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Is First Trust Cloud Computing ETF (SKYY) a Strong ETF Right Now?
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Launched on 05/27/2011, the First Trust Cloud Computing ETF (SKYY - Free Report) is a smart beta exchange traded fund offering 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.
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.
But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.
Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other such characteristics.
Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.
Fund Sponsor & Index
Managed by First Trust Advisors, SKYY has amassed assets over $4.52 billion, making it one of the larger ETFs in the Technology ETFs. 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.
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 this ETF, which makes it on par with most peer products in the space.
SKYY's 12-month trailing dividend yield is 1.04%.
Sector Exposure and Top Holdings
While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, 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 84.90% of the portfolio. Telecom and Consumer Discretionary round out the top three.
Looking at individual holdings, Pure Storage, Inc. (class A) (PSTG - Free Report) accounts for about 4.58% of total assets, followed by Arista Networks, Inc. (ANET - Free Report) and Oracle Corporation (ORCL - Free Report) .
Its top 10 holdings account for approximately 35.43% of SKYY's total assets under management.
Performance and Risk
The ETF has lost about -22.24% so far this year and is down about -20.52% in the last one year (as of 04/26/2022). In the past 52-week period, it has traded between $77.19 and $119.56.
The fund has a beta of 1.02 and standard deviation of 28.99% for the trailing three-year period, which makes SKYY a medium risk choice in this particular 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.
WisdomTree Cloud Computing ETF (WCLD - Free Report) tracks BVP NASDAQ EMERGING CLOUD INDEX and the Global X Cloud Computing ETF (CLOU - Free Report) tracks INDXX GLOBAL CLOUD COMPUTING INDEX. WisdomTree Cloud Computing ETF has $765.98 million in assets, Global X Cloud Computing ETF has $833.50 million. WCLD has an expense ratio of 0.45% and CLOU charges 0.68%.
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?
Launched on 05/27/2011, the First Trust Cloud Computing ETF (SKYY - Free Report) is a smart beta exchange traded fund offering 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.
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.
But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.
Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other such characteristics.
Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.
Fund Sponsor & Index
Managed by First Trust Advisors, SKYY has amassed assets over $4.52 billion, making it one of the larger ETFs in the Technology ETFs. 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.
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 this ETF, which makes it on par with most peer products in the space.
SKYY's 12-month trailing dividend yield is 1.04%.
Sector Exposure and Top Holdings
While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, 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 84.90% of the portfolio. Telecom and Consumer Discretionary round out the top three.
Looking at individual holdings, Pure Storage, Inc. (class A) (PSTG - Free Report) accounts for about 4.58% of total assets, followed by Arista Networks, Inc. (ANET - Free Report) and Oracle Corporation (ORCL - Free Report) .
Its top 10 holdings account for approximately 35.43% of SKYY's total assets under management.
Performance and Risk
The ETF has lost about -22.24% so far this year and is down about -20.52% in the last one year (as of 04/26/2022). In the past 52-week period, it has traded between $77.19 and $119.56.
The fund has a beta of 1.02 and standard deviation of 28.99% for the trailing three-year period, which makes SKYY a medium risk choice in this particular 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.
WisdomTree Cloud Computing ETF (WCLD - Free Report) tracks BVP NASDAQ EMERGING CLOUD INDEX and the Global X Cloud Computing ETF (CLOU - Free Report) tracks INDXX GLOBAL CLOUD COMPUTING INDEX. WisdomTree Cloud Computing ETF has $765.98 million in assets, Global X Cloud Computing ETF has $833.50 million. WCLD has an expense ratio of 0.45% and CLOU charges 0.68%.
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.