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Cloud Technology Monthly Report | September

  • Global Cloud adoption rates and spending hit new record highs. 
  • Work From Home behaviours are likely to become more permanent amongst tech savvy workers. 
  • Apple’s Cloud usage helped power it to $2 trillion valuation. 
  • Hybrid/Multi- Cloud usage increasingly common amongst enterprises. 

 

Performance Review

Monthly Performance of SKYY

HAN-GINS Cloud computing ETF (SKYY) enjoyed strong returns this month, benefiting from the acceleration of remote working behaviours amongst consumers and workers.  In August, SKYY posted a gain of 7.94%, and is now up 22.64% for 2020.  Over the past 12 months, our cloud computing ETF has gained an impressive 40.44%. Its NAV hit a new all-time high of $11.65 on 1st Setember*.

SKYY’s broad holding of Cloud Technology firms across infrastructure, platform, security and software as a service, ensure it is a major beneficiary of the global Work From Home phenomenon.  The global phenomenon has powered our top performers for August – with Salesforce up a record 39.93%, followed by Zoom Video up 28.04%, NVIDIA 26.00%, Apple 21.66%, Cloudera 17.21%, Adobe 15.55%, Alibaba 14.35%, Alphabet (Google) 9.52% and Amazon 9.05%.  The rapid adoption rates illustrates clearly the future has arrived far sooner for Cloud than many previously expected.

For the year to date 2020 leading performers in our portfolio include: 

NVIDIA (127.61%), Amazon (86.76%), Apple (76.99%) and Salesforce (67.64%) [1]. The month of August saw a number of our largest holdings hitting new highs for 2020.  This includes Apple, Amazon, Alibaba, Splunk and NVIDIA.  See table on page four for full breakdown.  Given these huge gains, we expect some profit taking to occur prior to the US election.

Large scale Cloud adoption by governments (including the Pentagon’s $10bn JEDI project), and across schools, hospitals and multinationals, ensures long term subscription revenues for Cloud providers.  This has led to a rerating across the entire theme as recurring revenues for the likes of Salesforce has exceeded prior analyst expectations.  Both large and smaller Cloud players have enjoyed higher reratings.)

Salesforce’s impressive gains has led it to be our largest single holding, while NVIDIA’s impressive gains has propelled it to our 3rd largest holding after Apple.  Impressive gains by Adobe, Splunk, Zoom and Twilio have ensured they are also amongst our Top 10 holdings.

It is clear COVID has significantly fast-tracked adoption rates. Global tech players involved in both the infrastructure and platform side of Cloud such as Microsoft, Amazon and Google increasingly rely on the Cloud to power its earnings. Cloud is now embedded in mainstream work-life activities – from streaming services, video conferencing to social media and remote academic learning (schools/universities) and remote work.

Cloud Technology ETF (SKYY) Performance

August  YTD*  12 Month** 
7.94%  22.64%  40.44% 

Past performance is no guarantee of future performance. Source: Bloomberg/HANetf *YTD figures based on 01.01.20 - 31.08.20 **12 Month figures based on 01.09.19 -31.08.20

HAN-GINS Cloud Technology UCITS ETF (SKYY) - 1 Year Performance (01/09/19-31/08/20) 

Past performance is not an indicator for future results and should not be the sole factor of consideration when selecting a product. Investors should read the prospectus of the Issuer (“Prospectus”) before investing and should refer to the section of the Prospectus entitled ‘Risk Factors’ for further details of risks associated with an investment in this product. Source: Bloomberg Data as of 31.08.2020

 

Industry News

Increasingly, companies are embracing a multi-cloud approach, moving away from a single provider.  Flexera’s latest survey clearly shows this move.  This reflects IBM’s big bet on Red Hat which it acquired last year.  The current Big Tech battleground within Cloud is offering such hybrid services to clients who seek to transfer data easily across multiple cloud platforms.

 

For illustrative purposes only
Source:  https://www.flexera.com/blog/industry-trends/trend-of-cloud-computing-2020/

 

In addition, the fast tracking of Cloud adoption can be seen in the latest 2020 survey results in the chart below:

For illustrative purposes only
Source:  https://www.flexera.com/blog/industry-trends/trend-of-cloud-computing-2020/

 

Given the flexibility cloud subscription services afforded users and the significant cost savings - versus maintaining onsite hardware – IT budgets are increasingly shifting away from hardware to Cloud.  We expect global cloud spending to hit a new all-time high for the 3rd quarter – as cloud spending globally continues to gain momentum.  As Work From Home behaviours become ingrained amongst tech savvy workers – pre Pandemic work rules will likely not revert.  Cloud now drives the Internet of Things, from Social Media and Digital Entertainment to Healthcare Innovation (trackers and telemedicine), Future Cars, Cyber Security and AI-Robotics.  Many of the larger Cloud players are vertically integrated – offering a variety of cloud services form software to infrastructure and security too.

 

Constituent News

Below we highlight some of the best performing cloud computing ETF holdings in SKYY’s portfolio.  Included are the stock’s individual price gains, as well as its contribution to SKYY’s portfolio return. The recent addition of Twilio has been a top performer and contributor to our August return. This broader definition of cloud includes all cloud communications, ensuring SKYY is one of the broadest cloud offers across all 3 key cloud areas of Infrastructure, Platform/Software as a Service.

