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Kavaljer
Investmentbolagsfond
March 2025
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Active management at almost the cost of an index fund
Kavaljer Investmentbolagsfond is an actively managed equity fund that takes an index-independent approach, investing long-term in Swedish and foreign investment companies and conglomerates, primarily in Sweden and the USA.
Investment companies and conglomerates are entities that invest in other companies while actively supporting their development. These types of companies offer several advantages: active ownership, effective risk diversification, and often attractive dividends. Additionally, investment companies with listed holdings are sometimes traded at a discount.
Through the Investmentbolagsfond, investors have a low-cost opportunity to benefit from the growth of a broad range of high-quality companies, both large and small, operating worldwide. The fund is available on platforms such as Avanza, Nordnet, and SAVR, as well as through banks and institutions trading via MFEX and Allfunds.
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Turbulent Stock Market Month Driven by U.S. Tariffs
March turned out to be a weak month for the stock market. The Stockholm Stock Exchange (OMXSPI-GI) declined by 7.9%, the small-cap index (Carnegie Small Cap Return Index) fell by 8.0%, and the Dow Jones World Index dropped by 4.0%.
The month was marked by rising concerns due to threats of new U.S. tariffs (on April 2, a 20% tariff was announced on imported goods from the EU), weak consumer confidence, and an underperforming tech sector. At the same time, inflation remained high, and the labor market showed signs of weakening. Together, these factors increased the risk of stagflation and economic slowdown, leading to heightened market volatility.
Regarding U.S. tariffs, the analysis firm Jefferies stated the following, which aligns with our view:
“We believe the proposed tariff rates represent a ceiling and may be reduced as countries negotiate bilateral agreements, which could support a market recovery.”
The Tariffs
The brutal market reaction at the end of the month is due to the fact that the tariffs announced by the U.S. are significantly higher than expected. The best and most likely scenario is that the high tariff levels are a negotiation tactic, with Donald Trump starting out aggressively only to later scale back in order to reach a new “deal.”. This is a negotiation strategy Donald Trump thoroughly described in his bestselling 1987 book The Art of the Deal. The book remained on the New York Times bestseller list for over 48 weeks and sold more than 1 million copies. The introduction of tariffs was expected. Donald Trump has talked about tariffs for decades, and implementing tariffs was also an election promise.
However, what was expected were reciprocal tariffs—i.e., ones that match the tariffs imposed by the other party. The method used by the U.S. to calculate counterpart tariffs is incorrect and leads to a gross overestimation of the opposing party’s tariff levels. Once again, regarding U.S. tariffs, Jefferies wrote the following, echoing our perspective: “We believe the proposed tariff rates represent a ceiling and may be reduced as countries negotiate bilateral agreements, which could support a market recovery.”
It is easy to feel anxious when the market falls sharply, and it's impossible to predict short-term developments. However, history shows us that stocks rise in the long run, and some of the absolute best buying opportunities in history have occurred during periods of market turmoil. Therefore, we continue to believe that the best course of action is to “stay the course.” Our focus remains on owning high-quality companies that grow and create shareholder value over time.
Fund Performance and Contributions
March was a negative month for the fund with a return of -8.0%, which is in line with the Swedish index but slightly weaker than the global index.
The largest positive contribution among the fund's holdings during the month came from Berkshire Hathaway, Prosus and Svolder with +0.2, +0.1, and +0.1 percentage points respectively. The largest negative contribution came from LVMH, Ratos and Industrivärden with -0.7, -0.4, and -0.4 percentage points respectively.
No portfolio changes were made during the month
The fund’s strategy is to own quality companies over the long term, and our indirect aim is therefore not to “need” to make too many changes to the portfolio. However, during both January and February we made several changes with a number of new additions as well as some exits. During March, no portfolio changes were made and we feel confident with the current portfolio composition even in more turbulent market conditions.
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New Holding: Sdiptech
In February, we added a new serial acquirer to the portfolio: Sdiptech.
Long-Term Serial Acquirer, Primarily in Industrial Sectors
Sdiptech is a Swedish technology group and serial acquirer headquartered in Stockholm, specializing in technical services and products for critical infrastructure. The company began its acquisition journey in 2016 by acquiring low-profit service companies. The strategy later shifted towards acquiring highly profitable infrastructure-related product companies, akin to those targeted by other successful serial acquirers such as Lagercrantz and Indutrade—companies known for strong track records and high valuations.
Most of the group’s companies are market leaders in small niche markets. These niches tend to be stable, as their size is usually too small to attract new entrants. Like the most successful serial acquirers, Sdiptech’s subsidiaries are run in a decentralized fashion, without central interference.
Currently, 61% of revenue comes from proprietary products, 16% from installation, and the remaining 23% from service. Over time, the company has transitioned more toward proprietary products (only 32% in 2020, now 61%), which has strengthened profitability and created a moat against competitors. This transition is reflected in an EBITA margin improvement from 7% in 2018 to nearly 20% in 2024.
Sdiptech operates in several countries, including the UK (42%), Sweden (18%), USA (5%), and the rest of Europe (35%). In 2024, the company reached revenues of SEK 5.2 billion with an EBITA margin just under 20%.
The company is led by Bengt Lejdström, who has been part of the transformation since 2018, when the company began shifting from service- to product-focus. He became CEO in December 2023, following a period as CFO. Sdiptech lacks a clear anchor shareholder with a proven capital allocation track record—something that may explain the lower valuation compared to more popular serial acquirers on the stock market.
