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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?
The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.
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.
On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as 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.
While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.
Fund Sponsor & Index
The fund is sponsored by First Trust Advisors. It has amassed assets over $2.92 billion, making it one of the larger ETFs in the Technology ETFs. SKYY, 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
When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.
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 has a 12-month trailing dividend yield of 0.01%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
SKYY's heaviest allocation is in the Information Technology sector, which is about 84% of the portfolio. Its 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 return is roughly 33.81% so far this year and was up about 12.44% in the last one year (as of 07/12/2023). In the past 52-week period, it has traded between $55.50 and $78.10.
The ETF has a beta of 1.05 and standard deviation of 32.34% for the trailing three-year period, making it a medium risk choice in the 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 $605.09 million in assets, WisdomTree Cloud Computing ETF has $714.69 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?
The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.
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.
On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as 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.
While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.
Fund Sponsor & Index
The fund is sponsored by First Trust Advisors. It has amassed assets over $2.92 billion, making it one of the larger ETFs in the Technology ETFs. SKYY, 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
When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.
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 has a 12-month trailing dividend yield of 0.01%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
SKYY's heaviest allocation is in the Information Technology sector, which is about 84% of the portfolio. Its 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 return is roughly 33.81% so far this year and was up about 12.44% in the last one year (as of 07/12/2023). In the past 52-week period, it has traded between $55.50 and $78.10.
The ETF has a beta of 1.05 and standard deviation of 32.34% for the trailing three-year period, making it a medium risk choice in the 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 $605.09 million in assets, WisdomTree Cloud Computing ETF has $714.69 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.