BUC2VL
00.00 | Instrument:CORONA_IMPACT |
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The BITA US Coronavirus Covid-19 Impacted Index (BUC2VL) is designed to capture the returns of a fixed basket of 30 US-listed companies that were (are) expected to suffer the biggest consequences as a result of the COVID-19 pandemic. The index is primarily made up of companies operating in industries such as hotels and restaurants as well as airlines, with all constituents equally weighted. Covid-19 Impact Index was launched on the 28th of October 2020 by BITA, a reputable German-based FinTech company, which also maintains the index.
BUC2VL launched with a value of 1000 at inception. The constituent companies of Covid Impact Index were expected to be hit hard as the coronavirus pandemic spread across the world. But the performance of BUC2VL has been anything but dull. The price initially dipped to below 800 before spending the better part of 2020 seesawing around the 1000 price handle. The index however, gathered steam around November 2020 and gradually drifted upwards at the turn of the year. It managed to print an all-time high of above 1700 in March 2021, and it held steady above 1600 as of April 2021.
Index Composition and Calculation
BUC2VL is an equally weighted market-capitalisation index calculated using the standard Laspeyres formula. Each constituent is given the same weight (1/30) at the start of each quarter, after which their respective prices determine their eventual prevailing weights. There is a special divisor applied to maintain continuity across major corporate actions such as mergers, takeovers, or spinoffs. An exit buffer of 30% is also present to ensure that no single constituent distorts the true pricing picture of the index.
Covid-19 Impact Index has 30 constituents. The companies making up the index meet the following conditions:
- Have a primary listing on a recognised US exchange, having met all the strict conditions.
- Have a minimum market capitalisation of $1 billion.
- They meet at least one of these features:
- Operate in any one of the following SIC-defined sectors: Hotels & Motels, Water Transportation, Air Transportation-Scheduled, Travel Agencies, Services- Gambling Transactions.
- Operate in the SIC-defined sector of Retail-Eating & Drinking Places, with at least a 10% revenue exposure to the Asia Pacific market.
The BUC2VL index is rebalanced quarterly on the third Friday of March, June, September, and December, at the close of business. The final day for data consideration is the Monday preceding the rebalancing month.
Here are the top 10 constituents of the Covid Impact Index as of April 2021:
Constituent | Weight |
Darden Restaurants | 3.55% |
3.54% | |
Wyndham Hotels Resorts | 3.48% |
Southwest Airlines | 3.48% |
Yum! Brands | 3.48% |
Booking Holdings | 3.47% |
Domino’s Pizza | 3.47% |
Delta Air Lines | 3.41% |
Wendy’s Class “A” | 3.37% |
Alaska Air Group | 3.37% |
Factors Influencing the Price of BUC2VL
It is always challenging to trade financial assets that fluctuate with the economy. It is even more daunting doing so during really tough times. This was the case of the constituents of BUC2VL when COVID-19 rapidly spread around the globe, and governments instituted tough restrictions to mitigate it. As an index that stood to benefit when ‘normalcy’ returned, its price was heavily influenced by vaccine news. Vaccines remained the only path to normalcy, and multiple headlines of clinical trials, production, and administration greatly boosted the price of BUC2VL. The index was also influenced by corporate actions, such as dividend payouts and changes in business strategy. Most Covid-19 Impact Index constituent companies are regular dividend payers whose stock prices were cushioned as dividends were cut.
Changes in business strategies, such as focusing on online models as well as implementing cost-cutting measures, such as employee layoffs and renegotiating debt obligations, also helped buoy investor sentiment towards the stocks of these companies. This is a major reason why US Coronavirus Impacted Index remained resilient even as pre-pandemic business levels were yet to be achieved. In addition to the above, the price of Covid-19 Impact Index can also be influenced by other factors that impact indices such as interest rates, overall economic conditions, and significant price changes of major constituent stock(s).
Why Trade BUC2VL
- Liquidity.
BUC2VL has bundled together companies that investors took an interest in during the pandemic. This has made the index very liquid, which means it can be traded with transparent prices and low transaction costs. - Stable Price Action.
Covid-19 Impact Index is computed in such a manner that its price action is very smooth and stable. This means that it is more predictable, except in unforeseen circumstances. - Vast News Coverage.
As the benchmark stock index for companies that were on investors’ radars during the coronavirus pandemic, BUC2VL benefits from vast news coverage. This makes it easy for any investor to access any vital technical or fundamental information related to the index.
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