Another bid on a portfolio company

• Fear of inflation returns
• Bid on our sewage services company
• Swiss catalyst in BioGaia

THE MARKET
The macroeconomic picture is rarely constant, but it is currently shifting unusually quickly. Donald Trump’s trade war will likely lead to slightly higher inflation in the U.S. and fewer interest rate cuts overall. At the same time, Germany’s new government is ramping up and introducing significant investment plans. More countries in Europe appear willing, or rather forced, to follow suit and growth prospects for Europe may be revised upward going forward.

Global equities, which have been in a clear uptrend since autumn 2023, suddenly focused on the uncertainty surrounding tariffs and inflation risks and corrected in March. The currency and commodity markets have also been volatile, with, for example, oil prices rising. The American tech giants fell by 10% (CNBC Magnificent 7 Index), adding pressure to both U.S. and global indices. The world index closed -5.1%. Nordic equities had a weak month, with broad Nordic indices down 10.6%. Small caps fared somewhat better overall but still ended down 7.0%.
24M: World Index (blue), Nordic Index (orange) & Nordic Small Caps (green)

The Copenhagen stock exchange has started the year down by just over 10%, while Stockholm is roughly flat. The Oslo exchange, sensitive to oil, has performed the best with a 7% increase. At the sector level, we see similarly large discrepancies: banks have risen by 11%, driven by expectations of rising interest rates and hence increasing profit margins. Real estate stocks, on the other hand, risk being negatively affected by rising inflation, especially if higher rates become persistent. The real estate index dropped about 9% in the first quarter of the year.
 
March was thus an unusually turbulent month. In situations like this, it is often wise to take a step back and reflect. Markets move in cycles, with periods of growth followed by corrections or declines. These downturns are often triggered by macroeconomic factors such as inflation, geopolitical tensions, or global financial crises. However, there are usually temporary setbacks, and markets tend to bounce back when conditions stabilize. Understanding the cycles, doing your homework, and investing contrarians in quality companies or funds is often a better strategy than following the negative sentiment.
 
ORIGO SELEQT
Seleqt's NAV decreased by 6.7% in March, which was slightly better than the fund’s benchmark index, which fell by 7.0%. Year-to-date, the fund has returned -1.4% compared to the index a -4.9%. Since its inception in 2022, the return amounts to 18.4%, which is 14.1 percentage points above the fund’s index.
 
During the month, Norva24, Invisio, and Protector contributed positively. Among the smaller holdings, BIM Object also showed strong performance. Some of the healthcare-related investments, including BioGaia and Carasent, contributed negatively.
 
At the beginning of the month, we received a bid for the sewage services company Norva24. See the section “Companies in Focus.”
 
The portfolio currently consists of around 30 companies where we see a combination of Value, Quality, and Change. On a sector level, Consumer Discretionary and Healthcare weigh more heavily, while we have limited exposure to highly cyclical sectors such as Industrials and Raw Materials. We see a significant valuation discount in several of our holdings compared to their historical averages and relative to large and mid-sized companies.
 
ORIGO QUEST
Quest declined by 3.2% in March. The short book contributed slightly positively, while the long book had a negative impact. Long positions in Carasent, Freetrailer, and Kalmar stood out on the negative side, while long holdings in Norva24 and Invisio yielded good returns.
 
At the beginning of the month, we received a bid for the sewage services company Norva24. Read more in the section “Companies in Focus.”
 
The rolling 12- and 24-month returns are 9.2% and 18.9%, respectively. The Nordic Index (VINX Benchmark SEK NI) has returned 5.9% and 12.8% over the same period. The portfolio's beta has simultaneously been 0.12 (12M). The strong risk-adjusted return has primarily been generated through successful stock selection in the long book, but the short book has also contributed well in absolute terms over the past two years.
 
We made some reallocations during the month. The Invisio position was reduced at a significant profit after an extreme price move. At the same time, we invested in software companies with interesting niche positions. Some of the funds’ larger long holdings are Bilia, Dynavox, and Carasent.

The short book is more diversified and includes gambling companies and others where we have identified accounting concerns and/or other red flags.
 
COMPANIES IN FOCUS
At the beginning of the month, we received a bid for sewage services company Norva24. The offer represents a 59% premium over the previous day’s closing price.
The bidder is the private equity fund APAX, and the larger shareholders Valedo, Briarwood, and the board of Norva24 are supportive of the deal. We understand the logic behind it, APAX likely sees exactly what our investment thesis is based on: an imminent European expansion in the UIM sector, driven by acquisitions and stable cash flows.

The timing of the bid, from our perspective, is up for debate. APAX made their move just after a couple of mediocre reports when the company was cleaning up its German operations. However, the deal now looks like a “done deal,” so we have chosen to sell our shares and lock in the gains.
 
