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Increased forest exposure

The fund rose 4.21 percent in October, and has now risen six months in a row. The big drop in March has now been recovered, and performance so far this year is 2.01 percent.

September’s equity markets showed greater volatility than we became accustomed to over the summer. An increased spread of Covid, greater uncertainty about the US presidential election, and the inability of US politicians to agree a new stimulus package shook the markets. Overvalued IT stocks saw their halo slip. With the exception of Norway, which was impacted by oil prices, Nordic stock markets performed well, perhaps because the spread of Covid is still limited here.

The equities component of the fund has continued to rise, mainly due to market growth, and is now around 65 percent. The fund already had significant holdings in forest products companies Holmen and SCA, and this exposure was upped in September with a new investment in Stora. In addition to a strong market position as a manufacturer of various grades of cartonboard, Stora owns significant forest assets. Unlike competitors SCA and Holmen, Stora has chosen to maintain a relatively conservative valuation of its forest assets that does not reflect the underlying market value. This may in part be due to a different attitude on the part of the management and/or shareholders, but Stora has recently appointed a new management and CEO, and has in various contexts communicated that the valuation will be reviewed. It can be argued that the value still exists in the company regardless of book value, but for SCA and Holmen the upward revaluation of their forest has probably been a strong driver in the upward revaluation of their stocks. Another value-creating measure could be for Stora to close down its paper production, which accounts for a small share of the business.

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