Monthly Report June 2024

Performance

Adrigo Small & Midcap L/S Class A and Class C fell 5.44% and 5.43% respectively in June after fees. Carnegie Small Cap Return Index Nordic fell 2.3% in May. So far in 2024, Adrigo Small & Midcap L/S Class A and Class C have risen by 15.71% and 12.54% respectively after fees. Carnegie Small Cap Return Index Nordic has risen by 11.1% so far this year. 

Among the Fund's larger holdings, Opter (Software), Sinch (Software) and Pierce Group (E-Commerce) made good contributions. Among the Fund's smaller and medium-sized positions, we noted good contributions from Proact (IT) and Frontline (Transport). As a group, the Fund's short positions had a positive impact on returns.

Adrigo Small & Midcap L/S Class A has since inception, and after fees, returned 125.8%. During the same period, the benchmark STIBOR 1M has returned 5.7% and Carnegie Small Cap Return Index Nordic has returned 96.4%. The average annual return for the fund since inception is 13.0%.

The Market and the Companies

Global stock market performance in June was mixed. MSCI World rose by 2.4%, S&P 500 rose by 3.6% while EURO STOXX 50 fell by 1.7%. Emerging markets performed strongly, with MSCI EM up 4.3%. Taiwan and Korea rose sharply, while both the Hang Seng and MSCI China recorded declines. In the Nordic region, the Danish market was again the best performer, rising 4.1%. The Finnish market fell by 2.9%, while Sweden and Norway both fell by 1.3%.  

We invested in Cint Group in the autumn of 2023 and the share performed very strongly for a number of months but fell steeply in connection with the first quarter report. The share price performance weakened further in June, fuelled by a downgrade due to weak cash flow performance from a Nordic broker. We note that the target price from the firm is SEK 14,36% above the current price. After Cint's acquisition of competitor Lucid, there has been a strong focus on integration where the company has worked to develop a common consolidated platform. This work is nearing completion and in June the company announced as a consequence that it is implementing an efficiency programme, which will lead to savings of around ten percent of personnel costs. These correspond to 26% of sales, so the effect on margins will be significant. Our assessment is that the share has a very large potential over a 2-3 year perspective.  

In June, the software company Enea received a follow-up order from a North American tier 1 mobile operator. The order was for 5G Network Data Layer, and may be a sign that the market, which has been weak for a long time, is now starting to strengthen. The Enea share has risen by 45% during the first half of the year and we have gradually trimmed our position.

During the spring, we invested in a couple of medical technology companies that we have followed for a long time. Both Braincool and Integrum are in interesting commercial phases where we expect an accelerating growth rate in the coming years. With market capitalisations of SEK 600 million and SEK 1,100 million respectively, institutional ownership remains low.  

The first half of the year has developed well for the Fund. The largest contributions have come from Calliditas, Pierce Group, Golden Ocean, Opter and Online Brands.  

• Calliditas was acquired at a significant premium and we have sold our shares, with the proceeds invested in both existing and new holdings.
• In Pierce Group and Online Brands, the cost savings of the past year have begun to pay off, while the companies are again showing organic sales growth. We note greater optimism among Nordic households and expect to see an accelerating rate of growth in the coming quarters, which should mean significant margin improvements. Despite this year's price increase, we see great potential in both stocks.  
• Golden Ocean is one of our two investments in dry bulk shipping (the other is Himalaya Shipping) and with a historically low order book and structural demand trends, the shares should have more to offer in the coming years.  
• Software company Opter has continued to show impressive growth. Recurring subscription revenue (ARR) grew by 17% in the first quarter of the year and the EBIT margin strengthened to 25% (22%).  

Among the disappointments in the first half of the year are Sinch, Electrolux and Getinge. All of these can be said to be contrarian investments, with large parts of the analyst and investor community taking a negative view. However, today's valuations seem very cautious and we still see room in our portfolio for the shares. 

Finally, as always, we would like to thank you, our co-investors, for your continued trust. Please do not hesitate to contact us with any comments or questions.