A Volatile Half-Year
June continued along a now familiar path marked by high macroeconomic and geopolitical uncertainty, as well as a delayed economic recovery. The latter, combined with lower inflation, prompted the Swedish Riksbank to lower its policy rate by another 25 basis points. This is expected to support consumption and the broader economy going forward. As a result, the Swedish stock market rose slightly during the month, although once again marked by high volatility. In contrast, global equity indices performed very strongly and ended the month up 4.4%.
Now that half of the stock market year has passed, we can conclude that the broad Stockholm Stock Exchange (OMXSGI-PI) is up 2% year-to-date after a highly volatile journey—starting the year with a sharp rise of 10% by mid-February, followed by a mini-crash to -13.5% in early April after Trump's announcement of new tariffs, and finally a strong recovery. The Small Cap Index (CSXRSE) has developed in line with the broader index and is up 2.2% so far this year.
Global indices (measured in USD) have performed more strongly, rising 8.8% year-to-date. However, a 15% weakening of the USD against the Swedish krona has resulted in weak performance for global index funds in SEK terms.
Around this time of year, we often hear phrases like "Sell in May and stay away", suggesting that one should sell their stocks after May dividends and return in August. Our view on this remains unchanged: we refrain from trying to predict overall market trends and instead stay focused on the companies themselves – how they are developing, how external factors affect each of them, and how they are currently valued. A choppy summer market can thus present opportunities to pick up quality companies at attractive levels.
Fund Performance
Kavaljer Investmentbolagsfond increased by 1.6% in June.
The corresponding figures for the OMXSPI-GI were +0.5% and for the Dow Jones World Index +4.4%.
Over the past 5 years, the fund has returned 80%, compared to 75% for the Stockholm Stock Exchange (OMXSPI-GI) and 72% for the World Index.
The largest positive contributions among the fund’s holdings during the month came from Prosus, Byggmästare AJ Ahlström, and Microsoft, contributing +0.5, +0.4, and +0.4 percentage points, respectively.
The largest negative contributions came from Svolder, Berkshire Hathaway, and LVMH, with -0.4, -0.3, 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%.
