Investor Outperforms Market: 15 Years Running

In practice, it was already decided before the last trading day of the year – but only after Tuesday’s closing was it possible to confirm: Investor has beaten its benchmark index this year as well.

– I don’t think there will be any celebration, but it is clear that we are competitive people like everyone else and it is more fun with 15 straight years than 14 years in a row, that’s how it is, says Jacob Lund.

With a total return of just over 15 percent, Investors B share outperformed the Six Return Index (SIXRX), which closed the year up around 12.5 percent, by a clear margin. SIXRX is a total return index that includes dividends. For Investor – Sweden’s most owned share – it is also the measure the company itself uses to evaluate its long-term performance.

But at the end of September, the situation looked completely different. With only one quarter left in the year, Investor clearly trailed its benchmark and the long streak was about to be broken. The investor share was then down 1.7 percent for the year, including dividends, while SIXRX had risen by just over 4 percent.

– We have never been stressed. We know that the companies have worked on even if the market has been a bit challenging. Then there are a number of things that have affected the valuation of us, such as currency, customs and so on, but we have never been super worried. And if you look at the listed companies, most of them have done very well during the year, says Jacob Lund.

But since then, the picture has changed rapidly – and the explanation can be found in several parallel movements.

– It is a combination of reduced substance discount, which was quite high in October, and that some of the larger holdings, including EQT and Astra Zeneca, have developed well since mid-October. I also believe that an international evaluation of health care has contributed to a more positive view of the unlisted portfolio, says Lars Söderfjell, the Bank of Åland’s equity manager.

Saab stands out among the holdings

Among the larger holdings that performed best, the defense giant Saab stands out with an annual increase of 126 percent. ABB, which is Investor’s largest holding, has also developed strongly and rose by nearly 16 percent.

The investment company’s second largest holding, Atlas Copco, was for a long time the big sinker – which in the end became a bit of a savior. After a weak start to the year, the stock has become a decisive piece of the puzzle in the final sprint, with an increase of just over 8 percent in the last three months.

The same annual rhythm could also be seen in Investor’s unlisted holdings, gathered under Patricia Industries – albeit with a greater lag in valuations.

During the first quarter, the total return for Patricia Industries, based on assessed market values, amounted to -9 percent. In the second quarter, the same figure was -6 percent. But in the third quarter, the trend turned upwards. The total return then amounted to 4 percent, mainly driven by rising multiples.

– The operational development has been good in many of the companies, then Investor’s “peer group” methodology means that the assessed market value has decreased in some cases. But if you do your own valuation of the unlisted portfolio, there is not much to suggest that the value development was negative during the year, rather the opposite. And if you look at the development of, for example, S&P 500 Healthcare in recent months, I think it looks like the multiples will come up a bit in Investor’s Q4 and Q1 reports, there is a little lag before changed valuations take effect, says Söderfjell.

The expert: “Shows the breadth of the portfolio”

That Investor still managed to beat the index despite the headwinds in several heavy holdings says something about the composition of the portfolio.

– The fact that you can beat the index despite Atlas Copco lagging behind shows the breadth of Investor’s portfolio. ABB, Astra, EQT, Ericsson, Saab and SEB have more than compensated for Atlas’ “gap years”, he says.

Seen over a longer period of time, it is precisely that ability that stands out, says Söderfjell. Beating a total return index year after year is unusual – even in an international perspective.

– You can say that is extremely impressive. I think many active managers would have wished for the same track record. However, it becomes a bit more difficult if you are a UCITS fund with only listed holdings, but hats off to Investor.

Behind the suite lies above all long-term value growth in the companies’ underlying operations, rather than temporary market movements.

– The most important thing is the ability to build and develop good companies, and thereby increase the net worth. Over the past 15 years, more than 80 percent of the total return has been explained by the growth in net asset value, the rest is dividend yield and discount reduction. This is also why we own Investor in almost all of our funds and portfolios – they have clearly demonstrated that they have a model for developing their holdings that works over time, says Söderfjell.

After the autumn’s strong performance, Investor also passed the dream limit of SEK 1,000 billion in market capitalization, which makes the company the largest on the Stockholm Stock Exchange, if you disregard Astra Zeneca, which is also listed in London.