If you want to benefit from a positive development of the global economy by investing in an (early) cyclical sector, look at the components of the Stoxx Europe 600 Basic Resources (EU0009658624): The index currently comprises 18 companies whose business is in the promotion and marketing of industrial raw materials (except oil and gas). The Top 3, Rio Tinto, BHP Group and Anglo American already balance more than 50 percent of the index capitalization – their relatively high fluctuation range leads to attractive return opportunities for sideways strategies.
Rio Tinto with 10 percent buffer (September)
The Rio Tinto share (GB0007188757), at 44 pounds, is only about 12 percent below the 10-year high of just under 50 pounds last July. Investors who expect the stock to trade at least £ 42 in September could opt for the exchange-rate-secured SG discounter with the ISIN DE000CL1Z4W3. At a price of 39.50 euros, a buffer of 10.7 percent is calculated. The maximum return is EUR 2.50 or 20 percent p.a., provided the share closes at least on the cap of £ 42 on September 18, 20. Otherwise cash settlement.
BHP with 13 percent buffer (September)
A similar strategy on BHP (GB00BH0P3Z91) also with exchange rate hedging is available from SG under ISIN DE000CL1Z3Y1. The security buffer of the discount certificate is 13 percent at a price of 14.29 euros; the cap of 15 pounds results in a maximum Yield of 0.71 euros or 15.7 percent pa if the share closes above the cap on 18.9.20.
Anglo American with 10 percent buffer (September)
If you want to get involved with Anglo American (GB00B1XZS820), you will again find such an exchange-rate-protected product at the SG: With the ISIN DE000CL1Z3R5 at a price of 15.75 euros, a return of 1.25 or 25.1 percent p.a. if the share closes above the cap of £ 17 on September 18, 2018. Otherwise there’s a cash settlement.
CertificateReport conclusion: Investors who forecast a sideways movement in the three major mine stocks listed in London can benefit from the relatively high volatilities and combine comfortable security buffers with interesting return opportunities. Exchange rate hedging (quanto) ensures that all bills are made in a 1: 1 ratio in euros.
This contribution does not constitute a recommendation to buy or sell Rio Tinto, BHP and Anglo American shares or investment products in Rio Tinto, BHP and Anglo American shares. No liability is assumed for the correctness of the data.
Author: Thorsten Welgen
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