Cloud providers are among the favourites of investors on the stock market. Despite the coronavirus crash, some of the stocks are trading at an all-time high, including Amazon and Shopify. The latter specialist for cloud-based e-commerce software climbed some 50% this year, bucking the market trend. The Canadians also grew strongly, with revenue shooting up 47% in the 2019 financial year. The share price of cloud computing company Veeva Systems, which was founded in 2007 and concentrates mainly on solutions for the pharmaceutical and biosciences industries, is also rising steeply. The Californians have seen the value of their company climb by a third since New Year. Veeva is likewise on a dynamic growth path in its operating results: sales and profits increased by a uniform 28% in the last financial year.
The cloud is a key technology and could therefore be considered a suitable field for a medium to long-term investment horizon. The best way of realising this strategy is with a tracker certificate on the Solactive® Cloud Computing Performance Index. The barometer contains 15 international cloud specialists, ranging from Amazon through IBM and Fortinet to Splunk and VMware. With a weighting of around 80%, the US groups set the tone in the wide and varied basket. While the sector index could not escape the effects of the most recent market turbulence, a dynamic recovery quickly manifested itself. The barometer climbed more than 40% from its low, enabling it to regain almost all the territory lost in the short term. The long-term track record is likewise persuasive: since its launch in April 2011, the Solactive® Cloud Computing Performance Index has posted a gain of 330%, equivalent to an annual return of 17.6%. This year, too, has already seen a rise of 13%.
The tracker certificate offered by Leonteq gives a one-to-one participation in the Solactive® Cloud Computing Performance Index. Quoted in Swiss francs, the product still has a residual term of rather more than three years, maturing on 26 June 2023. Since it is a performance index, investors enjoy the benefits of the dividends paid by the index members. The index is also an active process, with the barometer being reviewed every six months and adjusted where appropriate. This ensures that the composition is always up to date and prevents clumping. Holders of the certificate have to pay an annual fee of 1.2% p.a. for the privilege.
Conservatively minded investors now also have the opportunity to invest in the flourishing cloud market with partial protection. This is made possible by the Barrier Reverse Convertible (BRC) with carefully selected members of the Solactive® Cloud Computing Index. Three soft-callable BRCs denominated in Swiss francs, each having a term of 18 months, are available at present. All three products come with a comfortable risk buffer of 51%. If the barrier is not breached during the term, the maximum amount is safe. The coupons differ: the BRC on ServiceNow, Veeva Systems and VMware offers a guaranteed coupon of 14.60% p.a., while the product with Arista Networks, Fortinet and Splunk as the underlyings delivers the prospect of a 16.30% p.a. return. The "top interest-earner", though, is the Barrier Reverse Convertible on Shopify, Atlassian and Twilio, which brings a coupon of 20.00% p.a. For all BRCs, if at least one member of the trio breaches its barrier during the term, the repayment may be reduced. This would be the case if an underlying asset were not to recover to its starting level by the end of the term. In this case the “worst of” principle would apply. The guaranteed coupon payment is not affected, though, and would cushion possible losses. If, on the other hand, all underlying stocks are back above the strike level at the closing fix, no losses need be feared despite the barrier having been breached.
We look forward to answering all of your questions about our products and how they are traded. Please don't hesitate to get in touch! Phone: 058 800 11 11, email info@leonteq.com or contact us here.
