Börse Express – I bought BASF & Vonovia: And plan further investments if…

With the DAX shares BASF (WKN: BASF11) and Vonovia (WKN: A1ML7J) I already bought it. It might not be that big of a secret if you read my articles more regularly. But it is a fact: I am and remain convinced of these names in the long term. Even or especially when their ratings drop.

But what makes me reinvest? And what might even allow me to make additional purchases? Interesting question, which I can even answer with the same answer at BASF and Vonovia: The worst case doesn’t shock me too much. At least not in a business-oriented and long-term way.

BASF and Vonovia: What would be the worst case?

It is important for me to identify a realistic worst case scenario at BASF and Vonovia that could actually be possible. Besides things you just can’t plan for, of course. For example, I take it for granted that management has integrity.

But at BASF, it is mainly concerns about a natural gas failure that are currently weighing on the DAX chemical stock. The scenario may be possible. Production cuts and stops also seem like a plausible scenario in this case. Maybe individual quarters or even the year 2022, maybe early 2023 would be gone. But the central question is: should the market environment remain as it is? My assumption: No, there had to be alternatives. Maybe it would temporarily affect the drug and the losses. But the chemical company should survive. The dependence on fossil fuels and natural gas had to be compensated for somehow. So I think it would be more of a temporary phenomenon. Of course, that could still cause the share price to collapse further.

Vonovia, on the other hand, is suffering due to rising interest rates and inflation. In principle, there would be pricing power due to the housing shortage, but management cannot simply exploit it without risking a public outcry. Borrowed funds and debt are also a starting point, especially for rising interest rates. But seriously: Residential real estate is and will be a defensive business model. My assumption here is that even significantly rising interest rates will not destroy this business model.

And stocks are cheap

The worst case may therefore seem threatening to BASF and Vonovia. Nevertheless, I now believe that the broad market is exaggerating despite the risks. We can certainly infer that from the reviews. Finally, let’s take a look at these numbers.

At the end of last week, Vonovia closed trading at a share price of EUR 32.47. Therefore, the dividend yield is still above 5%, the price-FFO ratio is likely to be slightly above 11 in the current financial year. BASF, on the other hand, is valued at a price-to-earnings ratio of just over 7 at a share price of EUR 43.42 and has a dividend yield of over 7.8%. It’s too cheap for me. If it goes further down again, I will definitely buy the dip again.

The article I bought BASF & Vonovia: And plan further investments if… appeared first on The Motley Fool Germany.

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Vincent owns shares in BASF and Vonovia. The Motley Fool does not own any of the stocks listed.

Motley Fool Germany 2022

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