When other investment firms claim that five years is long-term, Fredrik Lundberg and the investment company Lundbergföretagen have shown what it truly means to be long-term oriented. While others have increased their debt, acquisition pace, and risk appetite to temporarily improve financial metrics, Lundbergföretagen has done the opposite.
In many lengthy CEO letters, Fredrik Lundberg describes the simple investment principles that many preach but are almost impossible to practice over time. According to Lundberg, successful ownership is only possible with a long-term perspective. The low level of debt ensures that he is never forced to sell assets or raise capital on unfavorable terms.
The wholly-owned real estate company Fastighets AB L E Lundberg is maximally leveraged at 50 percent, and the listed investments are made without leverage. To develop the portfolio companies in the desired direction, great importance is placed on appointing the right chairman in the portfolio companies.
Aside from the number of shares and larger values, the current portfolio composition is almost identical to ten years ago. When Sandvik spun off Alleima, a new portfolio company was added to the list. Since Alleima’s independence in 2022, Lundbergföretagen has also increased its exposure to the undervalued steel specialist through the acquisition of over 10 million shares for a total of approximately 700 million SEK.
Massive Dividends Finance Further Purchases
Profitable and dividend-paying companies have generated recurring cash flows over the years. Dividends last year totaled 3 billion SEK, more than double the total dividends in 2015.
Including this fall’s proposed dividends, the cash flow from dividends will be slightly above last year, and over ten years, they can be summed up to over 20 billion SEK, which can be compared to today’s market value of 135 billion SEK. Additionally, the real estate business has added a cash flow of approximately 10 billion SEK during the period.
Over ten years, there have been times of both low and high interest rates, extreme stock market movements, and generally strong economic conditions. Despite the cautious approach to investments, the returns have been far better than the broad market index during the period.
With an eternal perspective, one can sense that Fredrik Lundberg gladly takes advantage when others make investment decisions based on individual quarters. That’s when he is hardly visible beyond the order depths.
After Handelsbanken’s first-quarter report raised concerns about profitability, Lundbergföretagen bought 2 million shares for 98.5 SEK each in May. Since then, Handelsbanken has risen by 6 percent, with a total return of 29 percent over a year.
The net asset value discount is in the low single digits, and if you are considering owning shares in Lundbergföretagen, it is reasonable to share the main owner’s philosophy and, like the company, spread purchases over long time series.
During periods when high debt, risk appetite, and acquisitions are rewarded, the stock lags behind other listed companies. The shift to periods where the opposite applies often happens quickly.
Analysis:
Fredrik Lundberg and Lundbergföretagen exemplify the power of a long-term investment strategy and prudent financial management. By focusing on low debt levels, strategic investments, and consistent dividend payouts, they have achieved impressive returns over the years. Their approach serves as a valuable lesson for investors looking to build wealth steadily and sustainably over time. By following Lundberg’s philosophy and staying committed to long-term goals, individuals can potentially replicate the success seen in Lundbergföretagen’s investment journey.