The First Trust ISE Cloud Computing Index Fund (NasdaqGM: SKYY) entered Monday with a year-to-date gain of more than 9%, one of the more impressive performances among technology industry exchange traded funds. However, SKYY will be put to the test by a spate of upcoming earnings reports from cloud companies.
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.
SKYY tracks the ISE Cloud Computing Index, which “is a modified equal dollar weighted index designed to track the performance of companies actively involved in the cloud computing industry. To be included in the index, a security must be engaged in a business activity supporting or utilizing the cloud computing space, listed on an index-eligible global stock exchange and have a market capitalization of at least $100 million,” according to First Trust.
Earnings Tests for Cloud Investors
Some of cloud stocks investors should monitor include the groups marquee names as well as some mid-tier players.
“Salesforce.com (CRM) and Workday (WDAY) are the big dogs in this market, with market capitalizations of $89 billion and $25 billion, respectively, and years of operating as public companies under their belts,” reports Tiernan Ray for Barron’s.
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Salesforce.com accounts for 4.66% of SKYY’s weight. The ETF’s largest holding is Netflix Inc. (NASDAQ: NFLX) at a weight of 6.72%.
“Morgan Stanley’s software analysts Stan Zlotzsky and Brian Essex today are bullish, to an extent. While the stock performance this year suggests ‘heightened investor expectations,’ they believe there are ‘pockets of opportunity,’” according to Barron’s.
Amazon.com Inc. (NASDAQ: AMZN), SKYY’s second-largest holding, already reported a massive jump cloud revenue for its most recently reported quarter. The $1.41 billion SKYY holds 30 stocks.
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