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Is WisdomTree Cloud Computing ETF (WCLD) a Strong ETF Right Now?

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The WisdomTree Cloud Computing ETF (WCLD - Free Report) made its debut on 09/06/2019, and is a smart beta exchange traded fund that provides broad exposure to the Technology ETFs category of the market.

What Are Smart Beta ETFs?

For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.

Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.

But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.

Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.

Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.

Fund Sponsor & Index

Managed by Wisdomtree, WCLD has amassed assets over $782.04 million, making it one of the larger ETFs in the Technology ETFs. Before fees and expenses, this particular fund seeks to match the performance of the BVP NASDAQ EMERGING CLOUD INDEX .

The BVP Nasdaq Emerging Cloud Index is an equally weighted Index, designed to measure the performance of emerging public companies focused on delivering cloud-based software to customers.

Cost & Other Expenses

Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.

Annual operating expenses for WCLD are 0.45%, which makes it one of the cheaper products in the space.

WCLD's 12-month trailing dividend yield is 0%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

For WCLD, it has heaviest allocation in the Information Technology sector --about 83% of the portfolio --while Financials and Telecom round out the top three.

Taking into account individual holdings, Squarespace Inc - Class A (SQSP - Free Report) accounts for about 2.07% of the fund's total assets, followed by Momentive Global Inc (MNTV) and Asana Inc - Cl A (ASAN - Free Report) .

The top 10 holdings account for about 17.79% of total assets under management.

Performance and Risk

Year-to-date, the WisdomTree Cloud Computing ETF has added roughly 36.88% so far, and it's up approximately 18.95% over the last 12 months (as of 07/20/2023). WCLD has traded between $22.93 and $34.42 in this past 52-week period.

The ETF has a beta of 1.06 and standard deviation of 42.32% for the trailing three-year period. With about 70 holdings, it effectively diversifies company-specific risk.

Alternatives

WisdomTree Cloud Computing ETF is an excellent option for investors seeking to outperform the Technology ETFs segment of the market. There are other ETFs in the space which investors could consider as well.

Global X Cloud Computing ETF (CLOU - Free Report) tracks INDXX GLOBAL CLOUD COMPUTING INDEX and the First Trust Cloud Computing ETF (SKYY - Free Report) tracks ISE Cloud Computing Index. Global X Cloud Computing ETF has $636.73 million in assets, First Trust Cloud Computing ETF has $3.07 billion. CLOU has an expense ratio of 0.68% and SKYY charges 0.60%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Technology ETFs.

Bottom Line

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.

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