All investment strategies have the potential for profit and loss, your or your clients’ capital may be at risk.
True, but not the whole truth.
The fact is that for internet giants such as PayPal, Netflix and AT&T to deliver their services at speeds of less than a blink of the eye – the speeds we have become accustomed to – they require their Clouds to be housed in the centre of major population centres. What’s more, these Cloud computing servers need to be co-located within the same building so they can interconnect with one another and move traffic between their networks using a direct line which is fast and secure.
A company we lend to in our portfolios, Equinix, aims to be at the centre of data exchange globally. Equinix’s data centres aren’t located on vast bits of remote land, which is the model favoured by wholesale data centre providers. Instead, they own or lease warehouses in the middle of prime locations such as New York, Rio, London.
In basic terms, Equinix is a real-estate company that provides a house for the internet. Simple really, but then sometimes the thing that makes a business resilient is its simplicity. As the CEO, Charles Meyers, recently commented, the business is “…supported by the physics of proximity and the economics of aggregation”.
As the Cloud grows and data usage continues to increase, demand for interconnection is here to stay. Equinix has early-mover advantage and is a market leader, making it an obvious choice for customers who are looking to grow their presence on the Cloud and expand their reach.
Given the strength of Equinix’s competitive position, coupled with its prudent approach to capital allocation and balance sheet management, we believe that this is a business that will achieve its goal of higher credit ratings across the board. And it is an attractive investment for our portfolios.
The views expressed in this blog should not be considered as advice or a recommendation to buy, sell or hold a particular investment and it does not in any way constitute investment advice.
This communication was produced and approved on the stated date and has not been updated subsequently. It represents views held at the time of writing and may not reflect current thinking.
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Some of the views expressed are not necessarily those of Baillie Gifford. Investment markets and conditions can change rapidly, therefore the views expressed should not be taken as statements of fact nor should reliance be placed on them when making investment decisions. This blog contains information on investments which does not constitute independent investment research. Accordingly, it is not subject to the protections afforded to independent research and Baillie Gifford and its staff may have dealt in the investments concerned.
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