Monthly Report January 2025

Performance

Adrigo Small & Midcap L/S Class A and Class C gained 5.89% in January after fees. The Carnegie Small Cap Return Index Nordic rose by 5.41% over the same period, while STIBOR 1M returned 0.22%.

Among the fund’s larger holdings, Getinge (medical technology) and Frontline (transport) made strong contributions. Among the fund’s small and mid-sized positions, we noted solid contributions from BHG Group (e-commerce), Pierce Group (e-commerce), and Maven Wireless (technology). The fund’s short positions, as a group, had a negative impact on returns.

Since inception, Adrigo Small & Midcap L/S Class A has delivered a total return of 79.02% after fees. Over the same period, STIBOR 1M has returned 7.52%, while the Carnegie Small Cap Return Index Nordic has gained 107.0%. The fund’s average annual return since launch stands at 8.4%.

The Market

Global equity markets performed well overall in January. European markets were particularly strong, with the EURO STOXX 50 climbing 8.1%. MSCI World rose by 3.5%, while the S&P 500 closed the month up 2.8%. Among emerging markets, Korea and Brazil both posted gains of 4.9%. The strongest Nordic market was Sweden, where the OMX Benchmark rose by 7.6%, while the Norwegian and Finnish markets also performed well, rising 6.3% and 6.0%, respectively. Denmark, however, declined by 1.5%.

Oil prices surged by 10% in the first half of the month but ended January largely unchanged. We note that the new US administration has imposed sanctions on several marine vessels within the so-called "shadow fleet," which transports oil products from Russia and Iran. This has led to significant shifts in transportation patterns, benefiting shipowners.

Companies and Performance Highlights

For some time now, we have been increasing our exposure to Nordic e-commerce. Falling interest rates, pent-up consumer demand, and tax cuts in Sweden are some of the factors driving our optimism.

We have been investors in BHG Group, an e-commerce company specialising in home improvement, since autumn 2023 and increased our exposure in early 2025. At the end of January, the company released its Q4 report, which significantly exceeded market expectations. The low expectations were evident as the stock surged 24% on the day of the earnings release. BHG has undergone a tough restructuring over the past two years, following an overly aggressive acquisition spree around 2020. However, in Q4, the company reported its first quarter of positive organic growth in three years.

Has Getinge turned a corner? We believe there are strong indications that it has. For several years, Getinge has struggled with both internal and external quality issues, which have had a severe negative impact on earnings (around SEK 600 million in 2024). The stock market has not been impressed, and the share price has stagnated. However, we believe the worst may be behind us, and the company is now well-positioned for strong sales growth and improving margins.

The fourth quarter was solid across the board, with strong order intake and significant margin improvements. We also note that the acquisition of Paragonix, completed in late August, appears to be highly successful. The first tranche of the earnout payment was already made in Q4. Paragonix specialises in the preservation and transportation of organs for transplantation—a new business area for Getinge. The company has achieved triple-digit growth in recent years and is expected to maintain a growth rate of around 50% this year. With this acquisition, Getinge has secured a growth engine that will enhance its organic growth and, within a year or so, start contributing positively to margins.

It takes time to change market perception, and many investors remain sceptical about Getinge. We believe the company will need to deliver another one or two quarters of stable performance before we see any meaningful multiple expansion.

As always, we would like to thank our co-investors for their trust. We are fully aware of the fund’s weak performance in the second half of 2024, but we have strong confidence in our current portfolio. Please do not hesitate to reach out with any comments or questions.