"The strong are getting ever stronger", is one of the conclusions drawn by BrandZ with regard to the most valuable retailers in the world. This is especially true of the two e-commerce giants, Amazon and Alibaba. Both have also come through the recent coronavirus crisis well. With lockdowns in place around the world, online business has flourished, with Amazon's revenue growing 26% in the first quarter to reach USDbn 75.5. On the stock market, too, the operating performance of the world's largest online trader has led to significant premiums: the Amazon share price has advanced just under 30% since the turn of the year, even posting a new record high. Business is also booming for Alibaba, its Chinese competitor. Alibaba was the first commercial group in the world to pass the historic one trillion dollar mark in trading volume in the 2019/2020 financial year ending on 31 March. Meanwhile, revenue increased by 35%. Alibaba is looking to continue this growth trajectory in the new financial year and anticipates sales will rise by about a quarter.
Other retailers have not come out of the pandemic quite so well. US fast food chain McDonald's and luxury group LVMH have struggled from store closures in the last few months. Sales at McDonald's actually declined 6%, while the figure for LVMH was as much as 17%. Since then, however, the French company has reopened the majority of its stores in China and hopes for an improvement in the second quarter. The management does not want to commit to a forecast for the year as a whole just yet. US DIY chain store Home Depot surprised by performing rather better than expected in the last quarter. Although footfall in its stores was limited due to social distancing requirements, sales climbed 7.1% to USDbn 28.3, contrasting with analysts' expectations of just USDbn 27.5. The share price has seen a correspondingly strong recovery in the last few weeks, the Dow Jones member even hitting new highs.
While the lockdowns around the world are gradually being lifted, it is not yet possible to estimate how quickly customers will return to the pre-coronavirus routines. Caution thus remains the watchword when it comes to investing. That includes careful selection of the underlying stocks as well as an adequate safety net. The companies mentioned above – Amazon, Alibaba, Home Depot, LVMH and McDonald’s – each have valuable brands with all the resulting benefits, which makes them appealing for investors. Leonteq has created a Barrier Reverse Convertible with attractive terms out of this quintet. The CHF-based soft callable BRC offers a high coupon of 12.6% p.a., while the USD variant attracts an interest rate of as much as 13.8% p.a. Both instruments have a maximum term of 18 months. The first soft call review comes after half a year, thereafter every 3 months. The issuer consequently has the right to terminate the product for the first time after six months.
High coupons are just one side of the BRCs, though: the products also come with comfortable risk buffers. The barriers are just 40% away from the starting prices. But that's not by any means all: the European type was chosen for the barriers, which significantly enhances the security. That's because in this case the thresholds are only active at the closing fix – during the term, therefore, the product gives perfectly free rein to the underlying stocks. Should the risk buffer of at least one share not be sufficient at the end, however, the repayment will decrease. In this case the classic “worst of” principle would apply. However, the guaranteed quarterly coupon payments would cushion possible losses to some extent.
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