Social distancing has allowed users to lean heavily on cloud computing, which is driving growth for companies like Datadog, Twilio, and Upwork. From a macro perspective and through the eyes of factor investing, is this a sign of more opportunities to come for growth?
“All three have optimized their business model for top-line growth, spending most of their incoming revenue on research and development, marketing, and other growth-promoting efforts rather than collecting profits,” a Motley Fool article noted.
The impact of cloud computing can be felt as more companies are utilizing the technology at a rapid pace to power their core businesses. That’s why Global X ETFs, the New York-based provider of exchange-traded funds, recently launched the Global X Cloud Computing ETF (Nasdaq: CLOU).
Seeking to track the Indxx Global Cloud Computing Index, the fund holds a basket of companies that potentially stand to benefit from the continuing proliferation of cloud computing technology and services. The cloud computing industry refers to companies that (i) license and deliver software over the internet on a subscription basis (SaaS), (ii) provide a platform for creating software applications which are delivered over the internet (PaaS), (iii) provide virtualized computing infrastructure over the internet (IaaS), (iv) own and manage facilities customers use to store data and servers, including data center Real Estate Investment Trusts (REITs), and/or (v) manufacture or distribution infrastructure and/or hardware components used in cloud and edge computing activities.
Growth opportunities can be had in small cap and mid cap companies that are still in the early stages of their businesses, which can lead to scalable growth under the right stewardship. As such, investors can look at this pair of ETFs— the Principal U.S. Small-Cap Multi-Factor Index ETF (PSC) and the Principal U.S. Small-MidCap Multi-Factor Core Index ETF (PSM).
PSC seeks investment results that closely correspond, to the performance of the Nasdaq US Small Cap Select Leaders Index. The index uses a quantitative model designed to identify equity securities (including growth and value stock) of small-capitalization companies in the Nasdaq US Small Cap Index (the “parent index”) that exhibit potential for high degrees of sustainable shareholder yield, pricing power, and strong momentum, while adjusting for liquidity and quality.
PSM seeks to provide investment results that closely correspond, before expenses, to the performance of the Nasdaq US Small Mid Cap Select Leaders Core Index. The index uses a quantitative model designed to identify equity securities of companies in the Nasdaq US Small Cap Index and Nasdaq US Mid Cap Index that exhibit potential for high degrees of sustainable shareholder value, growth, and strong momentum.
For more market trends, visit ETF Trends.