More parts of ABB to come

Worldwide stock exchanges continued upward in March, but Stockholm failed to fully keep pace, largely due to some of our banks. Swedbank continued downward, and even Nordea and, particularly, SEB were impacted.

These three are now trading at 8-10 times earnings, which suggests the market is pricing in fairly hefty damages going forward, but this remains highly uncertain. On the upside, it seems there will be a reset at both board and management levels in Swedbank.

Even more positive are the noises from the fund’s big engineering holdings. It seems that demand is buoyant and we can look forward to fairly decent interim reports.

Many investors are of course worried that stock exchanges are continuing upward while data from both China and Europe, Germany especially, has been very weak. But do not forget that stock markets are forward-looking and this should be interpreted as the market expecting purchasing managers’ indexes and other data to turn upward in coming months.

The fixed income market (as usual) believes something completely different, and clearly indicates that the economy is slowing. The fall in ten-year interest rates has been quite remarkable and is what has fuelled, among other things, real estate shares.

We attended Skanska’s capital markets day and noted that it is about to completely dispose of its infrastructure portfolio, which is expected to free up a couple of billion kronor in the coming years.

The fund increased its holding in Securitas this month, which, despite its stability and low cyclical risk, is traded at lower multiples than the rest of the market. We also took the opportunity to increase in ABB, which is one of the most under-owned and hated major Swedish companies. Following its sale of Power Grids, a large part of the company will be pure net cash, which limits the downside. In addition, it is late cyclical and correctly positioned for the future through exposure to electric vehicles and robots. The company may eventually be divided into two or three parts, which in the long term could justify an upside of 40-50 percent.

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Sverigefond A

Carnegie Sverigefond invests in listed Swedish equities and contains the country’s best and most stable companies. We invest long-term in value companies with sustainable businesses, strong balance sheets and attractive...

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