Bayer stock has recently risen sharply due to positive company news. With bonus certificates with a cap, investors can also generate returns in the double-digit percentage range when the share price is stagnating or falling.
Bayer stock started the new trading year with a price increase of up to 19 percent compared to the end of 2022. The expected billions in proceeds from new drugs, as well as the entry of activist investors, which could also result in a positive split of the group for investors, were named as the causes of the price rally.
Although stocks in the European chemical sector are valued at their highest level 20 years ago, the experts at UBS reiterated their buy recommendation for Bayer stock with a target price of EUR 99.
The investment idea
Because of the predominantly positive news situation, Bayer stock could show further upside potential even after the strong rise in price. Investors who would like to significantly reduce the risk of buying shares directly and still want to achieve returns above the still high inflation rates could consider investing in a bonus certificate with a cap instead of buying shares directly.
Apart from dividend payments, private investors can only achieve positive returns when buying a share directly if the price rises. Compared to direct share purchases, bonus certificates with and without a cap offer investors opportunities for annual returns in the double-digit percentage range not only when the share price rises, but also when prices stagnate or fall.
The way it works
If the Bayer share never touches or falls below the barrier of EUR 42 by the certificate’s valuation date, the bonus certificate will be repaid on March 22, 2024 with the bonus level of EUR 69.
The key data
The HSBC bonus certificate with a cap (ISIN: DE000HG7QCA1) on Bayer shares has a bonus level and a cap of EUR 69. The cap defines the maximum repayment amount of the certificate. The barrier activated by the valuation date, March 15, 2024, is EUR 42. With the Bayer share price of EUR 56.00, investors were able to buy the certificate for EUR 57.82.
The chance
Since the certificate is currently available for EUR 57.82, it enables a gross return of 19.34 percent (=16.50 percent per year) in 14 months if the share price has never fallen by 25.00 percent to EUR 42 by the valuation date or falls below.
The Risks
If Bayer stock loses a quarter of its value by the valuation date and touches the barrier of EUR 42 and the stock is listed below the cap on the valuation date, the certificate is redeemed at the closing price of the share determined on the valuation date. If this is determined below EUR 57.82, then the certificate investment will cause a loss.
This article does not constitute a recommendation to buy or sell Bayer shares or investment products based on Bayer shares. No liability is assumed for the correctness of the data.
