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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?
For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.
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.
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.
These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination 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 $2.46 billion, making it one of the larger ETFs in the Technology ETFs. This particular fund 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
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.
Operating expenses on an annual basis are 0.60% for this ETF, which makes it on par with most peer products in the space.
It's 12-month trailing dividend yield comes in at 0.07%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, 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 82.40% of the portfolio. Telecom and Consumer Discretionary round out the top three.
Taking into account individual holdings, Arista Networks, Inc. (ANET - Free Report) accounts for about 4.65% of the fund's total assets, followed by Alphabet Inc. (class A) (GOOGL - Free Report) and Microsoft Corporation (MSFT - Free Report) .
The top 10 holdings account for about 37.32% of total assets under management.
Performance and Risk
The ETF has gained about 12.27% and is up about 1.25% so far this year and in the past one year (as of 05/12/2023), respectively. SKYY has traded between $55.50 and $78.10 during this last 52-week period.
The fund has a beta of 1.06 and standard deviation of 32.47% for the trailing three-year period, which makes SKYY a medium risk choice in this particular space. With about 66 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 $516.13 million in assets, WisdomTree Cloud Computing ETF has $604.12 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?
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?
For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.
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.
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.
These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination 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 $2.46 billion, making it one of the larger ETFs in the Technology ETFs. This particular fund 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
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.
Operating expenses on an annual basis are 0.60% for this ETF, which makes it on par with most peer products in the space.
It's 12-month trailing dividend yield comes in at 0.07%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, 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 82.40% of the portfolio. Telecom and Consumer Discretionary round out the top three.
Taking into account individual holdings, Arista Networks, Inc. (ANET - Free Report) accounts for about 4.65% of the fund's total assets, followed by Alphabet Inc. (class A) (GOOGL - Free Report) and Microsoft Corporation (MSFT - Free Report) .
The top 10 holdings account for about 37.32% of total assets under management.
Performance and Risk
The ETF has gained about 12.27% and is up about 1.25% so far this year and in the past one year (as of 05/12/2023), respectively. SKYY has traded between $55.50 and $78.10 during this last 52-week period.
The fund has a beta of 1.06 and standard deviation of 32.47% for the trailing three-year period, which makes SKYY a medium risk choice in this particular space. With about 66 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 $516.13 million in assets, WisdomTree Cloud Computing ETF has $604.12 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.