Investor, founded over a hundred years ago as the Wallenberg family’s investment company, is the second-largest company by market capitalization on the Swedish stock exchange. Approximately 70% of its investments are in listed companies, about 20% in unlisted companies, and the rest in shares and investments of the fund company EQT. Among the listed companies, the largest holdings are Atlas Copco, ABB, and AstraZeneca, while among the unlisted, it is Mölnlycke.
I decided to invest in Investor for the first time in 2014, inspired by Mölnlycke. I work in the healthcare sector, and Mölnlycke’s products are visible daily. The company accounts for approximately 12% of Investor’s investment value, making it a fairly significant holding. Over the years, Investor has also accumulated quite a few other healthcare companies on the unlisted side, so I’ve been able to somewhat evaluate these. All holdings can be found here.
Last year, Investor’s total shareholder return was 40%, and the dividend yield is a moderate 3%. The goal is a steadily growing dividend, and historically, it has a good track record.
Apologies if the text sounds too much like a sales pitch; that’s not the intention. I’ve just grown very fond of the company as an investment. Investor is by far the largest investment in my portfolio and will likely only increase its share, as I’ve decided to buy myself an additional 10% of Investor shares as a birthday gift every year. You can confidently put your money into this company.
Are there others here enjoying the ride with Investor?
Yep, Investoria is in my portfolio, one of the largest investments. The company always amazes me when you can get it for 80% of its book value. I usually buy it at that price.
There are posts on my blog about AstraZeneca, when I sold it during a takeover bid. At that time, the share price was somewhere between 400-500 SEK, I don’t remember exactly. Now the company’s share price seems to be around 900 SEK. Investor didn’t sell, I wonder why?
So, if companies seem interesting in its holdings, you often get a 20% margin of safety in this company and a good company developer along the way. For example, ABB is definitely worth owning through this due to dividend taxation in Switzerland.
Currently, the NAV is 596 SEK and the price is 482 SEK. Not quite below 0.8. The NAV can of course decrease with a drop in share price, but still. A 20% drop, for example, in Astra Zeneca, which is a coronavirus vaccine candidate, is a lot. SEB, of course, did not pay dividends. Money laundering and other stuff can hit the fan, but there is something behind it, like Investor AB…
I got it for my own portfolio about a month ago for 380. I follow a lot of Swedish investment discussions, and Investor always seems to be a cornerstone in their portfolios. It’s good to be on this ride. Sweden has many other good investment firms, but I haven’t studied others closely enough to have bought any, at least not yet.
Investor is one of those Swedish investment companies that I think is worth following.
As long as one remembers not to follow the company’s own usual key figures too closely if one bases a buying decision on them. A meaningful key figure, however, is the premium/discount in relation to NAV.
Changes in the value of holdings are reflected in the income statement and give a misleading picture of capital returns. One should always take the time to look under the hood at the holdings themselves.
As long as you remember not to follow the company’s own usual key figures if you base your purchase decision on key figures. However, a meaningful key figure is the premium/discount relative to NAV.
With these investment companies, a buying opportunity is rarely entirely good or bad. A good buying opportunity would have a constellation of cheap EUR-SEK, a high NAV discount, and favorable prospects for the underlying holdings.
Hardly ever are all three true at the same time, but if the last one and at least either the first or the second.
I haven’t yet figured out the best way to assess the current valuation of those investment companies. The discount relative to NAV is a good thing to look at. But I would also need something like a P/E ratio, or rather a way to grasp roughly how many years of earnings are needed for the stock to pay for itself. Without something like that, it’s a bit hazy. (Another option would be to calculate the return on equity relative to book value. But can this be used for Investor?)
Do you have any tips?
P.S. If at some point I start spending my time on other hobbies instead of stocks, I’ll start putting the money I’ve set aside into these once every six months and sleep peacefully at night.
I also started this a bit late compared to the current basis, and now I need to examine more closely what I’ve acquired. My gut feeling is that these Swedish families turn everything they touch into gold.
