If you’re looking to invest in the cloud computing revolution, but don’t want to put all your eggs in one basket or aren’t too certain about the companies behind the trend, you don’t have to be the helpless investor any longer. First Trust last July released a new ETF that specifically invests in companies involved in providing cloud computing products and services.
First Trust ISE Cloud Computing Index Fund (SKYY), is an ETF that holds 40 companies that are either a pure play on or closely affiliated with cloud computing. The fund changes .60% annually to holders, which isn’t great, but isn’t horrible either.
SKYY might be a good alternative for many investors looking to bank on an emerging trend without having to pick one or a handful of select companies. In new and emerging industries, it’s often difficult to pick the company that will come out on top. Those that do not come out on top often come out in the dustbin. The disparity between winners and losers in new industries is typically very stark.
Holding an ETF like SKYY will provide investors with a good deal of diversification, reduce investor’s research needs, and not hit them with a huge premium (maintenance fee). On July 6th SKYY opened up around $20 per share. With the market decline it is now trades around $17.25.
Many of the companies held in SKYY’s fund are trading at high premiums. This is not shocking given the potential growth and other expectations association with the industry. If you believe that 2011 and 2012 will see growth in the U.S. and/or abroad, then would have to assume business and consumer spending will increase.
Increases in spending will cause more funds to be allocated towards upgrading technology. Even companies looking to cut costs will benefit from some cloud computing services. I would certainly contend that you would need to have a bullish outlook for the latter part of 2011 and early 2012 to put money on this fund. Yet, with so much bearishness around these days, it does not take a whole lot to be a bull.
Disclosure: No Position