Everyday life in Germany is almost normal again, we can be happy about that. However, those who go shopping or get on public transport will quickly be reminded of Corona by mouth-nose protection. Unfortunately there are currently more reports of increasing numbers of cases in the news. New restrictions would not only restrict everyday life, but also threaten the stock exchanges. At the end of February we were able to experience the effects of large-scale lockdowns on the stock exchanges. In the US, meanwhile, the first wave is apparently still being struggled, with no end in sight. The importance of the USA for international stock exchanges certainly does not need to be explained here. In Europe there are again restrictions and quarantine rules for travelers.
A look at the price of gold could provide an indication of investors’ continuing fear of corona. At $ 1978.22 per troy ounce (as of July 29, 2020), the gold price recently hit its all-time high. Gold is definitely known as a crisis currency. The high demand could be due to the protection of many investors. But what else is there to secure value in times of crisis? In addition to normal gold, protection can also be achieved with “concrete gold”. If you want to do this in the form of shares, you have two large DAX companies to choose from. smell in (WKN: A1ML7J) and German living (WKN: A0HN5C). Both have clearly focused on real estate. But do they offer value retention for a potential second corona crash?
Vonovia and Deutsche Wohnen in the first corona crash
Not only did the DAX and Vonovia hit their all-time highs on February 19 of this year, Deutsche Wohnen shares were also at their annual highs on that day. In contrast to the DAX, the two real estate stocks have already achieved higher prices than before the corona crisis. Deutsche Wohnen’s share price has developed a little better than Vonovia’s in recent months. During this time, Deutsche Wohnen was knighted as a DAX group. Lufthansa was struck by the corona crisis and had to make way for the real estate company.
The two real estate stocks not only developed faster again, they also fell less sharply. The DAX plunged over 38% within a month. Vonovia and Deutsche Wohnen shares, on the other hand, fell very similarly by around 28%. As we can see, the two stocks outperformed the DAX by about 10 percentage points.
Threats to Vonovia and Deutsche Wohnen’s share price
If one looks at the development of the two stocks since the Corona low, one could say that the price decline was not necessarily justified. Many investors certainly expected rent losses from both companies. Terminations and short-time work could have been a burden on Vonovia and Deutsche Wohnen. The unemployment rate in Germany rose by 1.1 percentage points from March to June. This is certainly an acceptable increase under these special conditions. It becomes particularly clear when you look at unemployment rates in the United States. There, the unemployment rate skyrocketed by 10 percentage points in one month, from March to April!
Vonovia CEO Rolf Buch said at the end of June at the general meeting that there was no need to worry. Only 1% of the tenants would have asked to be deferred by that time. At Deutsche Wohnen, statements were quite similar in June: “So far, we have had no significant rental losses on either the residential or commercial side,” said CEO Michael Zahn. At Vonovia, only 2.8% of German rental income comes from commercial property. In the real estate portfolio of Deutsche Wohnen, commercial real estate only makes up 4% of the usable space. Apparently you don’t have to worry about loss of rent at both DAX companies.
Peaceful sleep possible with Vonovia and Deutsche Wohnen in the depot?
Neither Vonovia nor Deutsche Wohnen would be directly affected by renewed lockdowns, in contrast to companies that make a living from retail, for example. Many investors have certainly recognized that the discount in February for both stocks was obviously exaggerated.
Vonovia also successfully placed corporate bonds with a volume of EUR 1.5 billion at the beginning of July. Loans with higher interest rates should be paid with these bonds. A sensible step to reduce interest liabilities. Deutsche Wohnen also placed bonds of EUR 1.0 billion at the end of April. The new bond issue was oversubscribed 12 times, at an average coupon of 1.25%. The liquidity of both companies makes a very secure impression.
Since the two share prices have risen so well recently, one should certainly not expect huge price jumps in a short time. If there are new concerns about Corona, there could be a safe haven here. Those who prefer to put their money into active value-adding companies instead of gold, have two good options with Vonovia and Deutsche Wohnen shares to invest in “concrete gold” and thus largely protect their money from another possible corona crash.
The post Vonovia and Deutsche Wohnen – are these two stocks the best protection against a second corona crash? appeared first on The Motley Fool Germany.
Tom Evertz does not own any of the stocks mentioned. The Motley Fool does not own any of the stocks mentioned.
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