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Stillfront deserves more

Carnegie Småbolagsfond rose 1.5 percent in January. Stillfront was this month’s best holding, with a gain of 27 percent.

Stillfront continues its successful combination of strong organic growth and value-adding acquisitions. This time it is the successful mobile game developer Storm8 being acquired. Payment for the California-based company will be a combination of cash and newly issued shares.

Our initial analysis of the transaction suggests that Stillfront’s earnings per share will increase significantly more than January’s share price gain. Companies that make acquisitions are valued highly on the Stockholm exchange, and significantly above Stillfront’s valuation. This is despite the fact that Stillfront is growing faster organically, is making acquisitions that are large in relation its own size, and is bringing significant synergies to the acquired firms. After the acquisition, Stillfront is valued well below both the Stockholm exchange and the small caps index, so we consider it attractive.

Cloetta reported its earnings for the fourth quarter of 2019 and continues the excellent trend that began in early 2019. It continues to drive its organic sales growth in the right direction, and profitability is also headed the right way. We are not talking about a giant leap forward, but things are improving slowly and surely. Cloetta’s business is defensive, and now that it is growing both sales and profits this is an appetising mix. Its valuation is low in relation to Swedish small companies in general and to comparable companies in particular. We expect continued positive profitability growth during the year.

Collector is not a share we own, but the aftermath of its unfavourable development has negatively impacted our holding in consumer credit company Resurs Bank. The share declined by 11 percent in January. There are common denominators in the fact that both firms deal with consumer credit, but Collector has several other business segments that Resurs does not have.

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Carnegie Småbolagsfond investerar i mindre värdebolag på Stockholmsbörsen. Mindre bolag har historiskt haft en starkare kursutveckling än större företag, de har större möjligheter att växa och blir oftare uppköpta. Detta...

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