Prior to 2020, many investors probably wouldn't have considered investing in cloud stocks. However, the Covid-19 outbreak changed the game for many companies in the cloud computing sector. The impressive returns generated by some cloud companies left many investors wondering if 2021 was the year to invest in cloud computing stocks.
In this guide, we will list our selection of the top ten best cloud shares to buy in 2021.
Where Can I Trade Cloud Shares?
Whether you’re a novice or seasoned investor, you want to trade stocks on an easy-to-use platform with safe and reliable trade executions. You also want a broker that can offer you the tools, charts, indicators, and data to trade effectively. Here are our recommended brokers:
What Are Cloud Stocks?
Cloud stocks are shares or equity in companies that offer cloud-based solutions. And cloud solutions are diverse products and services offered through the internet, such as data storage, networking, databases, servers, and software. By using the cloud, a company no longer has to store data and host applications on local servers; it stores them on remote databases accessible via the internet.
The popularity of cloud computing has been rising steadily among individuals and businesses because it can save costs, boost performance and productivity, and ensure greater security.
The coronavirus pandemic forced many businesses to turn to cloud-based infrastructure so that their employees could work from home. Infrastructure providers reaped big returns, which in turn compelled more investors to pour their money into cloud software stocks. Even as the pandemic eases, cloud solution providers continue to achieve favourable returns, and their stocks are expected to continue posting impressive performances in the coming months.
How to Trade and Invest in Cloud Shares?
Open a Trading Account
Start by opening a trading count with a stockbroker that you trust based on criteria such as spreads, reputation, trading platform, and the financial instruments offered. You will need to provide your full name, address, and email address to open an account. Reputable platforms also insist on identity verification.
The next step is to choose the cloud stock(s) you'll put your funds in. Starting with our list of suggested stocks as a guide, carefully analyse each company's performance by digging through financial reports and comparing key stats. While this fundamental analysis will tell you which stocks to buy, it’s technical analysis (looking at a price chart) that tells you when might be the best time to buy.
Place Your Trade
If you’re not ready to trade for real, you can use a broker’s demo account to “paper trade” with play money. When you’re ready to trade for real, you just need to select a stock from the broker’s list, specify the number of shares to buy or the amount of money to invest, and press the “buy” button to buy at the current market price. Or, place a pending order to buy later.
Top 10 Cloud Shares to Trade
With the cloud computing market being hotter than ever, these are the top 10 companies in this sector:
- Alibaba Group
- Trade Desk
Now, let’s look at the top five in more detail.
1. Alibaba Group (NYSE: BABA)
Alibaba is the leading provider of infrastructure utility services (IUS) and infrastructure-as-a-service (IaaS) in the Asia-Pacific region. The company wants to focus on cloud computing as its main business in the coming years.
One attractive thing about investing in this company's stock is that Alibaba group has a plan to invest a whopping $28 billion in cloud infrastructure over the next two years.
2. Amazon (NASDAQ: AMZN)
Best known for its bookselling and other retail activities, Amazon is the leading player in the cloud computing industry, with 32% of the total market share. Like most other cloud providers, Amazon Web services benefited from the Covid-19 pandemic to boost its cloud infrastructure market.
Even as core commerce is still a major cash cow for Amazon, the company's cloud platform is well-positioned for immense growth in the coming months. So, trading Amazon stock is something that investors can look forward to this year.
3. Salesforce (NYSE: CRM)
For the past seven years, Salesforce has been the world's largest cloud-based customer relationship management (CRM) platform. Its Government Cloud Plus is positioned to take the lead as the cloud infrastructure for US local, state, and federal customers, contractors, and R&D centres.
The cloud computing company believes that by 2025, its market will grow at a compounded annual growth rate (CAGR) of 11%, which is good news for anyone hoping to invest in the CRM stock.
4. Trade Desk (NASDAQ: TTD)
In 2020, The Trade Desk shares jumped by over 250% but have been trading downwards since the start of this year. This provider of automated advertising technologies and services expects even more growth based on the results posted in its fourth-quarter report, so maybe it will start to go up again.
5. Dropbox (NASDAQ: DBX)
Dropbox first went public to much fanfare in 2018 when there was so much institutional interest in the stock that the IPO was 25 times oversubscribed. Although this company may look like it’s trailing behind its cloud peers, it is doing just fine with a decent combination of profits and growth which are expected to last throughout this year at least.
Expert Tip on Investing in Cloud Stocks“ The stocks listed here are just the tip of the cloud stocks iceberg. The trick is finding the cloud stocks that are the real catches based on business growth, profitability, and revenue. Business growth metrics work best for cloud companies that are growing fast. ”- Jim Mwangi
Why Invest in Cloud Stocks?
Covid-19 forced people and companies to take drastic digital transformation steps. Businesses were forced to adopt new cloud infrastructures, collaboration tools, and productivity software. After taking such steps, many companies realised the ongoing benefits in improving costs, time, returns, and customer experience.
Even as we try to put the whole coronavirus situation behind us, it is unlikely that businesses will revert to their old, manual, and paper-based processes. Therefore, cloud solutions are here to stay.
Frequently Asked Questions
You should always choose a regulated trading platform and use additional security measures such as two factor authentication (2FA).
Most countries consider profit from trading as a taxable activity, so you should check your local taxation laws before trading. Some countries let you trade via tax-efficient accounts, such as spread bets, an ISA, or a self-invested personal pension (SIPP) in the UK.
Some brokers may provide additional services such as bot trading for their users. You can also make use of stop-loss and take-profit orders to automate the buying and selling of stocks.
The economic disruption brought about by Covid-19 has increased spending on cloud software. Cloud stocks are thriving and (according to expert investors) are expected to continue doing so for the foreseeable future.
Reputable brokers will insist on seeing some identification documentation before you can fully open a trading account.
Most brokers allow traders to open stock positions during market trading hours (typically 8 am to 4.30pm, local time) from Monday to Friday.