Top 10 Constituents Weight 
Salesforce.com  5.01% 
Apple Inc  4.90% 
NVIDIA Corp  4.88% 
Alibaba Group  4.48%
Amazon 4.34% 
Zoom Video  4.34% 
Twilio Inc  4.32% 
SAP SE  4.22% 
Adobe Inc  4.07% 
Splunk Inc 3.94% 

 

Region Breakdown Weight 
North America  90.24% 
Europe 4.22% 
Asia 5.55%

Source: Bloomberg, HANetf. Data as of 31.08.20

 

Cloud Tech giants Amazon, Microsoft and Apple all touched new highs during August.  Apple exceeded a $2 trillion valuation by early September.  Amazon and Microsoft followed with valuation topping out at $1.6 trillion.  Microsoft’s commercial cloud revenue topped $50 billion for the year, for the very first time (see slide below), showing the growth of Microsoft’s Cloud product line versus its other business areas.   

Below are the leading contributors to SKYY’s year to date and August performance leaders – led by NVIDIA, Salesforce, Zoom, Amazon, Apple, Alibaba and Microsoft.  Amongst the most impressive returns for August were some of our smaller holdings too including:  Nutanix and Avaya – both up over 20% for August.  For the year Kingsoft, one of China’s leading cloud players with data centres across Asia – has gained 108.3%.

 Top Performing Contributors - Year to Date 2020

NAME OF HOLDING

% Average Weight

Total Return (%)

Contribution to Return (%)

NVIDIA CORP

4.94

127.61

4.63

AMAZON.COM INC

4.69

86.76

3.54

APPLE INC

4.38

76.99

2.90

SALESFORCE.COM INC

4.19

67.64

2.40

ADOBE INC

4.33

55.66

2.13

MICROSOFT CORP

4.39

44.15

1.80

SPLUNK INC

3.70

46.44

1.61

EQUINIX INC

4.45

36.89

1.47

ALIBABA GROUP HOLDING-SP ADR

4.07

35.33

1.42

ZOOM VIDEO COMMUNICATIONS-A

0.75

24.89

0.96

CITRIX SYSTEMS INC

2.60

31.65

0.92

TWILIO INC - A

0.86

20.00

0.88

ALPHABET INC-CL A

4.08

21.66

0.87

SAP SE

3.74

21.60

0.80

FORTINET INC

2.56

23.65

0.73

DELL TECHNOLOGIES -C

1.67

28.59

0.57

ORACLE CORP

3.94

9.44

0.44

CROWDSTRIKE HOLDINGS INC - A

0.42

18.38

0.41

RINGCENTRAL INC-CLASS A

0.59

11.74

0.37

KINGSOFT CORP LTD

0.47

108.33

0.35

ZSCALER INC

0.25

19.54

0.25

PALO ALTO NETWORKS INC

0.67

6.78

0.24

QUALCOMM INC

3.03

5.10

0.17

QUALYS INC

0.48

27.31

0.15

Past performance is no guarantee of future performance
Source: FactSet/Solactive and Bloomberg Data as of 31/08/20

 

Top Performing Contributors - August 2020

NAME OF HOLDING

% Average Weight

Total Return (%)

Contribution to Return (%)

SALESFORCE.COM INC

4.03

39.93

1.52

NVIDIA CORP

4.49

26.00

1.08

ZOOM VIDEO COMMUNICATIONS-A

3.73

28.04

0.99

APPLE INC

4.58

21.66

0.95

ALIBABA GROUP HOLDING-SP ADR

4.27

14.35

0.60

ADOBE INC

3.83

15.55

0.59

AMAZON.COM INC

4.23

9.05

0.38

ALPHABET INC-CL A

3.85

9.52

0.37

MICROSOFT CORP

3.83

10.28

0.37

CROWDSTRIKE HOLDINGS INC - A

2.08

11.07

0.24

INTEL CORP

3.01

7.47

0.22

DELL TECHNOLOGIES -C

2.07

10.45

0.20

SAP SE

4.30

4.34

0.19

SPLUNK INC

3.82

4.53

0.14

NUTANIX INC - A

0.55

29.38

0.14

ZSCALER INC

1.25

10.39

0.13

ORACLE CORP

3.66

3.19

0.12

NETAPP INC

1.29

6.98

0.08

CLOUDERA INC

0.45

17.21

0.07

INTL BUSINESS MACHINES CORP

3.78

1.61

0.06

TERADATA CORP

0.35

15.95

0.05

INSIGHT ENTERPRISES INC

0.27

19.99

0.05

CITRIX SYSTEMS INC

2.34

1.71

0.04

VMWARE INC-CLASS A

1.49

3.02

0.04

 

(Source:  2008-2020 Annual Report filings)

 

Salesforce’s blow out earnings, have helped drive a rerating in the Cloud Computing area.  Their superior earnings along with Zoom’s impressive earnings - confirm how Cloud adoption rates are booming globally.  Until recently, analysts had valued both Salesforce and Facebook at discounts to their peers (Adobe, Microsoft, Apple etc.) 

 

Fund Details

HAN-GINSCloud Technology UCITS ETF, is a UCITS compliant domiciled in Ireland.  

The SKYY cloud ETF tracks the Solactive Cloud Technology Index and seeks to provide exposure to companies active in the field of cloud computing, such as service providers or producers of equipment or software focused on cloud computing.  

Please remember that the value of your investment may go down as well as up and past performance is no indication of future performance.

 

EXCHANGE BB CODE RIC ISIN CURRENCY INCOME
London Stock Exchange SKYY LN SKYY.L IE00BDDRF924 USD Acc
London Stock Exchange SKYP LN SKYP.L IE00BDDRF924 GBP Acc
Borsa Italiana SKYY IM SKYY.MI IE00BDDRF924 EUR Acc
XETRA 5XYE GY 5XYE.DE DE000A2N5XC4 EUR Acc
SIX SKYYSW SKYY.S IE00BDDRF924 CHF Acc

 

 

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