Could BetaShares Cloud Computing ETF (ASX: CLDD) be one of the best exchange-traded funds (ETFs) to invest in?
What is CLDD ETF?
This investment gives investor exposure to leading companies that are taking advantage of the cloud computing megatrend.
There are a total of 34 names in the portfolio. To be included in the portfolio, a company’s share of revenue from cloud computing services must meet a minimum threshold. The more revenue made through cloud-based services, the more that business is prioritised in the portfolio.
What are the companies in the portfolio?
You may recognise some of the names in the top 10 holdings list including: Zscaler, Paylocity, Paycom Software, Shopify, Dropbox, Anaplan, Netflix, Salesforce.com, Everbridge and Workiva.
A few more names in the portfolio may be recognisable too like Xero Limited (ASX: XRO), Zoom Video, Microsoft, Amazon, Alphabet (Google) and Alibaba.
In terms of the sector allocation, there are a number of different areas. However, application software gets the biggest allocation at 55.3%. Internet services & infrastructure (16.2%), systems software (13.8%), specialised real estate investment trusts (REITs) and movies & entertainment (3.8%) were the other sectors that got a weighting of more than 3%.
Why BetaShares Cloud Computing ETF could be a really strong ETF
BetaShares itself says:
“Cloud computing has been one of the strongest-growing segments of the technology sector, and given much of the world’s digital data and software applications are still maintained outside the cloud, continued strong growth has been forecast.”
The fact that services are delivered through the cloud is likely to mean that these businesses have high gross profit margins, so as they get bigger, profitability can rapidly increase, leading to good shareholder returns hopefully. Profitability is usually what investors like to think about when valuing a business.
But there’s likely to be volatility, which isn’t necessarily a bad thing. Lower prices can mean a better entry price.
The businesses introducing new innovative services are ones that give themselves a good chance of capturing national and global attention.
