Should You Invest in the First Trust Cloud Computing ETF (SKYY)?
Sector ETF report for SKYY
Launched on 05/27/2011, the First Trust Cloud Computing ETF (SKYY) is a passively managed exchange traded fund designed to provide a broad exposure to the Technology - Cloud Computing segment of the equity market.
An increasingly popular option among retail and institutional investors, passively managed ETFs offer low costs, transparency, flexibility, and tax efficiency; they are also excellent vehicles for long term investors.
Additionally, sector ETFs offer convenient ways to gain low risk and diversified exposure to a broad group of companies in particular sectors. Technology - Cloud Computing is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 7, placing it in top 44%.
The fund is sponsored by First Trust Advisors. It has amassed assets over $5.83 billion, making it one of the largest ETFs attempting to match the performance of the Technology - Cloud Computing segment of the equity market. 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.
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.
Annual operating expenses for this ETF are 0.60%, making it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 0.81%.
Sector Exposure and Top Holdings
ETFs offer a diversified exposure and thus minimize single stock risk but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.
This ETF has heaviest allocation in the Information Technology sector--about 84% of the portfolio. Telecom and Consumer Discretionary round out the top three.
Looking at individual holdings, Digitalocean Holdings, Inc. (DOCN) accounts for about 5% of total assets, followed by Oracle Corporation (ORCL) and Mongodb, Inc. (MDB).
The top 10 holdings account for about 36.18% of total assets under management.
Performance and Risk
The ETF has lost about -3.39% and it's up approximately 5.06% so far this year and in the past one year (as of 01/12/2022), respectively. SKYY has traded between $92.24 and $119.56 during this last 52-week period.
The ETF has a beta of 0.97 and standard deviation of 26.50% for the trailing three-year period, making it a medium risk choice in the space. With about 67 holdings, it effectively diversifies company-specific risk.
First Trust Cloud Computing ETF holds a Zacks ETF Rank of 2 (Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, SKYY is an outstanding option for investors seeking exposure to the Technology ETFs segment of the market. There are other additional ETFs in the space that investors could consider as well.
WisdomTree Cloud Computing ETF (WCLD) tracks BVP NASDAQ EMERGING CLOUD INDEX and the Global X Cloud Computing ETF (CLOU) tracks INDXX GLOBAL CLOUD COMPUTING INDEX. WisdomTree Cloud Computing ETF has $1.04 billion in assets, Global X Cloud Computing ETF has $1.10 billion. WCLD has an expense ratio of 0.45% and CLOU charges 0.68%.
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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First Trust Cloud Computing ETF (SKYY): ETF Research Reports
Oracle Corporation (ORCL): Free Stock Analysis Report
MongoDB, Inc. (MDB): Free Stock Analysis Report
Global X Cloud Computing ETF (CLOU): ETF Research Reports
WisdomTree Cloud Computing ETF (WCLD): ETF Research Reports
DigitalOcean Holdings, Inc. (DOCN): Free Stock Analysis Report
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