - Free Report) tracks BVP NASDAQ EMERGING CLOUD INDEX. Global X Cloud Computing ETF has $653.88 million in assets, WisdomTree Cloud Computing ETF has $660.02 million. CLOU has an expense ratio of 0.68% and WCLD charges 0.45%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Technology ETFs.
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.