Bayer with a blockbuster! Vonovia weak! And how are Desert Gold shares doing?

Desert Gold: 1 Million ounces of gold resource vs. market capitalization below EUR 7 Million

Central banks continue to buy gold heavily. According to a recently published report by the World Gold Council, the official global gold reserves increased by a net 42 tons within one month. It is quite remarkable that so many central banks are hoarding gold on such a large scale. China, once again, was among the buyers. The country has increased its gold holdings for 13 consecutive months - and the trend is still rising. As of the end of October 2023, China's gold reserves of around 2,214 tons accounted for only 4.3% of its foreign exchange reserves. This is a relatively low figure. By comparison, Germany held 3,353 tons of gold in the summer of last year, representing a significantly higher proportion of foreign exchange reserves in the double digits.

In addition to central bank purchases, analysts' forecasts also point to a rising gold price. The experts at BCA Research, for example, expect an increase to USD 2,200 in the current year. In their scenario, inflation will not fall to the general target level of 2%, making gold an attractive long-term hedge against inflation. The drivers of long-term inflation are numerous: growing government debt, geopolitical uncertainty and the setbacks in globalization.

This should not only benefit the major gold producers such as Barrick & Co, but also the promising explorers such as Desert Gold. The Canadians are valued far below their gold resources. The identified gold resource is around 1 million ounces. The market capitalization is less than EUR 7 million. Desert Gold's 440 sq km SMSZ project is located in Mali, one of Africa's most exciting gold regions. Its neighbours include gold companies such as Barrick Gold and B2Gold. Desert Gold can, therefore, also be traded as a takeover candidate.

Bayer: Good news from the pharmaceuticals division

Bayer would likely only be a takeover candidate if it were split up. However, the management has rejected this idea for the time being. Shareholders of the Leverkusen-based company can look forward to a continuation of the positive news flow in January. It is particularly pleasing that Bayer has another promising blockbuster in the pipeline: Elinzanetant has achieved its primary objective in two pivotal Phase III trials. The drug for the relief of menopausal symptoms was convincing in reducing the frequency and severity of vasomotor symptoms - better known as hot flushes. Analysts at UBS expect the drug to go on sale next year and believe it will generate peak annual sales of USD 1.5 billion, making elinzanetant one of the great hopes in Bayer's pharmaceutical pipeline.

Another piece of positive news comes from the DAX-listed company's pharmaceuticals division. Bayer has received approval in the EU for a higher dosage of the eye drug Eylea. With the higher dosage, Eylea should remain competitive against competitor drugs and copycat preparations for longer. In 2022, Bayer generated impressive sales of EUR 3.2 billion with Eylea.

Will Vonovia shares rise above EUR 36?

Vonovia shares were one of the positive surprises at the end of 2023. The real estate group's shares rose by around 40% between the end of October and New Year's Eve. Are the price losses at the start of the year just a breather, or has the share exhausted its potential for the time being? According to the latest analysts' opinions, the Vonovia share is heading further north. JP Morgan believes that the share could rise to EUR 31. The share price currently stands at EUR 26.91. According to the analysts, interest rates should fall in the current year. As a result, investors will again focus on the fundamentals of real estate companies such as Vonovia. This argues for rising share prices.

Goldman Sachs has gone one better with the price target. The analysts believe that the Vonovia share could even reach EUR 36.40. The last time the share reached this level was in the Spring of 2022. Goldman also sees the expected decline in interest rates as the driver for the real estate group's shares. In their estimates, the experts have reduced Vonovia's cost of capital by 8%.

Vonovia is a bet on falling interest rates in the current year. It remains to be seen whether the fall in inflation will provide scope for significant interest rate cuts. Desert Gold is more than a bet on a rising gold price. Even at the current level of the precious metal, the share appears to be significantly undervalued in terms of resources. The past few weeks have shown that Bayer shares can react strongly to positive news. Unfortunately, the glyphosate issue is likely to continue to hang over the share like a dark cloud.