Close to seventy per cent of our portfolio companies presented results in line with or better than consensus estimates.
All of our investments within financials delivered results in line with or above expectations. Norway's largest bank, DNB, reported a brighter outlook for Norwegian companies. This is also seen through increased net interest income in all of the banks in which the fund is invested, as well as reduced loss provisions. In sum, this contributes to improving results in our bank holdings by between 4 and 30 per cent compared to the first quarter of 2017. The strongest profit improvements were seen in Sparebank 1 Midt-Norge and Sparebank 1 SR-Bank, which increased their net profits by 30 and 29 per cent, respectively.
Our seafood investments delivered yet another solid quarter. Lerøy and SalMar achieved an operating result per kilo of, respectively, 20.80 and 22.21 Norwegian kroner. Corresponding numbers for the first quarter in 2017 showed operating results per kilo of 25.80 and 25.50 Norwegian kroner. The spot price for Atlantic salmon fell by 5.80 Norwegian kroner during this period, which means costs are decreasing in the industry. Today's salmon price is close to 60 Norwegian kroner pr. kilo, and decreasing costs provides a good foundation for earnings for the rest of 2018.
“Our investment in the furniture company Ekornes – a good example of the kind of company we want to own – stretches over 17 years.”
The news of Chinese Qumei Home Furnishing Group Co Ltd putting in a bid for Ekornes during the last days of May contributed to a solid price increase. At 139 kroner per share, the bid entails a premium of 18 per cent compared to the closing price the day before the bid was announced, and a bid premium of 26 per cent compared to the volume weighted average price the last 60 days.
Our investment in the furniture company Ekornes – a good example of the kind of company we want to own – stretches over 17 years. We made our first investment in 2001 and have since been long-term investors in the company. During this period the company has paid out a total dividend of 132.4 Norwegian kroner per share. Annual sales growth has been close to 3.7 per cent and operating margins have on average been 16.1 per cent. The last seven years have been somewhat more demanding, with an annual revenue growth of two per cent and an operating margin of 11.4 per cent.
Since 2001, Ekornes has delivered an accumulated return of 535 per cent. During the same time, the Oslo Børs mutual fund index has had a return of 367 per cent. Converted to annual returns, the numbers are 11.7 per cent and 9.7 per cent, respectively. We made five purchases during the years 2001 to 2003. In 2014 we increased our weight in Ekornes in three rounds, with a total increase of three percentage points. Eleven years had then passed since our last investment. During our ownership period, our clients have received a total return of 606 per cent in Ekornes, equivalent to an annualised return of 12.1 per cent.
Our portfolio is priced at attractive levels. The fund is priced at 1.1 times the book equity value, and 11.6 times the total earnings of the companies for this year and 10.1 times next year's expected earnings. This is at the low end in a historic context for this portfolio. The combination of low pricing and increased returns on equity towards 2020 supports our view that today's portfolio has a high long-term safety margin.
Pareto Aksje Norge A had a return of 1.1% in May and 8.5% on average for the past 5 years as per 05/31/2018.
Historical returns are no guarantee for future returns. Future returns will depend, inter alia, on, market developments, the portfolio manager's skill, the fund's risk profile, as well as fees for subscription, management and redemption. Returns may become negative as a result of negative price developments.
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- Pareto Aksje Norge A
- Pareto Aksje Norge B
- Pareto Aksje Norge C
- Pareto Aksje Norge D
- Pareto Aksje Norge I
Portfolio management team
Einar Løvoll
Lead portfolio manager / Discretionary mandates
Besim Zekiri
Portfolio manager / Discretionary mandates