Worth noting it’s only been four months since Origo also received a cash offer for the Danish bank SparNord. Looking back a few years, our funds have averaged 1–2 bids per year (DIBS, Tribona, Cherry, Recipharm, SOBI, Veoneer, Mercell, among others). We believe this value driver will accelerate in 2025–2027 as large companies’ rising cash flows, cheaper financing, and renewed pursuit of growth become a reality after the unusual pandemic years.
 
We were quite surprised when RaySearch CEO Johan Löf sold a block of shares worth SEK 500 million to Swedish and foreign institutions in mid-March. However, we are less worried than the market, as Johan remains a major shareholder with 16% of the capital and 53% of the votes. He had “all” his wealth in the company and has rarely sold shares in the business he founded in 2000. The news nevertheless pushed the stock down 20%, which negatively affected our monthly return.
 
Speaking of big transactions and founder-led firms, BioGaia deserves mention too. Founders and long-time leaders Jan Annwall and Peter Rothschild have led the supplements company to great success, with a stock journey of over 6,000% since the IPO in 1996. A few weeks ago, however, they chose to sell their shares to the Swiss-based investment company Anatom, owned by the Kahane family. The Kahanes know the industry, and one of the key individuals has a background at the Danish enzyme company Chr. Hansen, which was acquired by Novozymes in 2022. We see the transaction between the founders and Anatom as a possible catalyst for both M&A and for optimizing the defensive balance sheet. We are digging further into this and will likely return to it soon!
 
The Finnish climate-tech company Vaisala, a mid-sized holding in our funds, recently held an analyst meeting to update on its U.S. operations. It’s only been a month since their Q4 report, so no big surprises were expected. Our interest was on tariffs and whether the operational improvements in the U.S. business were intact. The short answer from the analyst meeting: Vaisala is prepared to raise prices, and customers have so far not hesitated with new orders. The cost and improvement program is on track. There is a big difference between companies right now regarding whether they’re seeing a slowdown in new orders due to tariffs, but Vaisala was more positive, at least so far.
 
In the medium and long term, we believe innovation is what drives Vaisala. Over a third of its employees work in R&D, and we see no competitor putting as much emphasis on research as Vaisala does.
 
It is interesting to see how the company has renewed and developed its perhaps greatest innovation, HUMICAP, over more than 50 years. The system is now a global standard for humidity measurement across various industries. It began with measuring equipment for road weather stations, but today the technology is leading in sectors including the highly regulated pharmaceutical industry.
 
We increased our holding slightly after the decline in March.
 
Our investment thesis is based on:
 

• The market is growing rapidly and benefits from multiple megatrends
• Technology leader with a strong position and superior customer list
• Profitable growth with high ROCE and no debt
• Underestimated potential for continued margin expansion
•  We also note that the company is now valued at 15x operating profit, which is attractive compared to global tech firms in leading niche positions.

 
Finally, an update on Bakkafrost. The stock has fallen over 25% in the past year and is one of our weakest investments in the period. Unfortunately, things do not always go as planned. That said, we believe the company is moving in the right direction operationally. We note that harvests in both Norway and Scotland have slightly exceeded expectations, and average harvest weights were also higher.
 
The explanation for the weak share performance is likely that the spot price of salmon is somewhat below the short-term expectations previously priced in. If we extend the time horizon a bit, the price remains at high levels. Another factor negatively affecting profit forecasts is a slightly higher corporate tax in the Faroe Islands for 2025
 
Thank you for your trust,
Team Origo

 

Promising signals in quarterly reports

• Positive Signals from Small Caps
• Origo awarded top 3 Hedge Funds L/S in Europe
• Increased Investment in BioGaia
• Brighter times for consumer discretionary

 
ORIGO SELEQT
Seleqt delivered a return of 0.1% in February, which was almost three percentage points better than the fund’s benchmark index, which fell by 2.8%. The fund has thus risen by 29.3% over the past 12 months, while the index has returned 12.6%.

Freetrailer rose sharply during the month and contributed the most to total returns. MTG, Carasent, and BIM Object also performed strongly and contributed well. Elekta and Vaisala contributed negatively during the month.

In recent months, have we sold all our holdings in Castellum and increased our investments in BioGaia, Thule, and Europris, where we see more positive operational changes that the market has yet to price in. At the portfolio level, the fund is dominated by healthcare and consumer companies with high returns on capital and attractive risk/reward profiles, while we are somewhat more cautious toward industrial companies, where we generally find valuations too high given the demand in Europe and China.

