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Kavaljer
Investmentbolagsfond
May 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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Focus on Companies Despite Macro Swings Making It Hard to Stay Focused
May developed positively, and the Stockholm Stock Exchange (OMXSPI-GI) rose by 2.4%, while the Dow Jones World Index rose by 5.5%.
Focus on What Really Matters
The stock market remained heavily influenced by tariff headlines, where the U.S. president would raise the rhetoric one day only to lower it the next. The term TACO (Trump Always Chickens Out) was coined as a trading strategy—buying the dip each time Trump raises the tone, assuming he will most likely backtrack on his statement anyway. In times like these, it’s very easy to become fixated on macro events. As the above example shows, macro focus often leads to the creation of new macro-related trading strategies. One starts to think about how to “outsmart” the market and time opportunistic buys and sells. Our view is that it’s very easy to get this wrong, and then you have to “catch up” by buying back in after a failed trade. Since the media is driven by clickbait headlines, the effect is that both headlines and content become overly dramatic.
This creates an irrational impulse to act. We aim to completely resist this impulse. When things feel most difficult and the urge to sell is strongest, that’s often the absolute worst time to act—something clearly illustrated by the image below:
When stuck in macro thinking, it's easy to forget what investing in quality companies is actually about—co-ownership in businesses that earn money day in and day out. Moreover, these are companies that, for one reason or another, have historically been skilled at navigating tough macro environments. As fund managers, we also shouldn’t underestimate the impulse to appear as experts on everything related to the stock market—even though it’s been shown time and again that a focus on predicting macro events does not lead to outperformance. What we do in situations like this is what we always do: we assess how our holdings might be affected by broader macro concerns, estimate normalized earnings for our holdings and what we believe they should be worth—and allocate accordingly. Our hunt for quality companies continues, especially opportunities to buy them at attractive prices.
Fund Performance
Kavaljer Investmentbolagsfond increased by 2.8% in May. The corresponding figures for OMXSPI-GI and the Dow Jones World Index were +2.4% and +5.5%, respectively. The largest positive contributions among the fund's holdings during the month came from Ratos, Microsoft, and Prosus, contributing +1.0, +0.8, and +0.6 percentage points, respectively. The largest negative contributions came from Berkshire Hathaway, Danaher, and Lundbergföretagen, with -0.5, -0.2, and -0.2 percentage points, respectively.
Portfolio changes
During the month, we reduced our holdings in VNV Global and Xano Industri, while welcoming Vitec Software Group as a new holding in the fund. Later in the letter, we present our thoughts on Vitec. As we find LVMH’s valuation more attractive than it has been in a long time, we have chosen to provide an overview of the current situation and our outlook going forward. May also brought dividend payouts for many of our holdings, which is why we also include a section on the power of dividends. The equity allocation was 99%.
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Dividend Season: “The Eighth Wonder of the World”
May is the month when most of our portfolio companies hold their annual general meetings and approve this year’s dividend distributions to shareholders.
The Power of Dividends and Reinvestment – The Silent Engine Behind Wealth
In the stock market’s often noisy chase for skyrocketing share prices and quick profits, there is a quieter but powerful force that wins over time: dividends and their reinvestment. When a company distributes a portion of its profits to shareholders in the form of cash, it is called a dividend. For many investors, it’s simply a pleasant bonus—but for those who understand the mechanics of compound interest, dividends can be the most powerful tool in the investing toolbox.
Compound Interest – The Eighth Wonder of the World
Albert Einstein is said to have called compound interest “the eighth wonder of the world.” It describes the exponential growth that occurs when returns generate more returns. When you reinvest the dividends you receive—for example, by buying more shares in the same company—every krona you receive starts working for you. Over time, this causes your investment to grow not linearly, but exponentially. Patience and time become your strongest allies. A stock yielding 4%, when reinvested annually and combined with share price appreciation of 5–6%, can generate a total annual return of 9–10%—year after year.
Dividends Account for a Large Share of Total Market Returns
Studies show that between 30% and 50% of the total historical return in the stock market has come from reinvested dividends. During certain decades—especially periods of sideways market performance—dividends have been the very thing that kept portfolios alive and growing. By reinvesting dividends, you not only increase your portfolio’s value, but also the amount of dividends you receive next time—giving you even more to reinvest. It becomes a self-sustaining growth spiral, with time as the catalyst.
Stability, Discipline, and Growth
Dividend-paying stocks are often companies with strong cash flows, solid profitability, and stable business models. They tend to be less volatile than growth stocks and offer a psychological safety net during turbulent markets. Focusing on dividends also encourages long-term, disciplined saving—rather than chasing short-term gains. For those who reinvest dividends, every market dip becomes an opportunity to buy more shares at a discount and build a larger future stream of dividends.
