BMW shares, recommended for purchase by many experts, have recently risen sharply. With bonus certificates with a cap, investors can achieve disproportionately high returns even if the price rise does not continue or the share falls.
After its 28 percent fall between the beginning of February 2022 from 94 euros to 67.58 euros until March 7, 2022, the BMW share has mostly traded within a range of 69 euros to 84 euros in the past few months. In the past few days, the share has been able to rise significantly from the EUR 70 mark and is currently almost in the middle of the trading range at EUR 77.60.
In the latest analyses, experts reiterated their buy recommendations for the premium carmaker shares and thus also for the BMW share with price targets of up to 96 euros (Credit Suisse).
The investment idea
Anyone considering an investment in BMW shares at the current price level could consider buying a bonus certificate with a cap on BMW shares as an alternative to buying the shares directly. With such certificates, investors can reduce the price risk of the direct investment and still generate returns above the high inflation rates.
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 the price stagnates or falls.
The way it works
If the BMW share never touches or falls below the barrier of 42 euros by the valuation date of the certificate, then the bonus certificate will be repaid on December 22, 2023 with the bonus level of 88 euros.
The key data
The HSBC bonus certificate with a cap (ISIN: DE000HG5HQL1) on BMW shares has a bonus level and a cap of EUR 88. The cap defines the maximum repayment amount of the certificate. The barrier activated until the valuation date, December 15, 2023, is EUR 42. At the BMW share price of 77.11 euros, investors could buy the certificate for 75.32 euros. The certificate is therefore cheaper to get than the share.
The chance
Since the certificate can currently be purchased for EUR 75.32, it enables a gross return of 16.83 percent (=14.38 percent per year) in 14 months if the share price has never fallen by 45.53 percent to EUR 42 by the valuation date or falls below.
The Risks
If the BMW share loses almost half of its value by the valuation date and touches the barrier at EUR 42, and the share is quoted 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 price is found below EUR 75.32, then the certificate investment will cause a loss.
This article does not constitute a recommendation to buy or sell BMW shares or investment products based on BMW shares. No liability is assumed for the correctness of the data.
