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Record valuation gap between growth stocks and value stocks

Securities markets have gained successive vigour as the spread of the coronavirus has slowed and a number of countries have begun to ease restrictions on people leaving their homes. Stock markets have in some cases almost returned to the levels they were at before the spread of infection began to be regarded as a clear threat to the world economy.

Corporate bond markets have also strengthened, but not as significantly. Volatility has calmed. The Swedish krona has appreciated substantially over the past month, which is a sign of increased risk appetite.

“It is reasonable to believe that value shares could claw back some of this gap if the world economy soon returns to something like normal.”

Since expectations for corporate profits are now much lower than before the corona crisis, it is reasonable that the required rate of return has fallen on risk assets like shares. This is probably an effect of the support measures from central banks and governments. Growth shares, and especially IT shares, have benefited most from this. In mid-May, the valuation spread between growth stocks and value stocks was at the highest-ever level. It is reasonable to believe that value shares could claw back some of this gap if the world economy soon returns to something like normal.

In May, the fund increased its holdings in Investor, NCC and Telia. Carnegie Strategifond reduced its stakes in Kinnevik, SCA, Securitas, Skanska and Volvo. The main reason for these changes were the relative valuations. For example, it is incomprehensible that the discount in Investor is more than 20 percent given its fine portfolio and the low level of interest rates. On the bond side, Lundberg is a new holding. This should almost be seen as an alternative to cash since the return is low, but at the same time we assess the risk as low.

The share of equities remains at about 60 percent. The fund rose 3.9 percent in May, which means that the decline so far this year has now shrunk to 9.8 percent. The positive performance in May came mainly at the end of the month, when value shares slightly narrowed the gap against growth shares.

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Carnegie Strategifond is also available in the following share class: G (pays dividends each quarter). Carnegie Strategifond is a total return fund investing in Nordic securities with attractive yield, both...

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