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Is First Trust Cloud Computing ETF (SKYY) a Strong ETF Right Now?
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Designed to provide broad exposure to the Technology ETFs category of the market, the First Trust Cloud Computing ETF (SKYY - Free Report) is a smart beta exchange traded fund launched on 05/27/2011.
What Are Smart Beta ETFs?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
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.
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.
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 $2.88 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
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.
Annual operating expenses for this ETF are 0.60%, making it on par with most peer products in the space.
It's 12-month trailing dividend yield comes in at 0.01%.
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 85.40% of the portfolio. Telecom and Consumer Discretionary round out the top three.
Taking into account individual holdings, Pure Storage, Inc. (class A) (PSTG - Free Report) accounts for about 4.75% of the fund's total assets, followed by Mongodb, Inc. (MDB - Free Report) and Oracle Corporation (ORCL - Free Report) .
The top 10 holdings account for about 38.13% of total assets under management.
Performance and Risk
Year-to-date, the First Trust Cloud Computing ETF return is roughly 41.76% so far, and it's up approximately 16.07% over the last 12 months (as of 09/12/2023). SKYY has traded between $55.50 and $81.67 in this past 52-week period.
The ETF has a beta of 1.05 and standard deviation of 31.90% for the trailing three-year period, making it a medium risk choice in the space. With about 65 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 $579.08 million in assets, WisdomTree Cloud Computing ETF has $697.91 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?
Designed to provide broad exposure to the Technology ETFs category of the market, the First Trust Cloud Computing ETF (SKYY - Free Report) is a smart beta exchange traded fund launched on 05/27/2011.
What Are Smart Beta ETFs?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
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.
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.
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 $2.88 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
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.
Annual operating expenses for this ETF are 0.60%, making it on par with most peer products in the space.
It's 12-month trailing dividend yield comes in at 0.01%.
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 85.40% of the portfolio. Telecom and Consumer Discretionary round out the top three.
Taking into account individual holdings, Pure Storage, Inc. (class A) (PSTG - Free Report) accounts for about 4.75% of the fund's total assets, followed by Mongodb, Inc. (MDB - Free Report) and Oracle Corporation (ORCL - Free Report) .
The top 10 holdings account for about 38.13% of total assets under management.
Performance and Risk
Year-to-date, the First Trust Cloud Computing ETF return is roughly 41.76% so far, and it's up approximately 16.07% over the last 12 months (as of 09/12/2023). SKYY has traded between $55.50 and $81.67 in this past 52-week period.
The ETF has a beta of 1.05 and standard deviation of 31.90% for the trailing three-year period, making it a medium risk choice in the space. With about 65 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 $579.08 million in assets, WisdomTree Cloud Computing ETF has $697.91 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.