“Mikael Holm Lorsell, en Hedge Fund Genius Unveiled at Alcur Funds”
The reception at Alcur Funds could have turned sour if Mikael Holm Lorsell hadn’t swiftly entered the bright office on Birger Jarlsgatan. Alongside his five colleagues, he manages the hedge funds Alcur, Alcur Select, and the long-only fund Alcur Grow.
As the head of Alcur Grow, with assets under management of 1 billion SEK, Holm Lorsell is the main figure behind Alcur’s success. “We don’t have much to gain from discussing our short positions,” says Holm Lorsell as he gestures towards the conference room.
A man of varied experiences, having worked as an analyst at Danske Bank, Penser, and Swedbank, Holm Lorsell describes himself as a generalist. “I’ve delved into various sectors over the years, aiming to have a broad palette to become a fund manager later on.”
The journey of fund management seems to be going well so far. Alcur Select has seen a 290% increase since its inception in 2018. Alcur Grow A/B has recorded gains of 50% and 45% respectively since its launch in 2021, outperforming the small-cap index by 19% during the same period.
“We are a very small fish. What sets Grow apart from other small-cap funds is its size, allowing us to buy almost any stock. Additionally, it is traded monthly, creating a certain inertia in both directions. These factors improve the odds of long-term success,” explains Holm Lorsell.
The fund comprises approximately 30 companies, categorized by Holm Lorsell into three groups: high growth/organic leverage, roll-ups, and special situations. “The first group, with high organic growth and operational leverage, could be a medical technology product penetrating the market over a long period, expanding its margins,” Holm Lorsell elaborates.
One such example is the medical technology company Xvivo, offering solutions for organ transplantation, including lungs and hearts. “They have a very high gross margin and significant market potential. While their P/E ratio may seem high this year, one must consider the value of their upcoming products for heart and kidney transplants in the following years. It’s the kind of company that should sustain long-term growth with high scalability,” Holm Lorsell points out.
Another scalable roll-up segment is software. “Acquiring new customers costs virtually nothing, and if you have a good niche, you can grow sustainably. These stocks may seem expensive in the first year but have a lot of growth potential ahead,” says Holm Lorsell.
Holm Lorsell also favors companies that reinvest their cash flows effectively, known as roll-ups. Idun Industrier, the fund’s third-largest holding, has seen its stock rise by +69% this year. “It’s a serial acquirer that has been building up for a long time, progressing slowly. Their goal is to find companies with a strong market position in small niches. They often acquire a majority stake in the company and allow the entrepreneur to continue driving it forward,” Holm Lorsell explains.
Among Idun’s companies are everything from funeral products to tail lifts. In September, they conducted a directed new share issue, raising 200 million SEK but causing a 13% drop in the share price. “The stock has performed well since the IPO, and this is the first time Idun has raised funds. As the company grows and can make larger acquisitions, the risk diversification in such a transaction increases,” Holm Lorsell notes.
The healthcare company Ambea, also experiencing growth, has become the fund’s second-largest holding. The stock has risen by +85% this year. “They have been doing very well, especially compared to their competitors. Their profit development has been very strong, and their Swedish operations have clearly outperformed Attendo in the last ten years,” Holm Lorsell points out.
Attendo, another healthcare company in the portfolio, along with Ambea, has strong market positions in the private market. “Within elderly care, they have around 65% in-house, which is very high. I believe there will be a challenging situation in the coming years with supply and demand. Very little has been built, and we have the elderly mountain ahead of us. The market is enormous,” Holm Lorsell observes.
The regulatory risks faced by sector peer Humana are not the same for Ambea and Attendo since they do not have a state principal, but rather municipalities as customers. “They offer an attractive proposition to municipalities when building their accommodations, as they only charge for each place without any guarantees. The risk is that in practice, taxpayers are their only customers,” explains the fund manager.
In the opportunistic bucket for special situations, Holm Larsen has included Securitas. The security company saw a significant rebound in the Q3 report and has gained over 40% this year. “There have been many misconceptions in the market and quite a bit of skepticism towards the company. For a long time, the valuation was near 20-year lows, while the margins have never been better, and the growth has never been higher,” says Holm Lorsell.
However, the skepticism is not related to the strip club revelations on “Uppdrag Granskning” but rather revolves around the financial situation and cash generation, according to Holm Lorsell. “The debt has decreased after the Stanley acquisition, and there is a significant transformation of the company underway, costing a lot of money. They want to sell complete solutions as a package – not just two guys and a German Shepherd. It becomes more scalable and differentiated,” he notes.
The largest holding is the small SaaS company Vertiseit from Varberg, offering visual tech solutions to restaurants, stores, showrooms, and public transportation. Recently acquiring Visual Art, the company doubled in size. “Vertiseit combines high organic growth and acquisitions. They have a clear focus on increasing software revenue and reducing hardware over time. The screens are not where they make money; it’s more about providing a service to customers,” explains Holm Lorsell.
Holm Lorsell invested in the stock shortly after COVID, during a directed share issue with an acquisition, at a time when all retail-related businesses were equipped with face masks. “I noticed that software revenues had increased every quarter for the past 12 years, so I understood that customers really appreciated it. Since then, it has only continued to grow, which is fantastic,” he adds.
Following the acquisition share issue, Bonnier became a new major shareholder, a move Holm Lorsell appreciates. “We are not activists, so it’s good to have an active external owner. Perhaps the price tag for the acquisition was a bit high, but this is a super exciting journey in a global market with a strong team and low valuation,” he remarks.
Vertiseit’s stock has soared by a staggering 136% this year, topping the performance list alongside ITAB Shop Concept, which has increased by 114%. ITAB was recently added to the portfolio following an acquisition. “If you had on your bingo card that digital store materials would more than double by 2024?”
“No, but that’s how it is with beaten-down stocks. When it feels really tough, it’s often a bottom. Last year was an intermediate year, but if you look at the profit development and what they will earn, it’s often more than 100%. It’s a scale game that can continue for many years,” Holm Lorsell reflects.
Another winner is the software company Carasent, with its digital care journals up by 80% this year. A Swedish company listed on the Oslo Stock Exchange that is preparing for a listing transfer to the Stockholm Stock Exchange. “We were a bit lucky there. We owned the Finnish company Efecte, which was acquired by private equity, and we reinvested the money in Carasent. It was a special ownership situation, and the stock was under a lot of pressure. Then there was a bid for the company, but the major shareholder declined. The price is still close to the bid level, so it was good timing. The success of the case depends on how the business performs,” says Holm Lorsell.
If the carpets in the conference room come from Rugvista, Holm Lorsell cannot say for sure. However, he affirms that they are in the portfolio. “Rugs are an incredibly good category to sell in general. There are no strong brands and a very opaque market. You have no idea how much a rug should cost, 1,000 or 10,000 SEK?”
“You have high average order values, and Rugvista has had double-digit margins for ten years. Then there was a double whammy with too much inventory and a declining economy, but that is starting to wash out now. It has been a poor stock lately, but I strongly believe in it and have bought more during the year,” concludes Holm Lorsell.
As Holm Lorsell heads off for lunch to listen to Bufab about screws and nuts, the Placeras reporter avoids the not-so-friendly dog but is instead captured by one of Sweden’s firmest handshakes. “Yes, I have to hold on to my positions tightly,” trader Peter Guve laughs.