Two new stocks join Strategifond
June was a good month for the fund, with a return of 4.7 percent taking the overall gain to 16.7 percent for the first half.
Both equity and credit markets were strong. Although the US trade war remains a risk, both the ECB and the US Fed signalled that easing may be considered if the economy weakens. The tricky call for investors is that equity valuations suggest good corporate earnings growth while the bond market signals a recession.
The solid performance by the fund’s equity component in June left it at over 60 percent of the total, which we regard as very high. We have therefore sold some stocks, and this component is now around 58 percent. The sales were made in Volvo, ABB, Autoliv, Handelsbanken and Platzer, and the position in Industrivärden was sold entirely.
Despite the reduction in equities, the fund was able to invest in two new stocks. One of these, John Mattson, manages and develops a concentrated portfolio of residential properties on Lidingö, just outside Stockholm. The visible return of just over 2 percent may be low, but the location of the properties gives potential for substantial rent growth. It could also be possible to develop and improve the properties to further increase rental income.
The other newcomer, SCA, has been in the portfolio before and was previously sold on a steep uptick when the company was split into SCA and Essity. Low pulp prices have depressed the share, but it now appears attractive at this level. If we compare the valuation of the recent sale of BillerudKorsnäs forest assets to institutional investors with the book value of SCA’s and Holmen’s forest holdings, there are significant surplus values. Holmen is already an important holding. In an environment with the expectation of long-term low interest rates and increased demand for alternative assets, it is now obvious that real forest assets are perceived as very interesting.
The fund has increased the proportion of corporate credits slightly, including through a hybrid loan issued by DNB.