Investing in the Cloud

Jim Woods

Jim Woods has over 20 years of experience in the markets from working as a stockbroker, financial journalist, and money manager.

With companies and programs relying more on cloud computing every year, the technology offers one of the most relevant and important innovations of recent times.

The Global X Cloud Computing ETF (CLOU) seeks to invest in companies positioned to benefit from the increased adoption of cloud computing technology. CLOU aims to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of the Indxx Global Cloud Computing Index.

That index includes companies whose principal business is to offer computing Software-as-a-Service (SaaS), Platform-as-a-Service (PaaS), Infrastructure-as-a-Service (IaaS), managed server storage space and data center real estate investment trusts and/or cloud and edge computing infrastructure and hardware.

The fund provides its shareholders with exposure to cloud computing companies that license and deliver software over the internet by subscription, supplies a platform to create software online and own or manage data centers or make or distribute related hardware.

These companies must produce at least 50% of their revenue from these activities to make the cut. The index also allows businesses that earn more than $500 million from such actions, regardless of revenue percentage. Aggregate exposure to such firms is capped at 10%. The index includes cap-weighted stocks in both developed and emerging markets.

Among the fund’s top holdings are William Lyon Homes (NYSE: WLH), Hibbett Sports, Inc. (NASDAQ: HIBB), Ultra Clean Holdings Inc. (NASDAQ: UCTT), Group 1 Automotive, Inc. (NYSE: GPI) and Century Communities, Inc. (NYSE: CCS). Its top five sectors consist of Consumer Cyclicals, 38.73%; Industrials, 16.09%; Basic Materials, 13.46%; Financials, 8.34%; and Technology, 7.64%.

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The fund currently has $164.34 million assets under management and an average spread of 0.45%. It has an expense ratio of 0.35%, meaning it is slightly less expensive, on average, to hold in comparison to other exchange-traded funds.

CLOU is a relatively new fund that Global X announced in April 2019 and heavily weighted in Consumer Cyclicals. While the ETF does provide exposure to the world of cloud computing, this opportunity may not be appropriate for all portfolios. Investors are urged to exercise their due diligence in deciding whether or not this fund is suitable for their investing goals.

As always, I am happy to answer any of your questions about ETFs, so do not hesitate to send me an email. You just may see your question answered in a future ETF Talk.

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