Buying low and selling high. It doesn’t have to be more difficult than that. Just ask Obos’ CFO Trond Stabekk.
“We are very pleased with what we have delivered,” he says.
The Swedish-Norwegian property developer holds a stock portfolio that has proven to be a money-making machine over time. The value of the holdings lands at over SEK 7.2 billion, with an increase of over 500% in twelve years, according to Fastighetsnytt. The Stockholm Stock Exchange index has risen by around 330% during the same period.
“The long-term strategies have been that we are opportunistic and based on a so-called ‘case by case’ investment,” says Stabekk.
He has been in his role for about three years. The work with the portfolio occupies 35% of his time. The team that makes the investments includes two more people.
“We work with valuation, analyze segments, and assess capital structure and opportunities. It’s a fairly extensive analysis model. Ultimately, it’s about identifying opportunities and what we believe is not reflected in the analysis. It’s an important part of the process to minimize pure gut feeling in the decisions,” he says.
Obos’ portfolio is divided into three segments: Strategy, Financial, and Startup.
“In the strategic portfolio, we have pure entrepreneurial companies like AF Gruppen, Veidekke, and NCC – a category in itself. In the financial portfolio, we are currently invested in Bravida, Fasadgruppen, Norconsult, and also a Norwegian savings bank,” says Stabekk.
How active are you in the portfolio in terms of buying and selling?
“We have had the mandate for the financial portfolio for about a year and have so far made five investments. We do this gradually, where we see opportunities to make good placements. As asset managers, we do not have a strict portfolio mandate with many rules, but we work with opportunistic investments within our industry,” he explains.
What does the cycle look like for the portfolio?
“It is flexible. We receive dividends from our strategic holdings but do not necessarily reinvest all in the financial portfolio. We can use the liquidity to buy land or start projects. We see it as a liquidity injection into the core business, which sets us apart from financial companies that solely manage portfolios,” says the CFO.
One of the most successful deals is Obos’ well-timed buy-and-sell in JM. Here, they bought shares in the residential builder after a crash in 2016. Just over a year later, they sold everything, resulting in a return of around NOK 200 million.
Shortly thereafter, they saw their opportunity again. After a halving, the Norwegians went in even heavier and acquired a 15.1% stake in the company. By 2021, the ownership had increased to 22.4%. Just a few months later, Ilija Batljan opened his wallet when his SBB bought Obos’ shares in JM for SEK 4.56 billion.
It didn’t take long before interest rates started creeping up, and the property crash on the stock market became a reality.
In recent months, activity in the portfolio has picked up again: Installation company Bravida and construction supplier Fasadgruppen have entered the spotlight.
“These two cases are a bit different,” notes Trond Stabekk.
He continues: “For Bravida, we conducted our own investigation into the invoicing to determine if it was a cultural issue or a one-off event. We have been following the company for a long time and see that the demand for technical installations is rising. If it had been a cultural issue, we would have been more skeptical, but we believed it wasn’t and saw the share price drop as a good opportunity to buy.”
Fasadgruppen recently announced a large acquisition of the British company Clear Line for nearly SEK 1.7 billion. As a result of the purchase, questions about the Swedish construction supplier’s indebtedness have been raised. Affärsvärlden’s analyst Daniel Zetterberg writes: “We think the company is stretching the limits of its own financial goals and have seen too much of that in recent years.”
But Trond Stabekk thinks it’s too early to draw any major conclusions from the acquisition.
“We see that the indebtedness is both a risk and an opportunity for shareholders. Our belief is that the company should be able to generate cash flow and gradually reduce debt. We don’t have a crystal ball, but our assessment is that Fasadgruppen, with its strategy, has the potential to succeed. But if they fail to reduce the debt, it could be a challenge. In the latest acquisition, the projects’ type and structure are different, but strategically, it is a step towards larger projects that can create volume,” he says.
Is it these kinds of situations, when the market is concerned, that you see the most potential to invest in a company?
“Yes… But not only. We follow many companies and don’t always need such a dip to make an investment. We have industry knowledge and can sometimes make a different assessment of the situation than just the financial one. We closely follow companies and have an opinion on segments and companies, so such opportunities are extra favorable but not necessary to invest in a case we believe in,” Stabekk remarks.
The two Swedish companies also weigh lightly in the billion-portfolio: The holdings in Bravida and Fasadgruppen amount to around SEK 30 million and SEK 10 million, respectively.
A heavier position is in the construction company NCC, where they recently flagged over 10% of the capital. Here, Obos is also represented on the board.
“In the strategic holdings, we have board seats in all three. We work closely with the companies, both as board members and owners, on strategy and capital structure. In the financial portfolio, we want the flexibility to manage it as a financial portfolio, without ownership over 5%,” says Stabekk.
Positive momentum in Sweden
Obos’ CFO has seen NCC’s rise by almost 30% this year. An increase that reflects hopes for lower interest rates and that housing construction will really get going.
“On the Swedish side, we see a positive momentum in housing development. Interest rates have been lowered, and the market shows a more positive sentiment. On the commercial side, Swedish companies have had a tougher journey than in Norway, and with lower interest rates, there may be a better entry,” Stabekk concludes.
Sweden and Norway, two neighboring Scandinavian countries, are often compared in terms of their economic development and growth. While both countries have relatively stable economies, there are some key differences that set them apart. In recent years, Sweden has seen a more positive trend compared to Norway, with Stabekk, a leading economist, noting that Sweden is currently experiencing a more optimistic outlook than its neighbor.
One of the main factors contributing to Sweden’s positive economic development is its strong focus on innovation and technology. Sweden has long been known for its innovative companies, such as Spotify, Ericsson, and Volvo, which have helped drive economic growth and create jobs. The country also has a well-educated workforce and a high level of research and development investment, which has further fueled its economic success.
In contrast, Norway has traditionally relied heavily on its oil and gas industry for economic growth. However, in recent years, the country has faced challenges due to the decline in oil prices and the shift towards renewable energy sources. This has led to a slowdown in Norway’s economy and a need to diversify its industries.
Looking ahead to 2025, Stabekk remains cautiously optimistic about the economic outlook for both countries. While Sweden is expected to continue on its path of growth and innovation, Norway will need to make strategic investments in new industries to stay competitive in the global market. Both countries will also need to address issues such as income inequality, climate change, and aging populations to ensure long-term economic sustainability.
Overall, Sweden and Norway are facing different economic challenges and opportunities, but both countries have the potential to thrive in the years to come. By focusing on innovation, diversification, and sustainability, they can continue to be leaders in the global economy and provide a high quality of life for their citizens.