After a long-lasting decline in price, the Vonovia share recently started to climb again. With bonus certificates with a cap, investors can achieve positive returns even if the stock approaches the old lows again.
The prospect of a rise in interest rates had a particularly negative effect on the share prices of real estate groups and housing companies in the previous year. From August 2021 to October 2022, the Vonovia share also went on a long downward slide, during which the share price fell by 66 percent from EUR 55 to EUR 18.59. The stock has since fallen 43 percent from the October low of the previous year on hopes that the pace of rate hikes will slow. The share is currently trading at EUR 26.60.
Since the Vonovia share is still heavily undervalued even after the recent price recovery, experts with price targets of up to EUR 45.40 (Warburg Research) reiterated their buy recommendations for the share.
The investment idea
Investors who are considering an investment in the Vonovia share at the still low price level and at the same time want to reduce the price risk of a direct share investment could consider purchasing a bonus certificate with a cap as an alternative to buying the share directly. With such products, investors can achieve returns in the double-digit percentage range over the next 14 months with a significantly reduced risk of loss.
Compared to direct share purchases, bonus certificates with a cap offer investors the advantage that they enable high returns even when share prices are stagnating or falling. As a counter-trade for the attractive sideways opportunities, certificate investors have to forego the unlimited profit potential of equity investments and prospective dividend payments.
The way it works
If the Vonovia share never touches or falls below the barrier of EUR 18.00 by the valuation date of the certificate, then the bonus certificate with cap will be repaid on March 22, 2024 with the bonus level of EUR 29.00.
The key data
The DZ Bank bonus certificate with a cap on the Vonovia share (ISIN: DE000DW9XEZ0) has a bonus level and cap of EUR 29.00. The cap defines the maximum payout amount of the certificate. The barrier activated by the valuation date, March 15, 2024, is EUR 18.00. With the Vonovia share price of EUR 26.60, investors were able to buy the certificate for EUR 24.45. The certificate is therefore cheaper to get than the share.
The chance
Since investors can currently purchase the certificate for EUR 24.45, it enables a gross return of 18.61 percent (equivalent to 17 percent per year) in 14 months if the share price has never fallen by 32.33 percent to EUR 18.00 by the valuation date or falls below.
The Risks
If the Vonovia share touches the barrier of EUR 18.00 by the valuation date and the share is listed below the cap on the valuation date, the certificate is redeemed at the closing price of the Vonovia share determined on the valuation date. If this is fixed below EUR 24.45, then the certificate investment will cause a loss.
This article does not constitute a recommendation to buy or sell Vonovia shares or investment products based on Vonovia shares. No liability is assumed for the correctness of the data.
