Newsletter Equity Funds 31/10 2023
Market development
- There was some form of nirvana in the financial markets in November, with rising prices on stocks, government bonds and corporate credit. Behind the November rally were monetary policy developments.
- In the US, the Fed kept its key interest rate unchanged and its statements were interpreted as softer than previously. Weaker jobs stats also fueled expectations that the Fed has finished hiking rates.
- The Riksbank also somewhat surprisingly kept its key interest rate unchanged, but pointed out that it might hike in February instead. But if you don’t hike now, you won’t do it next time either, according to the market, which is now pricing in lower interest rates in 2024.
- Inflation continued to fall into the right track. Euro area inflation fell to 2.4%, lower than expected, US inflation fell to 3.2%, lower than expected, and in Sweden the CPIF was 4.2%, lower than expected.
- In addition, the spot price of oil continued to fall to the lowest level in 5 months.
- Christmas shopping started slightly weaker than expected if early indicators for both the US and Sweden during the Black Friday sales are to be believed. At the same time, however, traders also seem to have been more cautious with their price cuts than last year.
- Interest-sensitive stocks, such as highly leveraged companies and growth companies, performed particularly well during the month.
Simplicity Norden
Development
The fund performed well despite a large underweight in real estate and growth stocks that rallied during the month. Instead, the large industrial companies acted as the driving force in the portfolio. Volvo, Assa Abloy, ABB, Sandvik, Lifco, Trelleborg and Atlas Copco all performed better than the market as a whole. The latter rose after a good quarterly report from the end of October prompted analysts to raise estimates for the company. The fund’s salmon companies, MOWI and Salmar, also rose as analysts see better prospects for salmon sales next year.
Larger portfolio changes
Profit-taking in pharma giants Novo Nordisk and AstraZeneca meant that the weight of the healthcare sector decreased to just over 10% from the previous 13%. On the buy side, SCA was included in the portfolio during the month.
Returns as of 2023.11.30
- 4.0%
- 0.9%
- 5.7%
- 4.8%
Monthly report
Simplicity Sverige
Development
The fund rose sharply during the month, driven by the fund’s industrial companies and consumer discretionary companies. The large order books bode well for industrial heroes such as Volvo, Atlas Copco, Sandvik and Assa Abloy, all of which rose more than the index in November. Trelleborg also developed very positively as the company’s operational changes are increasingly appreciated by the market. The changes include a greater focus on more profitable niche areas and lower leverage. Among the consumer discretionary companies in the portfolio, H&M rose the most, up 15%.
Larger portfolio changes
During the month, the weight in AstraZeneca was cut to 0.7% from the previous 3.9%, while the real estate sector increased through the purchase of Sagax and Balder, among others.
Returns as of 2023.11.30
- 8.0%
- 5.0%
- 7.1%
- 8.6%
Monthly report
Simplicity Småbolag Sverige
Development
The fund rose by double digits during a very strong month for many of its holdings. Real estate companies rose with the lower interest rates, not least Balder, which returned over 30%. On the same theme, Hemnet continued its positive trend and rose by more than 20%. The stock is now up 91% year to date. Trelleborg also had a good month with an increase of 16%. The company’s structural changes, with a greater focus on more profitable niche areas and lower leverage, which enables future acquisitions, have begun to be appreciated by the market.
Larger portfolio changes
The fund continued to increase in real estate companies, which had a good month, to say the least. Sagax and Wallenstam accounted for the largest increases in the sector. The weight in Skanska was cut to 0.7% from the previous 3.8%.
Returns as of 2023.10.31
- 10.6%
- 6.6%
- -1.3%
- -0.3%
Monthly report
Simplicity Småbolag Global
Development
The fund had a strong performance during the month relative to its benchmark index. A stable U.S. housing market and lower interest rates contributed to an increase in the portfolio’s homebuilders and their suppliers. Taylor Morrison Home, Meritage Homes, Installed Building Products, Simpson Manufacturing, and others, rose on this theme. In addition, ELF Beauty got revenge for weaker performance lately as the company outperformed expectations in the latest quarterly report and the sales guidance was revised upwards sharply. It was the tenth consecutive quarter that the company beat earnings expectations.
Larger portfolio changes
The world’s private consumption is still healthy and the depressed valuations in consumer discretionary companies mean that the weight remains high in the sector and increased slightly to 25% during the month through purchases of Group 1 Automotive and Signet Jewelers, among others.
Returns as of 2023.11.30
- 2.9%
- -7.5%
- 0.8%
- 4.0%
Monthly report
Simplicity Fastigheter
Development
Real estate stocks rallied broadly during the month with the declining interest rates. The fund’s largest holding, Balder, had the best performance in the portfolio, with an increase of as much as 32%. In general, real estate companies seem less inclined to sell their properties compared to earlier in the year, which may indicate that the companies’ balance sheets have now strengthened to satisfactory levels.
Larger portfolio changes
Corem’s discount to net asset value is attractive and the weight in the share rose above the 5% mark to 6.2% during the month. Purchases were also made in Kojamo. The Finnish company also has a large discount to net asset value, while property valuations on the books are more cautious than in Sweden.
Returns as of 2023.11.30
- 19.3%
- 6.5%
- -1.6%
- -4.2%
Monthly report
Simplicity Green Impact
Development
The fund performed strongly during the month. The fund’s holdings in the theme of sustainable water management performed best, with the Japanese company Nomura Micro Science, a producer of equipment for water purification, making a major contribution. The fund’s holdings in energy-efficient building materials also performed strongly, such as American Installed Building Products and TopBuild. As a theme, holdings in renewable energy were the weakest.
Larger portfolio changes
During the month, Verbund was added to the portfolio. The company sells electricity to customers in Europe, which is generated in its own hydropower plants, among other things.
Returns as of 2023.11.30
- 5.9%
- -6.9%
- 3.0%
- 9.2%
Monthly report
Our Equity Funds
Simplicity
Fastigheter
Simplicity Fastigheter invests in listed companies that own, manage, and build various types of real estate in the Nordic region.
Simplicity
Palma
Our first actively managed mixed fund aims to achieve as high a risk-adjusted return as possible.
Simplicity
Green Impact
A global equity fund investing in companies that contribute to a sustainable development. The fund is classified as dark green (Article 9) under the EU Sustainable Finance Disclosure Regulation (SFDR).
Simplicity
Sverige
After several successful years managing Simplicity Norden we launched Simplicity Sverige, which only invests in stocks listed on the Stockholm Stock Exchange.
Simplicity
Småbolag Sverige
Simplicity Småbolag Sverige focuses on Swedish small-cap stocks. An investment fund for those who believe in the power of Swedish innovation and entrepreneurial spirit, which is anything but “Lagom”.
Simplicity
Norden
Simplicity Norden was launched in 2002 when Simplicity was founded. It has since then outperformed its benchmark index and was awarded with the prize as the best nordic equity fund at the Morningstar Fund Awards 2019.
Simplicity
Småbolag Global
Global diversification and higher expected returns for small- to mid cap equities. Simplicity Småbolag Global is our offering to investors seeking investments in small- to mid cap companies globally.