Profit From Cloud Computing Boom With This ETF

Video length: 00:05:25

Cloud is fast emerging as the new model of computing in the technology industry. Many companies now prefer to rely on cloud based service providers for highly specialized computing services so that they can focus on their core businesses.

Cloud computing is more secure as also cheaper than traditional systems. It also provides firms a lot of flexibility and agility in scaling up or down their computing capacity according to business needs.

According to International Data Corporation (IDC), public cloud spending will experience a 21.5% compound annual growth rate (CAGR) – nearly seven times the rate of overall IT spending growth. By 2020, IDC forecasts public cloud spending will reach $203.4 billion worldwide.

As of now, three tech titans —Amazon (AMZN - Free Report), Microsoft (MSFT - Free Report) and Google/Alphabet (GOOGL - Free Report) — control much of the market for cloud computing. From the recent earnings reports they have been investing heavily in their cloud computing business and those investments are bearing fruit now. Revenue growth in cloud businesses was very strong.

The First Trust ISE Cloud Computing Index Fund (SKYY - Free Report) is the only US listed ETF that is exclusively focused on this niche space. The product classifies companies operating in this space into three segments: 1) Pure play cloud computing companies 2) Non pure play cloud computing companies that provide goods and services to the industry and 3) Technology conglomerate cloud computing companies, and assigns equal weights to each company within its classification.

FANG stocks—Facebook (FB - Free Report), Amazon, Netflix (NFLX - Free Report) and Google—are among the top holdings.

With an expense ratio of 60 basis points, the ETF is not cheap, particularly compared with broad tech ETFs, but expenses are in-line with many another niche ETFs.

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Disclosure: None.

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