Buy cheap. Sell high.
It doesn’t have to be more complicated than that. Just ask Obos’ CFO Trond Stabekk.
“We are very pleased with what we have delivered,” he says.
The Swedish-Norwegian property developer is sitting on a stock portfolio that has proven to be a money-making machine over time. The value of the holdings lands at over 7.2 billion SEK, 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 held his role for about three years. Managing the portfolio takes up 35% of his time. The team involved in the investments includes two more people.
“We work on valuation, analyze segments, and assess capital structure and opportunity space. It is a fairly extensive analysis model. Ultimately, it is about identifying opportunities and what we believe is not reflected in the analysis. This is an important part of the process to minimize pure gut feeling in 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 even a Norwegian savings bank,” says Stabekk.
How active are you in the portfolio when it comes to 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; instead, we work with opportunistic investments within our industry.”
What is the cycle like for the portfolio?
“It is flexible. We receive dividends from our strategic holdings, but do not necessarily reinvest all of it 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 only 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 developer after a crash in 2016. Just over a year later, they sold everything, resulting in a return of around 200 million Norwegian kroner.
Shortly after that, they saw their chance again. After a halving, the Norwegians went in even heavier and acquired a 15.1% stake. In 2021, ownership had increased to 22.4%. Just a few months later, Ilija Batljan opened his wallet when SBB bought Obos’ shares in JM for 4.56 billion SEK.
It wasn’t long before interest rates started creeping up, and the property crash on the stock market was a reality.
Acquired Bravida and Fasadgruppen
In recent months, activity in the portfolio has picked up again: Installation company Bravida and construction supplier Fasadgruppen have been brought into the fold.
“These two cases are a bit different,” notes Trond Stabekk.
He continues:
“For Bravida, we conducted our own investigation into invoicing to determine if it was a cultural issue or a one-time event. We have been following the company for a long time and see that the demand for technical installations is increasing. If it had been a cultural issue, we would have been more skeptical, but we believed it was not, and saw the price drop as a good opportunity to buy.”
“A risk and an opportunity”
Fasadgruppen recently announced a large acquisition of the British company Clear Line for nearly 1.7 billion SEK. 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 pushing the limits of its own financial goals too much and have seen too much of that in recent years.”
But Trond Stabekk thinks it is 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 will 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 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.
Are these types of situations, when the market worries, where you see the most potential to invest in a company?
“Yes… But not solely. We follow many companies and do not 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 follow companies closely and have an opinion on segments and companies, so such opportunities are particularly favorable but not necessary to invest in a case we believe in,” says Stabekk.
The two Swedish companies also have a light weight in the billion-portfolio: The holdings in Bravida and Fasadgruppen are valued at around 30 and 10 million SEK, respectively.
A heavier stake 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 run it as a financial portfolio, without ownership over 5%,” says Stabekk.
Positive momentum in Sweden
Obos’ CFO has seen NCC rise by almost 30% this year. An increase that reflects the hope for lower interest rates and the start of serious housing construction.
“On the Swedish side, we see a positive momentum in real estate 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,” he says.
The Swedish and Norwegian economies have been closely watched in recent years, with many experts weighing in on the potential outcomes for both countries. However, according to Stabekk, a prominent economist, the outlook for Sweden appears to be slightly more positive than that of Norway at the moment.
Stabekk’s analysis suggests that Sweden is currently experiencing a more favorable trend compared to Norway, despite both countries facing economic challenges. “We see a more positive development in Sweden than in Norway right now, but from a larger decline,” Stabekk explains.
When asked about his predictions for 2025, Stabekk remains cautiously optimistic but admits that significant market improvements may be hard to come by. This sentiment reflects the uncertainty surrounding the global economy and the potential impact of various factors such as political instability, trade tensions, and technological advancements.
As Stabekk delves deeper into his analysis, he highlights the key drivers shaping the economic landscape in both Sweden and Norway. One of the primary factors influencing these economies is the ongoing shift towards digitalization and innovation. Both countries have made significant investments in technology and research, positioning themselves as leaders in sectors such as fintech, biotech, and renewable energy.
Additionally, Stabekk points to the importance of sustainable development and environmental consciousness in driving economic growth in the region. Sweden and Norway have been at the forefront of adopting green initiatives and promoting clean energy solutions, which not only benefit the environment but also create new opportunities for businesses and investors.
Despite these positive developments, Stabekk acknowledges the challenges that lie ahead for both countries. Economic disparities, demographic changes, and geopolitical uncertainties are just a few of the issues that could impact the future trajectory of Sweden and Norway. As such, Stabekk emphasizes the need for proactive measures and strategic planning to navigate these potential obstacles and sustain long-term growth.
In conclusion, Stabekk’s insights shed light on the complex dynamics at play in the Swedish and Norwegian economies. While Sweden may currently have a slight edge in terms of positive growth, both countries face a range of challenges that will require careful navigation in the years to come. By staying attuned to key trends, fostering innovation, and prioritizing sustainability, Sweden and Norway can continue to thrive in an ever-evolving global landscape.