4 Funds to Continue Growing on Rapid Adoption of Cloud

Zacks Equity Research
·6-min read

The adaptation of technology, especially cloud, has been dramatic since the coronavirus outbreak in March. Moving business to the cloud, buying collaboration platforms and using software-as-a-solution (SaaS) applications have become essential to keep businesses running and employees safe. Meeting and events have moved online for an indefinite period and this may lead companies to take to the digital transformation.

The pandemic has also highlighted the future of technology and how it could save resources. Remote working was dramatically adopted since the pandemic began, a MariaDB global survey highlights that as of May 2020, 40% businesses said COVID-19 is accelerating their move to the cloud. And as per Gartner’s prediction, 75% of all databases will be deployed or migrated to a cloud platform by the end of 2020.

High demand for digital transformation has also boosted cloud providers. In first-quarter fiscal 2021, Azure, Microsoft’s cloud platform, witnessed growth of 48% after 47% in the previous quarter. Sales of collaboration and other cloud-based tools or SaaS tools also jumped, while Office 365 Commercial and Dynamic 365 recorded a 21% and 38% jump, respectively.

According to International Data Corporation (IDC), IT spending will bump up to $6.8 trillion from 2020 to 2023. With the pandemic acting as an external force driving the change, IDC predicts that 65% of global GDP is digitalized by 2022. By the end of 2021, nearly 80% of the companies would put a strategy in place to shift to cloud-centric infrastructure and applications, twice as fast as the pre-pandemic levels.

What’s more? Along with growing demand for collaboration and communication platforms and other cloud-based tools, companies may start spending on virtualized office environments to enable employees to access their work computers from anywhere across the globe. This in turn will increase spending on security to protect sensitive information.

Per a ResearchAndMarkets.com report, the global cloud computing market size is projected to grow to $832.1 billion by 2025 from an expected $371.4 billion in 2020, at a CAGR of 17.5%.

Our Top 4 Fund Choices

Given the robust growth in the cloud computing space, we have selected four mutual funds that carry a Zacks Mutual Fund Rank #1 (Strong Buy). Moreover, these funds have encouraging year-to-date (YTD) returns. Additionally, the minimum initial investment is within $5000. We expect these funds to outperform their peers in the future.

The question here is why should investors consider mutual funds? Reduced transaction costs and diversification of portfolio without several commission charges that are associated with stock purchases are primarily why one should be parking money in mutual funds (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).

Fidelity Select Technology Portfolio FSPTX aims for capital appreciation. The fund invests primarily in equity securities, especially common stocks of companies that are engaged in offering, using, or developing products, processes, or services that will provide or will benefit significantly from technological advances and improvements. FSPTX is a non-diversified fund and has returned 27.4% and 29.3% in the past three and five years, respectively.

This Zacks Sector – Tech product has a history of positive total returns for more than 10 years. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.

FSPTX has an annual expense ratio of 0.71%, which is below the category average of 1.25%. The fund has no minimum initial investment. Some of the fund’s top clouds computing stock holdings are Microsoft, Nvidia and Salesforce.

T. Rowe Price Global Technology Fund PRGTX aims for long-term capital growth. The fund invests most of its assets in the common stocks of companies that its managers expect will generate the majority of their revenues from the development, advancement, and use of technology. PRGTX is a non-diversified fund and has returned 23.3% and 26.1% in the past three and five years, respectively.

This Zacks Sector – Tech product has a history of positive total returns for more than 10 years. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.

PRGTX has an annual expense ratio of 0.88%, which is below the category average of 1.25%. The fund has a minimum initial investment of $2,500. Some of the fund’s top clouds computing stock holdings are Alibaba, Workday and Salesforce.

Franklin DynaTech Fund Advisor Class FDYZX aims for capital appreciation. The fund invests primarily in equity securities especially common stocks of companies that the fund manager believes are leaders in innovation and takes advantage of new technologies. FDYZX has returned 26.8% and 24.4% in the past three and five years, respectively.

This Zacks Sector – Tech product has a history of positive total returns for more than 10 years. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.

FDYZX has an annual expense ratio of 0.61%, which is below the category average of 1.05%. The fund has no minimum initial investment. Some of the fund’s top cloud computing stock holdings are Microsoft, Amazon and ServiceNow.

Janus Henderson Global Technology and Innovation Fund Class T JAGTX aims for long-term growth of capital. The fund invests majority of its assets in securities of companies that the fund managers believe will significantly benefit from advances in technology. JAGTX has returned 27.9% and 28.2% in the past three and five years, respectively.

This Zacks Sector – Tech product has a history of positive total returns for more than 10 years. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.

JAGTX has an annual expense ratio of 0.93%, which is below the category average of 1.25%. The fund has a minimum initial investment of $2,500. Some of the fund’s top clouds computing stock holdings are Microsoft, Adobe Systems and salesforce.com.

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