47 Subsidiaries Across Four Business Areas With Strong Historical Growth and Profitability
Sdiptech currently owns 47 companies, divided across four business areas:
Supply Chain & Transformation: SEK 2.3 billion revenue, 18.7% EBITA margin Energy & Electrification: SEK 1.4 billion revenue, 21.1% EBITA margin Water & Bioeconomy: SEK 1.1 billion revenue, 23.8% EBITA margin Safety & Security: SEK 0.5 billion revenue, 25.8% EBITA margin
These segments offer solutions in water purification, energy supply, electrical automation, temporary power, and air and climate control.
The company has seen strong growth in recent years, driven mostly by acquisitions but also organically. Historically, organic earnings growth has been around 3–5%, and revenue growth around 4–6% annually. (Full historical data available below.)
Picture: Sdiptech, 2025
Strong Profitability Funds Acquisitions Alongside Debt (and Possibly Equity Issuance at Higher Valuation)
Sdiptech finances its expansion through a combination of cash flow, debt, and selective directed share issues. The EBITA margin is approximately 20%, and the return on equity (ROE) currently stands at 10–11%. Net debt/EBITDA excluding leases is 2.25, and including potential earn-outs (primarily for 2025–2026, but also extending through 2029), total leverage amounts to approximately 2.85. The company aims to acquire SEK 120–150 million in EBITA annually, which we consider slightly high given the already relatively elevated leverage. At that pace, there is a risk of a share issue, which we would prefer to avoid. We would rather see a target of approximately SEK 100 million in acquired EBITA—equivalent to 10% growth—which could be fully financed by internal cash flow. Still, we believe and hope that the company avoids issuing new shares at current valuation levels.
Attractive Valuation
Despite strong growth and profitability, the company’s valuation is significantly lower than that of comparable firms, which could suggest potential for future revaluation. Analyst estimates indicate that Sdiptech trades at just over 10x EBITA for the current year. Historically, the company has had a cash conversion rate of about 80% of EBITA, corresponding to a free cash flow (FCF) multiple of 12–13x. We consider Sdiptech to be very conservatively valued, both in absolute terms and relative to its highly valued peers (e.g., Lagercrantz is trading at a P/E of 43 this year, with several others in a similar range).
Strong Risk/Reward Profile for Our Long-Term Portfolio
The biggest risk lies in exposure to the cyclical industrial sector. However, the company has shown resilience by owning businesses with low economic sensitivity. Naturally, U.S. tariffs are an uncertainty that affects all industrial companies—either directly or indirectly. All things considered, Sdiptech offers strong growth potential, with a continued focus on value creation through strategic acquisitions and operational efficiency. We believe that the opportunities and attractive valuation outweigh the risks, and expect Sdiptech to be a strong long-term holding. Sdiptech currently accounts for 0.9% of Kavaljer Investmentbolagsfond. The company is also held in Kavaljer’s other fund, Kavaljer Quality Focus.
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Prosus
The global technology company Prosus holds investments in over 100 fast-growing, consumer-oriented internet companies worldwide. Its operations span approximately 90 countries and cover areas such as digital payments, social platforms, e-commerce, food delivery, and classified ads. By far the largest holding in Prosus’ portfolio is the Chinese internet conglomerate Tencent, which accounts for 79 percent of the company’s net asset value. Tencent, one of the world’s largest tech giants, has several Swedish investments, including in Paradox Interactive, Spotify, and Doktor.se. High discount despite large-scale share buybacks Despite extensive share buybacks, Prosus continues to trade at a significant discount of 43 percent. In the summer of 2022, Prosus launched an open-ended buyback program, meaning it has no fixed endpoint and will continue as long as the stock trades at a substantial discount. To finance the buybacks, Prosus sells Tencent shares on a daily basis and uses the proceeds to repurchase its own stock. These large-scale buybacks aim to reduce the discount over time, but despite this strategy, the discount remains high.
Investments in AI and fintech
In parallel with the buybacks, Prosus has remained active on the investment front.
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USD 54 million was invested in SpotDraft, an AI-driven contract management platform. SpotDraft uses advanced artificial intelligence to streamline the creation, review, negotiation, and storage of legal agreements.
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In payment technology, Prosus’ subsidiary PayU acquired a strategic stake in Mindgate Solutions, a leading company in real-time payment technologies.
In healthcare, Prosus Ventures invested USD 3 million in Voa Health, an AI-powered assistant for clinical documentation in healthcare. The investment aims to strengthen product development, team, and marketing, reinforcing Prosus’ position in AI-driven healthcare efficiency.
Food delivery – a growing sector
Prosus has also strengthened its presence in the food delivery sector through its acquisition of Just Eat Takeaway.com, one of the world’s largest food delivery companies. Just Eat Takeaway, formed through the merger of UK-based Just Eat and Netherlands-based Takeaway.com, operates across Europe, North America, Asia, and Australia. The company competes with players such as Uber Eats and DoorDash.
Fast-growing tech companies at a high discount support the case for Prosus
Prosus offers solid diversification across multiple high-growth technology companies and exposure to the large Chinese market through its significant holding in Tencent. The large discount at which the stock is trading should gradually decrease through the ongoing buyback program.
Prosus represents 4.8% of Kavaljer Investmentbolagsfond.
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Kavaljer Investmenbolagsfond, Performance/Index |
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Fund Information
Fund Type: SICAV (UCITS)
Name: LMM - Kavaljer Investmentbolagsfond
Custodian: CACEIS Investor Services Bank S.A.
Auditor: PricewaterhouseCoopers Société cooperative
Management Fee: 0,3% per year
Minimum Investment, SEK: 100
Subscription: Daily
ISIN: LU1777968246
Risk Level: 4 av 7
Category: Global & Sweden
AUM: 944 mkr
Morningstar Rating: ⭐️⭐️⭐️
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Nacka Strand, April 7, 2025
Peter Lindvall, Håkan Telander & Jesper von Koch |
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