Cloud Computing ETFs May Power Through the Volatility | ETF Trends

While the volatility has dragged back broad swathes of the equities market, investors can still find pockets of opportunity and growth through targeted exchange traded fund picks.

When investing in volatile markets, investors should focus on stocks with strong growth stories that have been “unfairly punished by short-term market noise,” Mark Tepper, president at Strategic Wealth Partners, told CNBC, particularly highlighting the cloud computing and software segment as a service in this environment.

“If you stick with companies whose growth stories are less impacted by market noise, you’re going to do well,” Tepper added.

For example, Tepper underscored the opportunity in companies like Microsoft (NasdaqGS: MSFT) that are expanding into cloud computing.

“When it comes to cloud computing, we like Microsoft. They are growing their cloud business by over 40% annually and they offer this hybrid solution that’s interesting to lots of businesses that had invested a lot of money into internal IT infrastructure in the past,” Tepper said.

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.

ETF investors who are interested in the quickly growing cloud computing business can look to sector-specific ETFs to hone in on this market segment. For instance, the First Trust ISE Cloud Computing Index Fund (NasdaqGM: SKYY) was the first ETF dedicated to cloud computing companies.

SKYY tracks the ISE Cloud Computing Index, which tracks 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.

The ETF’s holdings are split among three categories: pure play cloud companies, technology conglomerates with cloud exposure and non-pure play cloud companies that provides services to companies in the cloud space.

More recently, Global X debuted the Global X Cloud Computing ETF (Nasdaq: CLOU), which targets the Indxx Global Cloud Computing Index. CLOU’s holdings are positioned to benefit from the increased adoption of cloud computing technology, including companies whose principal business is in offering computing Software-as-a-Service (SaaS), Platform-as-a-Service (PaaS), Infrastructure-as-a-Service (IaaS), managed server storage space and data center real estate investment trusts, and/or cloud and edge computing infrastructure and hardware.

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