The fund’s five largest holdings are currently:

Elekta – Strong global position and new product portfolio in a growth industry
SOBI – Promising portfolio with a high share of new products and increased growth
New Wave – Brand company with underestimated distribution capacity
Carasent – Business-critical systems for an increasingly digitalized healthcare sector
RaySearch – Advanced software in radiation therapy with high scalability
 
ORIGO QUEST
Quest rose by 0.6%, resulting in a return of 16.7% over the past 12 months. Both the long and short books contributed positively, while index derivatives had a slightly negative impact. The top three performers in the long book were Freetrailer, Carasent, and Invisio. At the bottom were Elekta and Dynavox.
Several of the fund’s short positions fell significantly during the month and contributed positively to returns, including Cinis Fertilizer (-50%) and SBB (-27%).

The management model in Origo Quest means the team always strives for absolute return regardless of market trend. Our goal is for the spread between our long and short stocks to be positive over time, and for the absolute return to reach ~10% per year. If we meet that goal, the fund delivers uncorrelated and competitive returns and becomes a strong competitor to virtually all other investments.

We note that the long book has clearly outperformed a Nordic small-cap index over the past 12 months (and since the fund's inception in 2013), while short positions have delivered positive returns. It is particularly satisfying that the fund has not only a positive spread between long and short positions but has also achieved absolute returns in both segments, with a Beta close to zero, and exceeded the 10% absolute return target over the past year.

At the beginning of the month, the fund received a top-3 ranking in the BarclayHedge list of all long/short hedge funds in Europe. A great honor and extra motivation for the year ahead.

THE MARKET
Appetite for equities remained positive during the month, but it is now primarily European stocks and small caps that are in demand—unlike in 2024, when capital flows were funneled into a few large U.S. tech stocks. We have repeatedly warned over the past year that U.S. large caps are overvalued and that many funds (U.S., global, and tech-focused) have unusually high concentration and valuation risk. The opposite is true in Europe, where valuations are historically low.
In Bank of America’s latest survey (Feb. 2025), a full 89% of investors said they believe the U.S. equity market is overvalued. At the same time, recession expectations have fallen further (to a 3-year low), and a clear majority (75%) expect further rate cuts from the Fed in 2025.
S&P 500 fell by 1.4% in February, while S&P Europe rose by 3.4%. Nordic markets performed strongly, in line with the rest of Europe, but Nordic small caps lagged behind.

The big question now is whether the market rally is ending—or just beginning?

We believe in a comeback for Europe, especially small caps, but are more skeptical of the U.S. We are sketching—or rather guessing—a scenario where the focus on Trump soon diminishes and macro data gradually takes over. Fiscal policy has provided tailwinds in recent years, but with upcoming cutbacks (DOGE), we do not rule out weak U.S. numbers going forward. We also believe, as mentioned, that the Mag7 multiples will normalize this year.

Europe and the Nordics likely bottomed and can grow from a low base, driven by increased investment and a somewhat more cheerful consumer. See "Theme: The Consumer" later in the report.
The Q4 earnings season is nearly over, and the outcome has been positive. Around 58% of companies have surprised on the upside with about 80% of VINX companies having reported.

Another key observation is that small caps stand out. For the first time in twelve quarters, small caps have had more positive surprises than large caps. However, they have not yet been rewarded for this outperformance. (Source: Handelsbanken Analyst Team)
Despite knowing that sentiment is often set by the U.S. market trend, we believe the above signals are positive for Nordic equities in general and small caps in particular.

Regarding downside risks to our market scenario, we note that inflation has increased in some markets and segments. Debt-financed fiscal policy in the U.S. and Europe, driven partly by increased defense spending, could dangerously stimulate inflation. But expansive defense policy, if not too rapid, can also bring positive effects like higher growth and a boost to research and industry.
 
COMPANIES IN FOCUS
BioGaia develops probiotic products based on the Lactobacillus Reuteri bacterium. Its supplements, including those for colic, are international bestsellers, now sold in over 100 countries. The Q4 report was a sign of strength: revenue increased by 23% and the operating margin rose to 28% (from 27%). All regions performed well, with the Americas growing the fastest at 32%. Some inventory buildup seems to have added pressure. Operating expenses increased by 7%, driven by higher direct sales and marketing. The balance sheet is very strong. Based on our estimates, the stock trades at an EV/EBIT of 18–19x versus a historical range of 17–32x. We expect continued strong growth, especially through the increasingly important Amazon sales channel in the U.S. We also expect the company to optimize its balance sheet. At the current share price and with SEK 1.2 billion in cash, we foresee dividends and special payouts yielding 6–12% annually for many years to come.

Elekta increased sales in Q3 (non-calendar year) by 2% and profit by 4%. Order intake rose by 21%. The gross margin, historically a problem, came in roughly as expected but is still negatively affected by installations in Ukraine. Order growth was strong across all regions, driven by new products EVO and Elekta One. A strong order intake suggests increasing momentum in installations and sales going forward. Overall, a neutral report, but the company revised down its full-year guidance—prompting the CEO to step down. We believe weak profitability from 2022–2024 was a key factor, along with poor explanations for persistently low margins. A CEO change seems reasonable in this context.

