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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) made its debut on 05/27/2011, and is a smart beta exchange traded fund that provides broad exposure to the Technology ETFs category of the market.
What Are Smart Beta ETFs?
Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.
Market cap weighted indexes work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.
There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track 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.
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
Because the fund has amassed over $3.10 billion, this makes it one of the largest ETFs in the Technology ETFs. SKYY is managed by First Trust Advisors. Before fees and expenses, this particular fund 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
Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.
Operating expenses on an annual basis are 0.60% for SKYY, making it on par with most peer products in the space.
It's 12-month trailing dividend yield comes in at 1.26%.
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.
This ETF has heaviest allocation in the Information Technology sector - about 85.90% of the portfolio. Telecom and Consumer Discretionary round out the top three.
Taking into account individual holdings, Mongodb, Inc. (MDB - Free Report) accounts for about 4% of the fund's total assets, followed by Pure Storage, Inc. (class A) (PSTG - Free Report) and Arista Networks, Inc. (ANET - Free Report) .
SKYY's top 10 holdings account for about 34.21% of its total assets under management.
Performance and Risk
So far this year, SKYY has lost about -37.69%, and is down about -42.52% in the last one year (as of 10/31/2022). During this past 52-week period, the fund has traded between $56.79 and $119.56.
The fund has a beta of 1.06 and standard deviation of 33.59% 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 $597.55 million in assets, WisdomTree Cloud Computing ETF has $632.17 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) made its debut on 05/27/2011, and is a smart beta exchange traded fund that provides broad exposure to the Technology ETFs category of the market.
What Are Smart Beta ETFs?
Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.
Market cap weighted indexes work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.
There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track 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.
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
Because the fund has amassed over $3.10 billion, this makes it one of the largest ETFs in the Technology ETFs. SKYY is managed by First Trust Advisors. Before fees and expenses, this particular fund 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
Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.
Operating expenses on an annual basis are 0.60% for SKYY, making it on par with most peer products in the space.
It's 12-month trailing dividend yield comes in at 1.26%.
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.
This ETF has heaviest allocation in the Information Technology sector - about 85.90% of the portfolio. Telecom and Consumer Discretionary round out the top three.
Taking into account individual holdings, Mongodb, Inc. (MDB - Free Report) accounts for about 4% of the fund's total assets, followed by Pure Storage, Inc. (class A) (PSTG - Free Report) and Arista Networks, Inc. (ANET - Free Report) .
SKYY's top 10 holdings account for about 34.21% of its total assets under management.
Performance and Risk
So far this year, SKYY has lost about -37.69%, and is down about -42.52% in the last one year (as of 10/31/2022). During this past 52-week period, the fund has traded between $56.79 and $119.56.
The fund has a beta of 1.06 and standard deviation of 33.59% 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 $597.55 million in assets, WisdomTree Cloud Computing ETF has $632.17 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.