Meeting portfolio companies in Copenhagen – Portfolio managers’ thoughts and insights
In the beginning of January, we travelled to Copenhagen to meet some 20 companies of which several portfolio companies in our small- or micro cap funds.
The aim of the meetings where to get a grip on the short term demand situation but also the long term growth prospects of the companies that we are invested in. Another purpose with the trip was to scout for new interesting investments as many of the small and micro cap stocks in the Nordics have decreased substantially during the last year, and today the valuations look very attractive for the long term investor. During the last year large caps stocks have massively outperformed small and micro caps, which happens from time to time. These occasions have historically always been a good entry point what comes to small and micro cap investments. What is typical for many of the Nordic smaller companies are that they are run by entrepreneurs and in many of these companies the focus is on innovation and providing the customers with high quality products and solutions. These companies are often market leaders in their niches.
During the days we met with Concentric, Elekta, Össur, GN Store Nord, Medicover, Crayon, Swedencare, Instalco, Afry, Borregaard and HMS Network among others. The demand continues to be strong especially in segments that are driven by investments in environmentally friendly solutions, energy solutions, automatization, digital solutions and healthcare related products. Despite some headwinds what comes to production costs and wage increases, the companies were confident that they will be able to pass on these costs to their customers. The high energy prices that we saw during the autumn have not impacted the companies in a bigger way and as energy prices have now decreased substantially the companies are not worried about this issue any longer, which we find very positive. Companies are also relieved to see that freight costs have come down a lot and it also seems that the problems what comes to chip shortage and delays starts to be behind us. Summarising the situation, we got the feeling that the problems everybody saw during the summer and in the beginning of the autumn were overdone and that the companies seem to cope with the situation fairly well. There is a fair chance that a recession in Europe 2023 could be very mild.
From a sustainability and environmental point of view we find the Norwegian speciality cellulose and bio chemicals producer Borregaard particularly interesting. The company management gave a good insight in how the company has taken and will continue to take market shares, combined with how the strategy of the company has changed since the IPO of the company in 2012. Today the company is a highly innovative company focusing on purely biobased solutions for segments like battery production, food and ingredients production, construction and agricultural industry. The Swedish industrial technology group Concentric also gave a fairly positive insight of the company future. The company that mainly produces pumps and other vehicle related products saw a bright future what comes to its exposure to electrical vehicles and agricultural equipment. Fondita Nordic Micro Cap has been invested in the company for nearly 10 years. During our meeting with the management team of the Swedish- Finnish consultancy group Afry we discussed the Pöyry- integration work and how the company has focused on bringing together two company cultures. The CEO of the company was very pleased with how the integration had been implemented. He also highlighted the main growth drivers for the company – energy transition, digitisation in our daily lives and the focus on infrastructure and energy efficient transportation.
After three days we flew home to Helsinki full of new ideas and with a strong confidence in our investments. It was fantastic to talk to company management teams once again in person after a long period of mainly digital meetings.
Markus Larsson, Portfolio Manager and CEO
Kenneth Blomqvist, Portfolio Manager