The stock is down  around 20% over the past year and around 10% since our spring purchase. The decrease is modest considering operations, but expectations are already very low. Our investment thesis remains intact, and we still see a positive risk/reward profile.
Carasent delivered a solid report, though with a slightly weaker near-term outlook but more activity expected in H2 2025. Sales grew by 22% (15% organic). Management notes that some contracts are taking longer to implement. Last year was eventful, including a transformation and a stock exchange move from Oslo to Stockholm. We see a strong and growing need for digitalization in healthcare and find Carasent’s position attractive. We view Carasent as a value case with a strong balance sheet undergoing a positive transformation under new leadership.
 
BRIGHTER TIMES FOR CONSUMER COMPANIES
Economic activity in the Nordics has been volatile in recent years, but for 2025–2026 we expect more synchronized growth. Lower interest rates and higher disposable income will likely be key drivers of consumption and overall growth.

A simple measure of consumer sentiment is the Consumer Confidence Index (CCI). Consumers are asked about current and future expectations for the economy and their personal finances.
The CCI is a metric closely watched by the markets (among many leading indicators) as it reflects how aggressive or defensive consumers might behave. But such indices can be hard to interpret. Sentiment does not always match actual behavior.

CCI grew steadily in Europe during most of 2024 but fell again in Q4, still higher than a year earlier. Optimism declined broadly, except for Generation Z. France, Italy, Germany, and the UK saw the biggest drops. The Nordics were stronger—except Denmark.
Capital-intensive discretionary goods have been hit the hardest in recent years, while discount retail has thrived. But we now see a positive sales trend in discretionary goods, indicating stabilization in that segment.

In Sweden, where variable-rate mortgages are more common than elsewhere in Europe, consumption responds faster to interest rate changes. With the central bank’s rate cuts and forecasts for further cuts alongside a better business climate and low unemployment consumer confidence has improved significantly more in Sweden than in the rest of Europe and the U.S. Though consumer expectations will remain volatile due to the global and geopolitical situation, we believe the worst is behind us and consumer demand will increase, especially in Sweden.

As important as improved confidence is the ability to spend. SEB analyzed how lower rates and 2025 tax cuts will affect household finances. A Swedish household with SEK 1.2m in income and SEK 4m in loans will see over SEK 100,000 more in annual cash flow due to the lower rates and tax cuts.

Consumer discretionary is one of our largest overweights, with a variety of companies. This is not due to a top-down macro bet—we have re-analyzed or initiated new research on attractive consumer names. Many have faced headwinds in recent years, hurting short-term results. In some cases, potential positives have been overshadowed by short-term challenges.

Last year we invested in gaming companies MTG and Paradox, both of which had demand issues and some short-term release-related problems. They have been more affected by post-pandemic demand normalization and uncertainty.

Other companies with more Nordic exposure, we bought Matas in H2 2024 and gradually increased our position in Bilia.
At Bilia, service margins are good—but could be better. We see positive progress, especially in Norway, where they have been under pressure. Our research focused on whether the car market is improving, which would help both new car sales and service operations. We believe consumers now have more spending power and that new car sales in Sweden bottomed in 2024.
Analysing Bilia, we interviewed independent car dealers across Sweden about their 2025 sales outlook versus 2024 and if signs of improvement were already visible. The study showed a better 2025 and a slightly stronger-than-expected Q1.

Matas is a transformation case due to its acquisition of underperforming Kicks. It provided geographic expansion, purchasing advantages, and more efficient inventory. Our thesis is that they are building a Nordic “Ulta Beauty.”
Transforming companies is never easy, but rising demand helps. Cosmetics is not very cyclical, but Kicks, being more premium-focused, has suffered more than Matas and the market. Our research focused on Kicks’ consumer relevance, whether Matas’ investments are right, and if the changes are strengthening the brand. We believe Kicks is relevant to a large part of the market, and that price investments are the right move to shift brand perception and attract more customers. In our last meeting with the Kicks CEO, she noted the platform will be upgraded in mid-2025. Though many initiatives have not yet paid off, it already seems like Kicks is on the right track in its transformation.

Source: Origo Fonder Market Research
Other companies we own with significant Nordic consumer exposure include New Wave, Freetrailer, Europris, Bakkafrost, and Thule.
 
Kind regards,
Team Origo
 
Risk Disclosure
Past performance is not a guarantee of future results. If you invest in securities or funds, your investment may both rise and fall in value, and it is not guaranteed that you will get back the entire invested capital. An investment in our funds should be considered a long-term investment.