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Small caps buck the trend

December saw generally falling share prices. Stockholm lost 4.1 percent and the small cap index 1.1 percent. But Carnegie Småbolagsfond rose 2.0 percent, giving a rise of 34.2 percent for 2015.

The month’s highlight was newcomer Nordnet, gaining 30 percent. We find the valuation and dividend attractive in absolute terms and relative to competitor Avanza. Nordnet’s customers are currently highly active, but short-term activity is difficult to predict as it largely depends on market mood. In the longer term, however, we feel sure that Nordnet will continue to take market share from the big banks.

Avanza has performed better in recent years, and we expect Nordnet to up its game, such as through an improved website and a launch of mortgages in 2016. We regard the good share price performance in December as a reaction to a very weak trend in earlier months.

Elanders rose 13 percent in December after acquiring German packaging and specialty printing company Schmid Druck. This is not a big acquisition, but the valuation seems very attractive and makes a positive contribution to earnings for Elanders, which is a good example of a company in a dull sector doing well through a combination of innovation and acquisitions. Backed by main shareholder Carl Bennet, we anticipate a continued good trend.

Major holding Hoist continued its healthy development and rose 11 percent in December. The company has expanded rapidly and has bought a large number of debt portfolios over the past three years. We believe this is the right strategy and we expect Hoist to report rising earnings in coming years. The company says it sees continued opportunities to acquire debt. We expect further expansion and regard more portfolio acquisitions as likely, as well as entry into new markets in 2016. The valuation is attractive and we find its non-cyclical growth appealing in the current low-inflation environment.

We also find Hoist’s peer Intrum Justitia attractive, and we upped our stake in December. The company’s long-time CEO Lars Wollung had to leave the company in November, which of course created some uncertainty. Acting CEO Erik Forsberg has not been idle. In December, the company made a significant portfolio acquisition, strengthened its bank financing and declared a clear ambition to increase the pace of acquisitions. We find the valuation appealing and we see a buying opportunity in the wake of the recent turbulence.

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