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This Cloud Play Is Your “In” on a $164.3 Billion Market

0 | By Michael A. Robinson

I’ve just made a big tech change in my home, and it’s about time.

I am wholeheartedly embracing cloud computing.

When it comes to adopting new consumer tech, price, convenience and ease of use are factors just about everyone considers before taking the plunge – and I’m no different.

Back on Jan. 22, for instance, I told you I was getting ready to upgrade the wireless network for my home office. And I mentioned a great way to play the wireless networking market with the Wi-Fi router firm Ubiquity Networks Inc. (Nasdaq:UBNT).

So I’m happy to report that I installed three Ubiquity WiFi routers in my home… and I love them. No wonder this company is on fire.

But after I set up the Ubiquity system, I also realized I could break from my reliance on hard-disk computing and fully embrace cloud data storage and applications. That’s why I also upgraded my iCloud account through Apple Inc. (Nasdaq:APPL), so I can take full advantage of its powerful platform.

What a difference it’s made. I now have a powerful one-two punch.

And I’m not alone here. In fact, I’ve joined a tech segment that is growing at nearly 28% a year on billions in revenue.

Which is why today, I’m going to show you how to capitalize on this trend. And show you a great way to play this high-growth field…

Check it out…

Migrating to the Cloud

I’ve been involved with the cloud as tech analyst for several years. During that time, members of my monthly newsletter, Nova-X Report, have scored market-crushing gains from the sector several times.

On a personal level, I have relied on a cloud service to copy all of my data in case of a catastrophic failure. You probably know what I’m talking about…

I’ve got years’ worth of investment info, my favorite music, and the precious family home movies, videos and more that I back up to a hard disk. Simply stated, I can’t imagine losing any of this.

But I have made only limited use of iCloud, until now. See, after reconfiguring my wireless network, I realized that the shift from reliance on local computing to the cloud would work great for my family and me.

That’s because now that I have 2 terabytes of data available to me on iCloud, I can become even more portable. My plan is to use a newly redesigned Mac Mini as my desktop unit, and my new MacBook Air as my mobile computer.

Doing so means I can open a document on one of my Macs (or one of my many iPads for that matter), and have it appear on any other Apple product.

For instance, I’m writing this note to you on a MacBook. I downloaded a copy of it on my iPhone X, and typed in this statement: “Let’s get rich on the cloud!” When I reopened the Pages document on my MacBook, that sentence automatically appeared.

Now then, I’m sharing this anecdote with you today so you can get a sense of what’s up for grabs in this high-growth tech field. Multiply my example by 1,000 fold and you can see why Transparency Market Research is so bullish on this sector.

The researchers forecast the value of the software-as-a-service (SaaS) segment at $164.3 billion by 2022, up from $23.8 billion in 2014. And please bear in mind, this covers only one of several fast-growing fields within the broader cloud segment.

And that’s where things can get sticky for many investors. There’s simply so much going on with cloud computing that finding the right play can intimidate many folks.

A Great Backend Play

Fortunately, there’s an easy way to target a broad swath of the sector with a single investment – the First Trust Cloud Computing ETF (NYSE:SKYY).

As you might imagine, a robust fund like this owns famous names, like Apple, Amazon.com Inc. (Nasdaq:AMZN) and Microsoft Corp. (Nasdaq:MSFT).

But SKYY also owns an intriguing mix of stocks that give us wide exposure to the cloud. Of the 28 stocks in the portfolio, 37% are in software, while 14% make communications gear, and 12% are in entertainment. Take a look:

  1. Activision Blizzard, Inc. (Nasdaq:ATVI) ranks as the world’s largest interactive gaming company, and the fifth largest publisher by revenue. So you might not think of it as a cloud play. However, this aggressive firm pioneered the path for the lucrative field of e-sports. This is where teams battle it out with computer games played live at big sporting events, while millions watch online. Plus, the firm now “sells” many titles to play online, rather than shipping physical media like DVDs. It also boasts popular games played on mobile devices that connect through the cloud. Candy Crush Saga is the sector’s No. 1 title, and the company’s biggest segment by sales in the most recent quarter was mobile gaming.
  2. VMware Inc. (NYSE:VMW). This firm is moving quickly into the cloud-based internet of everything (IoE) to build upon its massive presence in data storage management. And it’s using a purpose-built, IoE platform called Liota to get there. Liota is a secure, open-source software development kit (SDK) that applies standard software protocols to enable big data-levels of analytics and security. As an example, Liota underpins the growing set of data being generated by the early class of connected cars. Open source software, like Liota, is seen as one of the best ways to ensure that all connected cars in the future can profit from the growing body of on-the-road data that is generated.
  3. SAP SE (NYSE:SAP). The German juggernaut is using its sophisticated Hana platform to drive cloud sales. Hana is also the firm’s best shot at IoE leadership. The $21 billion (in sales) database software giant is well-positioned to scale up to even larger data processing jobs, and SAP is also targeting smaller firms, which is a savvy move. There are now roughly 600,000 online firms operating in the U.S., which is a much deeper client pool than the Fortune 1000 that SAP has made its’ main client focus. SAP also sees the IoE as a Trojan horse into cloud computing. The firm expects to grow its cloud-based subscription services from around 22 billion euros in 2016, to around 27 billion by 2020.
  4. Adobe Inc. (Nasdaq:ADBE) is one of the more successful firms at shedding physical products and moving to the cloud. You may recall that Adobe is the go-to firm for creative professionals because of Photoshop for photographers and Illustrator for graphics pros. These and other products are now offered through the high-margin Creative Cloud platform. And Adobe is leveraging its savvy use of the cloud to enter new realms. It recently bought Magento Commerce for $1.68 billion to move into e-commerce. The firm now says its total addressable market for all its wide-ranging services will be $80 billion in 2020.

Investing For the Long Haul

As you can see, the cloud is brimming with so many opportunities it can really pay off to target a group of companies that are all best of breed in their respective fields.

And that’s exactly what we get with SKYY.

Simply stated, the fund’s managers are doing all the heavy lifting for us. They’re the ones who are deep diving into the product lineups, the financials and the trends affecting each of the stocks they select.

That means we automatically get a screen of winners that downplay any Wall Street hype in favor of solid performers.

Please don’t underestimate the importance of this last item. When the markets are choppy, as they are now, it can be difficult for investors to focus on what matters.

But with a winning ETF like this one, you can ignore the daily headlines, and really focus on growing your wealth over the long haul.

And while you’re at it, you might want to also take a look at a state of the art piece of tech my Money Morning colleague has developed to profit from the movement of money within the S&P 500 itself.

Just think how crazy the markets have been lately – stocks moving up and down, without much rhyme or reason.

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Created over the course of eight years with the help of a PhD physicist and nuclear engineer, this souped-up algorithm combines fractal mechanics, quantum physics, digital signal-processing math, and neural networking to predict the future of the stock market seven days in advance. And it’s 93% accurate.

Click here for the detailed explanation of how this works.

See you back here soon.

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