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Finance

3 A-Rated Cloud ETFs to Buy Right Now

Most companies providing cloud-based services grew exponentially last year as COVID-19 pandemic-led restrictions compelled most businesses to operate remotely. Furthermore, the resurgence of COVID-19 cases owing to the rapid spread of the highly transmissible Delta variant of the coronavirus has lead to the re-imposition of restrictions in several parts of the world, which should further increase the demand for cloud-based services.

With continuous innovation in artificial intelligence (AI) and machine learning (ML), the cloud industry is expected to grow exponentially. According to a Fortune Business Insights report, the global cloud computing market is expected to grow at a 17.9% CAGR between 2021 – 2028. While it may be risky to bet on a particular cloud stock with rising competition in the cloud space and increasing vulnerability to cyber-attacks, a less risky way could be to bet on cloud-stock-focused ETFs.

So, we think cloud-based ETFs First Trust Dow Jones Internet Index Fund (FDN), First Trust Cloud Computing ETF (SKYY), and Global X Cloud Computing ETF (CLOU) could be solid bets now. These ETFs are rated A (which translates to Strong Buy) in our proprietary POWR Ratings system.

Click here to check out our Cloud Computing Industry Report for 2021

First Trust Dow Jones Internet Index Fund (FDN)

FDN is an exchange-traded fund launched and managed by First Trust Advisors L.P. It invests in the stocks of companies across information technology, software and services, IT services, internet services, and infrastructure sectors. In addition, the fund seeks to track the performance of the Dow Jones Internet Composite Index by using a full replication technique.

With $10.86 billion in AUM, FDN’s top holding is Amazon.com, Inc. (AMZN), which has a 9.30% weighting in the fund, followed by Facebook, Inc. (FB) at 7.88% and Alphabet Inc. (GOOGL) at 5.38%. It has a 0.51% expense ratio of 0.51% versus  the 0.37% category average.

FDN has gained 24% over the past nine months and 31.1% over the past year.

FDN’s POWR Ratings are consistent with its growth outlook. It has an overall A rating, which equates to Strong Buy in our proprietary rating system. In addition, it has an A grade for Buy & Hold and Trade. Get FDN’s Peer grade rating here.

FDN is ranked #3 of 118 ETFs in the A-rated Technology Equities ETFs group.

First Trust Cloud Computing ETF (SKYY)

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Launched and managed by First Trust Advisors L.P., SKYY invests in public equity markets of the global region. It also invests in the growth and value stocks of companies across diversified market capitalizations. In addition, it seeks to track the performance of the ISE CTA Cloud Computing Index by using a full replication technique.

Microsoft Corporation (MSFT) has a 3.88% weighting in the fund as its top holding, followed by GOOGL at 3.85%, and Oracle Corporation (ORCL) at 3.80%. The fund has $6.29 billion in AUM. Its 0.60% expense ratio compares to the0.55%  category average.

SKYY pays $0.18 annually in dividends to its investors, which yields 0.17%. Its average four-year dividend yield stands at 0.45%. Over the past year, the fund has gained 40.5%. In addition, it has gained 31.8% over the past nine months.

It’s no surprise that SKYY has an overall A rating, which equates to Strong Buy in our proprietary rating system. In addition, it has an A grade for Trade and Buy & Hold.

Click here to access SKYY’s Peer grade as well. SKYY is ranked #6 in the Technology Equities ETFs group.

Global X Cloud Computing ETF (CLOU)

Managed and launched by Global X Management Company LLC, CLOU invests in stocks of companies that operate across computing software-as-a-service, platform-as-a-service, infrastructure-as-a-service, managed server storage space, and data center real estate investment trusts. In addition, it seeks to track the Indxx Global Cloud Computing Index’s performance by using a full replication technique.

CLOU has $1.37 billion in AUM. Its top holdings include Zscaler, Inc. (ZS) with a 5.10% weighting in the fund, Shopify, Inc. (SHOP) at 4.89%, and Paycom Software, Inc (PAYC) with 4.81%. The fund’s 0.68% expense ratio compares to the 0.55% category average.

Its average four-year dividend yield stands at 0.02%. The fund has gained 32.6% over the past year and generated 21.2% returns over the past nine months.

CLOU’s strong fundamentals are reflected in its POWR Ratings. It has an overall A rating, which equates to Strong Buy in our proprietary rating system. It also has an A grade for Trade and Buy & Hold.

CLOU is ranked #21 in the Technology Equities ETFs group. In addition to this, one can access CLOU’s Peer grade here.

Click here to check out our Cloud Computing Industry Report for 2021

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FDN shares were trading at $241.15 per share on Tuesday afternoon, down $1.08 (-0.45%). Year-to-date, FDN has gained 13.63%, versus a 19.33% rise in the benchmark S&P 500 index during the same period.

About the Author: Nimesh Jaiswal

Nimesh Jaiswal’s fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles. More…

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