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Breathtaking numbers from Stillfront

The Stockholm exchange rose 2.0% in November, and the small cap index by a somewhat stronger 4.2%. Carnegie Småbolagsfond rose 5.6%.

Stillfront contributed most to the fund in November, with a 34% rise in its share. This game developer has long been an important holding and, in early November, presented third-quarter results with a sales gain of 64% and an adjusted operating profit up 80%.

These numbers are breathtaking, but the great thing is that the share valuation is still a good bit below the average for Swedish small caps, which is why we own it. At the end of the month, Stillfront organised a well-attended capital market day when it presented ambitious new financial targets. The management has a history of delivering, and we see a good probability of these targets being met. We still see the stock as attractively valued.

We have taken in Systemair as a new holding. This ventilation group is getting back into shape after a lull, and we believe its journey of improved profitability will continue. Founded in 1974, Systemair is undeniably a success story but lost some focus a few years ago, resulting in declining profitability. The management has worked systematically to get the company back into shape, and we are seeing the changes bear fruit. The valuation is attractive in absolute terms, and compared to competitors, and also relative to its own history.

Bufab is making a significant entry into the US market through an acquisition of American Bolt & Screw, a well-run and profitable company that contributes significantly to Bufab’s earnings per share. We see the deal as positive from several perspectives. It is exciting that Bufab is serious about making a substantial entry into a very large market, and is just the right strategy in our opinion. It also strengthens Bufab’s position as an acquisition-driven company. This type of company enjoys very high valuations on the Stockholm stock exchange, so in addition to the positive effect on EPS, it can be argued that Bufab’s valuation multiples should rise. The stock rose 20% in November.

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Carnegie Småbolagsfond invests in smaller value companies on the Stockholm Stock Exchange. Such small caps have historically had stronger share price growth than larger companies, partly because they have more opportunities...

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