Strong Swedish construction market

The month was marked by an initial decline that turned into a recovery. The Carnegie Småbolagsfond fund rose in February by 0.4 percent, writes Viktor Henriksson in his fund manager’s comment.

The big news in February was that US Mylan placed a bid for Meda at a 92 percent premium, but Carnegie Småbolagsfond did not own shares in Meda.

The fund’s largest holding, Peab, had an eventful month. It started with a project impairment loss of SEK 800m for the Mall of Scandinavia. This was in line with our expectation, so we were surprised when the stock price fell sharply. It has long been known that Peab has not managed to successfully deliver this huge mall on budget. A week or so later, the company presented its report for Q4 2015. The key number was a substantial increase in orders, and the stock took a steep upturn. The movements in the month added up to a gain of 16 percent. We see it as positive that the impairment for the Mall of Scandinavia has been taken. This was the last project in Peab’s old strategy, before it began to focus on profitability. The good order intake is evidence that the Swedish construction market is strong.

Another cause for celebration was our new holding in Catena Media. We participated in the IPO, and the shares have had a good start on their stock market journey. The company provides marketing for gaming companies, and we expect strong demand for Catena Media’s services. The company reported its 2015 financial statements in late February. These showed very good performance for sales and earnings, and the report was welcomed by the stock market.

The positive trend for property companies continued in February. A somewhat unexpected rate cut by the Swedish central bank further fuelled the interest. Our holdings in AtriumLjungberg, Fabege and Hufvudstaden had a good month.

Haldex was the month’s disappointment, with an interim report below expectations. Both sales and earnings fell short. We recognise that the valuation is low, but we are also disappointed in the company’s performance at the end of the year.

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