Many investors have heard the term cloud computing, which allows for the ability to have a storehouse of information online that can be accessed from anywhere, on any device. Cloud companies provide on-demand services to a centralized pool of information technology resources via a network connection.
Cloud computing has become so popular in this increasingly fast-paced world because it can include the delivery of computing services such servers, storage, databases, networking, software, analytics, and intelligence on a mobile basis, via the Internet (“the cloud”), thereby enabling faster innovation, flexible resources, and economies of scale. Moreover, users typically pay only for cloud services they use, helping to lower operating costs, run infrastructure more efficiently, and help businesses to adjust and scale as their needs change.
For investors looking to use ETFs to participate in these technologies, there are only a handful of choices that currently exist, one of which is the WisdomTree Cloud Computing Fund (WCLD).
Over the last decade, the Information Technology industry has grown to become one of the largest sectors in the S&P 500 Index. When combined with the Communications Services sector, the companies in these sectors represent roughly one-third of the total market. For investors seeking to generate excess returns, this creates a challenging mix of slower-growing mature businesses with faster-growing emerging ones. Cloud-based businesses represent compelling opportunities for investors that are looking for industry-leading operating leverage as shown by gross margins and sales growth.
WCLD offers a number of benefits for its 0.45% expense ratio. The fund provides targeted exposure to emerging, fast-growing U.S.-listed companies (including ADRs) that are primarily focused on cloud software and services. Investors can use the fund to replace or complement growth-oriented and technology sector investment strategies, as well as to satisfy the demand for prospective high growth companies, with the potential for better sales growth, margins, and operating leverage.
According to Wisdom Tree, “The investment seeks to track the price and yield performance, before fees and expenses, of the BVP Nasdaq Emerging Cloud Index. Under normal circumstances, at least 80% of the fund’s total assets (exclusive of collateral held from securities lending) will be invested in component securities of the index and investments that have economic characteristics that are substantially identical to the economic characteristics of such component securities. The index is designed to track the performance of emerging public companies primarily involved in providing cloud computing software and services to their customers. It is non-diversified.”
For investors looking for a way to allocate funds to a dynamic and rapidly growing technological space, WCLD may be worth a look.
For more market trends, visit ETF Trends.