SKYY High for the Cloud Computing ETF

Active followers of the exchange traded funds industry may remember the reception the First Trust ISE Cloud Computing Index Fund (NasdaqGM: SKYY) when it debuted nearly four years ago.

Plenty of folks had something to say about SKYY and most of the commentary was to dismiss the ETF as too much of niche product. Niches or not, critics are eating crow as SKYY has returned 49.1% over the past two years, a performance that is about 50% better than the S&P 500 over the same period.

Year-to-date, SKYY is up 6.9%, which is 60 basis points ahead of the Nasdaq Composite and nearly triple the returns delivered by the S&P 500.

Cloud computing refers to a mode of accessing digital information from the internet through web-based tools and applications, instead of directly connecting to a server. The desired data and software packages are stored in servers where a consumer can access them anywhere as long as one has access to the internet. It is SKYY’s somewhat loose interpretation of cloud computing companies that has driven the ETF’s stellar performance. [Tech Investors Love the Cloud]

For example, SKYY’s largest holding is Netflix (NasdaqGS: NFLX). Netflix, classified as a consumer discretionary company and not often viewed as a true cloud player, commands a weight of 5.1% in SKYY, meaning SKYY has one of the largest Netflix allocations of any ETF.

Amazon (NasdaqGS: AMZN), more of a cloud company than Netflix though still a member of the discretionary sector, is SKYY’s fourth-largest holding at a weight of 3.9%. With Netflix and Amazon up 63.9% and 26%, respectively, this year, SKYY shareholders probably are not complaining about the inclusion of those stocks in the ETF. [Netflix ETFs]