You can, for example, calculate a weighted average of the P/E of the holdings. This works with publicly listed holdings and gives a rough estimate.
Investment company reports usually contain an estimate of the market value of unlisted assets and the company’s ownership percentage of it. However, their net profits may not necessarily be mentioned. With good luck, you might still get estimates for those, or some also publish their own reports.
Remember to multiply the P-component of that average P/E by what percentage the investment company’s share price is of the NAV, so that the premium/discount is correctly taken into account.
A truly pedantic person might also account for and subtract expenses due to the investment company’s cost structure. Then you would know in how many years, considering the holdings, the discount/premium will generate net profit equal to the investment company’s share price.
@Emhoo
By the way, when calculating the margin of safety, you cannot necessarily think directly that the margin is the difference between the price and the NAV. In the case of an investment company, you can get a better handle on the margin by calculating how much the current discount deviates from the historical average.
For example, Investor, if I recall correctly, has historically been valued at an average 20% discount relative to its NAV, so, for instance, a purchase at only a 10% discount would already be a premium when compared to history.
However, it only depends on what investors accept. There are also investment companies that trade at a premium relative to their publicly listed holdings, seemingly without reason.
I input the most important key figures into Excel myself for the exact same reason, to get an estimate of the valuation. I don’t use just one key figure, but several different ones.
For example, the P/E calculated with 5-year ROE and P/B is 16.4. In Investor’s case, a good way to calculate valuation, in my opinion, is to calculate the dividend growth percentage and discount future dividends.
Isn’t B precisely the question mark here? The dividend development is nice and stable, though.
Anyway, I almost “blindly” trust the company’s moral regarding balance sheet valuations, and this is somewhat of a buy-and-forget stock in the portfolio.
In this company, it’s important to understand that B melts if the stock market falls, and conversely, B grows if the stock market rises.
But then, to the calculation itself. ROE (return on equity) decreases if B is large and contains “fluff.” If, on the other hand, B is undervalued or not fully listed, ROE increases if unseen capital in the balance sheet generates profit. Five years is about the time frame where these figures become difficult to “distort.” Secondly, B should be written down for tax reasons, if possible, especially during an upswing.
Someone correct me if there’s an error in my thinking, but this is how I see it. I personally suspect that B is undervalued in Investor’s case due to its long and distinguished history.
I agree with Hele’s comment that it’s worth considering the NAV discount, EUR-SEK, and the holdings and their outlook, preferably closer to the bottom.
Disclaimer: I own and have bought Investor on two occasions in February-March.
I’ve been involved for a few years. The investment decision was based on what has been mentioned, i.e., ABB and a few other large companies (Atlas Copco, among others), interesting unlisted companies, and above all, the Wallenbergs’ undeniable expertise in making money. It’s a pretty relaxed holding in the portfolio; no need to constantly monitor and analyze. I’ve added to it once during a crisis.
Around the turn of the millennium, there was a similar investment in the Helsinki Stock Exchange called Norvestia. I owned some myself and never quite understood why the company was cheaper than the sum of its holdings. I just Googled it and found out it was merged with Capman. Was the compensation received by Norvestia’s minority shareholders reasonable? Is Investor facing a takeover threat?
Well, the Wallenberg Foundation owns 50.2% of the company’s voting rights, and the company is not for sale, nor can it be sold by a single individual’s decision.
Norvestia’s market capitalization at the end of 2015 was approximately 122 million euros. Investor’s market capitalization is estimated at 122 billion euros. Buffett has been mentioned to be sitting on a massive cash position, which, according to the latest information, was 128 billion dollars. So, Buffett’s cash isn’t quite enough to take over Investor. However, he has bought companies such as the railway company Burlington Santa Fe and Fruit of the Loom, for example.
That’s a bit of caliber. I don’t consider a takeover of Investor very likely. One would have to get 0.3% of the voting rights from the Wallenbergs and also buy nearly 70% of the share capital.
