With the technology sector soaring this year, some investors are considering more tactical plays, such as the First Trust ISE Cloud Computing Index Fund (NasdaqGM: SKYY). SKYY, the first and only exchange traded fund dedicated to cloud computing equities, is up nearly 18% year-to-date.
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.
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.
Long-term trends bode well for SKYY.
“The software market will jump the most, growing from $39 billion in 2016 to an estimated $110 billion in 2020, but infrastructure and platform should soar as well, from $38 billion to $70 billion and $13 billion to $30 billion, respectively, according to estimates from ClearBridge Investments,” said Morningstar in a research note.