Conclusion: Small Seeds, Big Trees
Reinvesting dividends is like planting small seeds every year—seeds that grow into trees which in turn bear fruit year after year. It requires patience, but the reward is powerful.
In a world where quick wins often dominate the conversation, the slow and steady dividend strategy remains one of the most underrated—and most effective—ways to build real wealth.
Let your money work—and let time do the heavy lifting.
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LVMH in a Growth Dip – We Believe It's Temporary and See a Good Buying Opportunity
Since the beginning of 2024, LVMH has entered a phase of negative growth and weakening profitability, a contrast to the strong growth years preceding it. During this period, growth has gradually declined each quarter, culminating in negative organic growth of -3% in Q1 2025. The downturn has been particularly noticeable in Asia (excluding Japan), where revenues fell by 11% compared to Q1 2024, mainly due to continued weak demand from Chinese consumers and challenging comparisons following last year’s strong development in Japan. In the U.S., LVMH also faced headwinds, with revenues falling 3%, while Europe managed modest growth of 2% during the period.
Weakness by Category: Wines, Spirits, and Leather – and Geographically: China and the Uncertainty in the U.S
The negative trend has primarily been driven by weakness in Wines & Spirits, where revenues declined 9% organically in Q1, and Fashion & Leather Goods, with a 5% drop. Demand for cognac has remained low in both China and the U.S., and in Selective Retailing, low passenger volumes in the travel retail segment (DFS) in Hong Kong and Macau weighed on performance. However, Sephora continued to grow, driven by proprietary brands and physical expansion—though from high comparison figures.
Management attributes the deterioration in Asia mainly to subdued Chinese demand, related to external factors and changing consumption patterns. In other regions, demand remains stable, but the company is also affected by tough comparables, particularly in the U.S., where the beauty segment and higher growth rates in 2023 contribute to the current weaker results. Broader macroeconomic uncertainty and new trade barriers—such as U.S. tariffs—also shape the market climate and increase forecast volatility.
Focus on Cost Control While Maintaining Flexibility and Innovation for the Market Turn
LVMH is responding by emphasizing cost control and operational flexibility, while continuing to invest in innovation and brand development to maintain its market leadership and be ready to accelerate when market conditions improve. There have been no signals of drastic cuts or major strategic shifts, but the company has made it clear that the current climate demands discipline and ongoing reassessment of investment pace. Profitability has been pressured by negative mix effects and declining volumes, which is reflected in margin trends for both Q4 2024 and Q1 2025.
In summary, since early 2024, LVMH has experienced slowing growth, pressured profitability, and greater regional imbalances, mainly due to weak Chinese demand and difficult comparison bases. The company is responding with disciplined resource use, ongoing innovation, and a long-term focus on brand strength.
Valuation at Its Lowest in a Long Time – Attractive Entry Point
As always, we believe investors must take a helicopter view to act rationally. Growth has weakened over just one year, and profitability has declined from just over 26% to 23%.
Looking at the long term, LVMH has grown revenues by an average of 10% per year over the past 20 years. During the same period, profitability has improved from around 18% EBIT to a four-year average of nearly 26%. Few companies can match this financial performance. (See chart below – not included here.) The recent weakness has significantly dragged down the stock price. At the beginning of 2023, the stock peaked at EUR 900. It is now below 500, resulting in an EV/EBIT of 14 and a P/E below 20 on a rolling 12-month basis. The 5-year average P/E is 33, and the 20-year average is 23, meaning the stock is historically cheap. The balance sheet is strong with net debt/EBITDA at 1.1x, and the dividend yield is 2.7%. The current valuation reflects a bleak outlook, but we see no reason why this engine should not keep running as reliably as it has historically. We therefore see a good buying opportunity and have increased our holding in the stock.
LVMH accounts for 4.2% of Kavaljer Investmentbolagsfond.
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New Holding: Vitec – Serial Acquirer in the European VMS Industry
Vitec was founded in 1985 by researchers Olov Sandberg and Lars Stenlund in Umeå, Sweden. They began by hobby programming together, which led to the development of Vitec’s first software product, ESS200, a tool for graphically displaying energy consumption in buildings. Their research gave them unique insight into property heating, and they identified an open market niche—marking the beginning of Vitec’s success story. In 1999, Vitec’s shares were listed on Aktietorget, and by 2003, the company had formulated its acquisition-based growth strategy. Since then, Vitec has expanded significantly, primarily through acquisitions.
