The Sky’s the Limit for This Play on the $164.3 Billion Cloud Computing Sector

0 | By Michael A. Robinson

Tomorrow marks the 50th anniversary of one our nation’s greatest accomplishments.

Actually, strike that… It’s one of the top achievements in the history of the human race.

When Neil Armstrong walked on the moon on July 20, 1969, the event was far more than making good on President John F. Kennedy’s moonshot goal.

It cemented our reputation as the most technologically advanced nation on earth.

All across America, folks stopped what they were doing to watch Armstrong on TV as he descended the steps of the lunar landing module.

Today, we take all the computing advances the event signified for granted. After all, our smart phones are more powerful that what NASA had to get us to moon and back.

But what most folks don’t know is the essential, behind-the-scenes role that software played in it all.

That’s why I want to briefly review what happened back then. Along the way, I’ll reveal a tech investment that will help put your portfolio in orbit…

Check it out…

The Software Behind NASA’s Moon Mission

Of course, there’s not an American today who isn’t familiar with Armstrong’s immortal words, “That’s one small step for man, one giant leap for mankind.”

Funny thing is, he sounded so relaxed and confident that no one knew the hazards lurking in the background. The lunar landing almost didn’t occur.

Turns out, the onboard computer became overwhelmed and nearly forced the mission to be scrubbed at the last minute.

But thanks to some savvy code warriors, the spacecraft’s software successfully rebooted the computer just in the nick of time.

That’s one of the facts that really jumped out at me in reading a recent fascinating account of the software coding team assigned to the NASA mission.

In a series of top-secret weapons programs (we’ve nailed it down to one company)

It comes courtesy of the Wall Street Journal. Science writer Robert Lee Hotz interviewed many of the software writers on that NASA team. What jumped out at me is how many of them were in their early- to mid-20s.

More to the point, the software remains the unsung hero of the whole mission. Without those 145,000 lines of code, NASA’s powerful computers would never have gotten the job done.

As a veteran tech analyst, this stuck me as a proof of a lucrative part of the tech landscape. Fact is, I often recommend software stocks because of the vital role the field plays in our modern world, and because of the high margins the firms have.

And these days, that often means we are by definition investing in the cloud. The reason: rather than ship CD-Roms in boxes, savvy firms now deliver their products via the web.

Transparency Market Research forecasts the value of the software-as-a-service (SaaS) segment at $164.3 billion by 2022, up from $23.8 billion in 2014. Bear in mind, this covers only one of several fast-growing cloud fields, meaning the field is easily worth than double this estimate.

A Giant Leap For Investors

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

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

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

  • Paycom Software Inc. (NYSE:PAYC) ranks as a leader in providing human capital management (HCM) products. Paycom delivers this as a cloud-based platform that employers use for everything from payroll and performance reviews, to tracking how they comply with government mandates, to the hiring process itself. Founded in 1998, the firm went public roughly five years ago. Though he’s hardly a household name, founder and CEO Chad Richison built a platform that made him a billionaire. Paycom is a great play on the current jobs boom. But it also has legs. It’s focused on clients with 50 to 2,000 workers, the market with the most active hiring over the long haul.

$15,000 richer in less than a month (and that’s just the beginning)

  • Adobe Inc. (Nasdaq:ADBE) is one of the more successful firms at moving to the cloud and getting rid of physical products. You may recall that Adobe is the go-to firm for creative professionals because of Photoshop for photographers and Illustrator for graphics pros. Those and other products are now offered through the high-margin Creative Cloud platform. 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.
  • Zscaler Inc. (Nasdaq:ZS) is a Silicon Valley firm founded in 2008 specifically to protect the cloud. It’s finding rapid adoption for its technology. The company now supports more than 3,250 clients around the world. In fact, 50% of its sales come from offshore. Part of its success stems from the ability to provide protection at huge scale. Each day it delivers 120,000 updates to its system while blocking some 100 million threats. Armed with more than 120 current or pending patents, Zscaler now ranks as the biggest provider of cloud-based web security gateways.
  • SAP SE (NYSE:SAP). The German juggernaut is using its sophisticated Hana platform to drive cloud sales. Hana also is 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. 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 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.


61 of our best-kept secrets are being revealed (take a look)

Your Portfolio Takes Off

Make no mistake. SKYY is a great performer. Since the market rebounded last Dec. 24, it’s up 32%. That means it beat the S&P 500 over the period by 45%.

But that is literally a fraction of its long-term, market beating track record.

Consider that over the last five years, SKYY has rocketed by 124.7%. During that time, the S&P has climbed 56%.

So, in that time, this winning ETF gained 122.6% more than the broad market. I don’t about you, but I’ll take that kind of performance any day.

Which explains why I continue to recommend SKYY. I believe it’s one of the better ways to play all the software breakthroughs occurring regularly, and then delivered over the internet.

In other words, this ETF will help your portfolio soar for years to come.

Start the countdown: Ordinary Americans are about to take a major hit in the wallet

Finding Unicorn Startups

Now, when it comes to soaring portfolios, you might be surprised to learn about what angel investing can offer.

See, everyday folks from around the country are now backing little-known startups well before they go public or IPO. And some of these firms are exploding in value, becoming worth billions of dollars.

It’s making some Americans wealthier than they believed possible.

But when you’re in the position to have all of these exciting deals at your fingertips, you need a way to help ferret out the potential winners from the rest.

And as you’ll see in this brief video, the Angels and Entrepreneurs Summit fits the bill.

Click here to watch it.

Cheers and good investing,
Michael A. Robinson

P.S.: I’ll be speaking at The Money Show – San Francisco this Aug. 16th from 10:45 a.m. to 11:30 a.m. Pacific time. If you’re in the area, I suggest you stop by. I’ll be talking about How to Own Great Tech Stocks For Free. So don’t miss it! You can register by clicking here.

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