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Is First Trust Cloud Computing ETF (SKYY) a Strong ETF Right Now?
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The First Trust Cloud Computing ETF (SKYY - Free Report) was launched on 05/27/2011, and is a smart beta exchange traded fund designed to offer 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.
Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.
This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of such characteristics.
The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.
Fund Sponsor & Index
The fund is managed by First Trust Advisors. SKYY has been able to amass assets over $3.42 billion, making it one of the larger ETFs in the Technology ETFs. This particular fund, before fees and expenses, 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
Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.
Annual operating expenses for SKYY are 0.60%, which makes it on par with most peer products in the space.
The fund has a 12-month trailing dividend yield of 1.21%.
Sector Exposure and Top Holdings
ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.
This ETF has heaviest allocation in the Information Technology sector - about 85.80% of the portfolio. Telecom and Consumer Discretionary round out the top three.
Taking into account individual holdings, Alibaba Group Holding Limited (adr) (BABA - Free Report) accounts for about 4.03% of the fund's total assets, followed by Pure Storage, Inc. (class A) (PSTG - Free Report) and Mongodb, Inc. (MDB - Free Report) .
Its top 10 holdings account for approximately 34.14% of SKYY's total assets under management.
Performance and Risk
So far this year, SKYY has lost about -32.77%, and is down about -35.44% in the last one year (as of 08/30/2022). During this past 52-week period, the fund has traded between $61.99 and $119.56.
The fund has a beta of 1.05 and standard deviation of 32.55% for the trailing three-year period, which makes SKYY a medium risk choice in this particular space. With about 71 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 $642.65 million in assets, WisdomTree Cloud Computing ETF has $687.32 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?
The First Trust Cloud Computing ETF (SKYY - Free Report) was launched on 05/27/2011, and is a smart beta exchange traded fund designed to offer 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.
Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.
This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of such characteristics.
The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.
Fund Sponsor & Index
The fund is managed by First Trust Advisors. SKYY has been able to amass assets over $3.42 billion, making it one of the larger ETFs in the Technology ETFs. This particular fund, before fees and expenses, 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
Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.
Annual operating expenses for SKYY are 0.60%, which makes it on par with most peer products in the space.
The fund has a 12-month trailing dividend yield of 1.21%.
Sector Exposure and Top Holdings
ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.
This ETF has heaviest allocation in the Information Technology sector - about 85.80% of the portfolio. Telecom and Consumer Discretionary round out the top three.
Taking into account individual holdings, Alibaba Group Holding Limited (adr) (BABA - Free Report) accounts for about 4.03% of the fund's total assets, followed by Pure Storage, Inc. (class A) (PSTG - Free Report) and Mongodb, Inc. (MDB - Free Report) .
Its top 10 holdings account for approximately 34.14% of SKYY's total assets under management.
Performance and Risk
So far this year, SKYY has lost about -32.77%, and is down about -35.44% in the last one year (as of 08/30/2022). During this past 52-week period, the fund has traded between $61.99 and $119.56.
The fund has a beta of 1.05 and standard deviation of 32.55% for the trailing three-year period, which makes SKYY a medium risk choice in this particular space. With about 71 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 $642.65 million in assets, WisdomTree Cloud Computing ETF has $687.32 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.