A Leader in Niche-Specific Vertical Market Software with 45 Business Units across Europe
Vitec is a market leader in Vertical Software—industry-specific software for niche markets too small to attract larger new entrants. The company, headquartered in Umeå, develops and delivers standard software for various societal functions. Its products are integral to operations in sectors like energy, insurance, retail, hospitality, religious organizations, and healthcare. Vitec operates a decentralized structure, consisting of 45 business units, each functioning as an independent company with its own CEO and decision-making authority close to the customer.
Vitec is active in the following vertical market segments:
Property Management Energy Healthcare Finance Automotive Education Religion/Churches -
Other sectors
The company is active in 12 countries, with Belgium, Denmark, Finland, the Netherlands, Norway, and Sweden considered home markets where business units have their headquarters.
Mission-Critical Software with Limited Competition Means High Predictability
Vitec delivers mission-critical software tailored to niche industries and essential societal functions. The software boosts efficiency and has clear business value for clients. These solutions are deeply integrated into customers’ core operations, creating strong customer retention and high switching barriers, which also protect against competition. Vitec serves approximately 26,000 B2B customers, with low customer concentration—the top 10 customers account for just 7% of sales, and the largest single customer contributes only 1.4%.
Strong Entry Barriers and Niche Dominance
Vitec positions itself as a market leader in vertical software. Business units are typically leaders in their niches at the time of acquisition. The company operates in small, often regulated markets, which reduces economic cycle sensitivity and deters new entrants due to the limited market size.
Significant Insider Ownership
CEO Olle Backman holds ~43,000 shares (worth ~SEK 20 million). CIO/CTO Jerker Vallbo owns 0.64% of the capital and 3.3% of the votes (worth ~SEK 120 million). Co-founder Lars Stenlund still owns 3.5% of the capital and 19.1% of the voting rights, and currently serves as Chairman of the Board. Notable institutional investors include Capital Group, Cliens Fonder, SEB Fonder, Lannebo Fonder, and Carnegie Fonder. Foreign ownership accounts for 32% of the capital.
Impressive Financial Track Record
Vitec has a very strong financial history. Over the past 20 years, the company has delivered average annual revenue growth of 17% and EPS growth of 20%. Profitability has steadily improved. The share of recurring revenues has increased from 59% to 89% over the past 13 years. Growth has come through a mix of organic and acquired growth. Between 2020–2024, average organic growth was 7% per year, indicating that slightly more than half of growth has been acquisition-driven. Acquisitions have been financed via a mix of internal cash flow, debt, and share issues.
CEO Olle Backman holds ~43,000 shares (worth ~SEK 20 million). CIO/CTO Jerker Vallbo owns 0.64% of the capital and 3.3% of the votes (worth ~SEK 120 million). Co-founder Lars Stenlund still owns 3.5% of the capital and 19.1% of the voting rights, and currently serves as Chairman of the Board. Notable institutional investors include Capital Group, Cliens Fonder, SEB Fonder, Lannebo Fonder, and Carnegie Fonder. Foreign ownership accounts for 32% of the capital.
Valuation Considerations
Due to its acquisition-heavy strategy, Vitec regularly amortizes customer relationships and similar assets, making P/E and EV/EBIT metrics less meaningful in relation to cash flow. EV/EBITA is a better proxy, but where not available, EV/EBITDA is a reasonable alternative—though somewhat flattering due to capitalized costs. Historically, Vitec traded at conservative multiples—as recently as 2019, it traded at 10x EBITDA. As serial acquirers became more appreciated by the market, valuation climbed to ~25x EBITDA. Today, the stock trades at ~14x EBITDA, or about 19x EBITA.
Given Vitec’s long and strong history of value creation, we believe this is an attractive entry point for owning such a high-quality business.
Vitec represents 0.5% of Kavaljer Investmentbolagsfond.
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Idun Industrier Q1’25: Steady Growth and Strengthened Profitability
Idun Industrier continues to deliver, reporting organic growth of 3% and total growth of 4% in the first quarter. EBITA increased by 8%, reflecting solid profitability improvement across the portfolio. A new credit agreement will reduce annual interest expenses by SEK 20 million, which, combined with improved profitability, boosted earnings per share (EPS) by 25%. During the quarter, Idun increased its ownership in two existing holdings at an EBITA multiple of 7x – reflecting continued discipline on the acquisition front. Net debt/EBITDA stands at 2.0, including the follow-on investment in 2B Best Business, which was completed after the quarter-end.
The company continues to perform steadily and reliably. Given its continued low valuation, we see strong potential for significant upside going forward.
Idun Industrier currently represents 1.1% of the 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: Equities, Global & Sweden
AUM: 867 million SEK
Morningstar Rating: ⭐️⭐️⭐️
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Nacka Strand, June 4, 2025
Peter Lindvall, Håkan Telander & Jesper von Koch |
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