Management comments November 2020
The rally in the stock markets continued during November. Both the positive news on vaccine development and the US presidential election boosted stock prices. Expectations of a strong 2021 are now high as it could be a year of both improved international relations (between the US and China, for example) and an end to the covid-19 crisis. The news that a vaccine may soon be distributed triggered a sector rotation in stock markets where winners of the pandemic such as e-retailers, game developers and food stores developed weakly, while cyclical companies and losers on the pandemic soared. Among the funds’ best holdings were banks SEB, Swedbank and Nordea, industrial companies Nibe, Atlas Copco, Volvo and Frencken, material companies such as Yara, Holmen, SCA, Boliden and Graphic Packaging, as well as investment companies Industrivärden, Investor and Svolder.
The real estate companies were also revalued upwards, which benefited Simplicity Norden, Simplicity Sverige and Simplicity Småbolag Sverige. Castellum, Hufvudstaden, Fabege, Diös and Platzer all rose by more than 14 %. Norwegian Entra also rose sharply in Simplicity Norden after takeover interests from both Samhällsbyggnadsbolaget and Castellum. The bids show the strong investment appetite in the sector, which awaits brighter times when people return to offices and stores next year.
Stock of the month: Nordic Entertainment Group, which delivers TV through channels such as TV3 and streaming through Viaplay in particular, saw its share soaring by as much as 34% during the month after the revelation of the company’s five-year plan to expand its streaming service to several new markets including the US and Poland. The brave expansion plans were cheered on by analysts as the growth potential is great for the current leading streaming player in the Nordic region. Both Simplicity Sverige and Simplicity Småbolag Sverige have large stakes in the share with weights of around 2 %. In Simplicity Norden it weighs about 0.5%.
Global developments in brief
A mix of positive news contributed to the raging bull market in November. The MSCI World Index had its best month ever since its inception in 1969. Worries for the lingering high virus spread and extended restrictions faded in comparison to positive test results for vaccines from Pfizer, Moderna and Astra Zeneca. It is now reasonable to assume that a broad distribution of vaccines will be rolled out in the first half of next year. In addition, Americans elected Joe Biden as the next president while Republicans appear to remain in power in the Senate. A scenario that bodes well for a continued pro-business Senate and lower risk of an escalating trade war.
The Riksbank kept the policy rate at 0% while the support purchases were increased, although they are prepared to cut the repo rate if necessary. No surprises, in other words.
Simplicity Småbolag Sverige
Simplicity Småbolag Global
All figures are presented in currency SEK.
Fixed Income Funds
Portfolio Managers Comments
November was a busy month within many different areas. The American presidential election became a rather messy story where it took a number of days before it could be concluded that Joe Biden had been elected as the new US president. The outgoing president, Donald Trump, has still not admitted himself as defeated and has continued to claim election fraud, but without being able to present any evidence that this has actually occurred. Trump’s stance has hampered the transfer of power, but Joe Biden has nevertheless begun to form his government where the strategy seems to be to nominate established and experienced people such as the former Fed chief, Janet Yellen, who seems to be the new secretary of the treasury. During the month, positive news from a number of pharmaceutical companies that a vaccine against Covid-19 may be approved within short was well received by the markets. There are now indications that vaccinations will be able to start within short. The development of the spread of the virus was not as encouraging though, as the number of new infections continued to rise although some early signs of improvement could be seen after extensive restrictions had been introduced, especially in Europe. It also seems that the actions taken has not created the same disturbance to the economic activity as we saw during spring. In summary, most of the news flow was interpreted positively, which led to increased risk appetite and rising equity- and corporate bond prizes.
In the US, the Fed’s interest rate announcement was undramatic as no policy changes were announced. This was in line with expectations given that the meeting took place the days after the US election. However, Fed chief, Jerome Powell, stated that the Fed is discussing the parameters for its asset purchases, which means that there may be changes announced at the December meeting. The Riksbank expanded its asset purchase program by SEK 200 billion to a total of SEK 700 billion and extended the program until 31 December 2021. The Riksbank also announced that they will expand their purchases of corporate bonds by offering to buy predefined bonds via a so-called reverse auction procedure. At the first auction, which will take place on 2 December, the Riksbank offers to buy ten different bonds issued by five different companies in the real estate- and capital goods industries. However, these purchases are expected to have a limited impact on the market as the liquidity in these bonds is good in the first place. Up to and including 27 November, the Riksbank had purchased corporate bonds issued by Swedish non-financial companies for a total amount of SEK 2 billion.
The credit market experienced a strong performance during the month as a result of the increased market optimism which was an effect of most reporting companies posting results that were in line with or better than expectations. Bilia announced that Volvo Cars has terminated Bilia’s contract regarding new car sales in Sweden and Norway, which means that they will not be allowed to sell any new Volvo cars from 2022. The decision is of course negative for Bilia and the prices of the company’s bonds fell when the news were announced. Simplicity has a minor exposure to Bilia bonds in Simplicity Företagsobligationer and was thus only affected to a limited extent by this. In the real estate market, a bidding war arised in the Norwegian real estate company Entra after both SBB and Castellum made takeover bids for the company. It remains to be seen how the situation plays out but Castellum has taken the initiative after acquiring just over eight percent of the shares in Entra from the Norwegian government. Castellum’s bid is also higher than SBB’s but consists of a combination of equity and cash, while SBB’s bid is in cash only. After a slow start of the month, the activity in the primary market increased as the sentiment improved. Simplicity participated in new issues in the industrial company Epiroc, the forest company Stora Enso and the e-commerce company Desenio. During the month, we divested our entire holding of shares in SAS which we were allotted in connection with the company’s recapitalization process. Simplicity Likviditet rose by 0.19 percent during the month and among the positive contributors were Resurs Bank, Castellum and Balder. Simplicity Företagsobligationer, Simplicity Global Corporate Bond and Simplicity High Yield benefited, among other things, from a strong perfomance in subordinated bank- and real estate bonds and rose by 0.95 percent, 2.29 percent and 1.58 percent, respectively.
Performance YTD: 0.52%
Yield net of fees: 0.40-0.50%
Duration: 0.18 years
Maturity profile: 1.17 years
Performance YTD: -0.74%
Yield net of fees: 2.50-2.60%
Duration: 1.15 years
Maturity profile: 3.14 years
Simplicity Global Corporate Bond
Performance YTD: -0.67%
Yield net of fees: 3.00-3.10%
Duration: 2.67 years
Maturity profile: 3.64 years
Simplicity High Yield
Performance YTD: 3.43%
Yield net of fees: 3.60-3.70%
Duration: 1.39 years
Maturity profile: 3.47 years
All figures are presented in currency SEK.Tillbaka till Nyheter