Exaggerated reactions in both directions

“As goes January, so goes the year,” is a popular expression from the other side of the Atlantic and, considering how the year began over there, it looks like being a negative year for stock markets.

Here at home, however, the stock exchange chose to rise, and it was actually a month of comebacks. Hennes & Mauritz rose sharply as it once again beat expectations by coming in with better numbers than predicted. And the fact that sales surprised positively and inventories continued to decline while the balance sheet is strong certainly helped.

In fact, things are going so well that Karl Johan Persson has decided to step back from the role of CEO to become chairman. This is impressive given how downbeat everyone was 1-2 years ago. It is also impressive and smart that the new CEO was previously the head of sustainability. This shows that the company understands the challenges it faces. And talking of forward-looking, H&M has adjusted to market conditions by opening very few stores this year.

Hedge funds and many others were downbeat about NCC, with an entirely wrong focus on its balance sheet (something we raised in several monthly reports during the autumn). NCC basically issued its fifth consecutive report with no impairments, and its dividend was raised to SEK 5 per share. Excluding leasing and pensions, NCC now actually has net cash and is slowly moving towards raising its margin further.

It is worth repeating that turning a company around always takes longer than you think, but patience is a virtue.

So how should we summarise the reports? We would say slightly better than acceptable. Profitability remains at high levels, cash flows are good in almost all industries, and dividends were an upside surprise (the biggest in Volvo, another dear friend). Share price reactions have been far too large and exaggerated, in both directions, but this creates opportunities.

This month we increased our holding in Handelsbanken. At current levels this feels like a relatively low risk, and that suits us.

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Carnegie Sverigefond investerar i svenska börsnoterade aktier och innehåller landets bästa och mest stabila bolag. Vi investerar långsiktigt i värdebolag – bolag med hållbara verksamheter, starka balansräkningar och goda utdelningsmöjligheter. Carnegie Sverigefond...

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