Monthly letter
1 APR 2024

March 2024 – Idus Martiae

The middle of March, idus martiae, is a time shrouded in myth, during which many revolutionary events have occurred. Perhaps the origin myth spun around the assassination of Gaius Julius Caesar has inspired successors to act at a similar time, gradually strengthening the mythos and cult surrounding the date itself. Until the meme 'the Ides of March' began to lead its own ominous life. Perhaps there is something to the question of whether we collectively think too often of the Roman Empire? In the financial market, we have seen final capitulations in March both in 2003 and 2009. On March 16, 2020, which turned out to be the absolute bottom during the pandemic, we ourselves sought some kind of support among the Romans in the only yield commentary between month-ends so far. March 2024 has, overall, not offered much drama, but beyond what seems like a stable positive development, several significant events at the corporate level are hidden.

The month began with a small but offensive acquisition within business-critical software. Fortnox is purchasing Boardeaser, which develops solutions for reporting, consolidated accounting, board work, and corporate governance. As users, we give the service high marks and can clearly see the synergies in Fortnox being able to deepen its relationship with its customers. The valuation of Boardeaser, which has a turnover of about 20 million kronor, is initially 100 million, giving a revenue multiple of 5x. A possible earn-out could bring the multiple for 2023's turnover to 8x. Valuation relative to the company's turnover certainly doesn't tell the whole story, and we know very little about Boardeaser's long-term sustainable profitability potential. However, the significance of even small companies in a private environment being able to attract multiples above the average for how listed software companies are currently valued does not escape us.

A week later, Novo Nordisk, a holding in both TIN Ny Teknik and TIN World Tech, conducted a capital markets day where they presented how they plan to achieve their 2025 aspirations. Many participants and commentators were captivated by the enthusiasm of the Chief Development Officer, Martin Holst Lange, for Amycretin, which is seen as an even more promising future treatment for diabetes, obesity, and cardiovascular diseases than CagriSema, which until now has been the company's prime candidate to bridge patent expirations in 2031/32. Novo Nordisk's pipeline undoubtedly looks promising, and they are progressively strengthening their portfolio with clinical data based on large studies. Research promising new products is normally what engages a news-hungry market the most, and continued innovation is, of course, crucial for the company to maintain long-term growth. At the same time, both CagriSema and Amycretin are still far from the market and will not move the needle for Novo Nordisk in the foreseeable future.

What really caught our attention was the presentation by the manufacturing manager, Henrik Wulff. He highlighted the company's 50 years of accumulated experience in balancing ever-increasing demand with production at the lowest unit cost and highest quality in the market. The challenge is that the molecules are becoming more advanced, while there is also a desire to increase the number of patients who can receive treatment. The more often each patient takes the medicine, the more production needs increase. Fundamentally, it is the company's own ability to increase capacity that sets the limit for how much revenue can grow, given how small a part of the targeted population is being helped today.

In just two years, from 2021 to 2023, Novo Nordisk's investment budget increased from 6 to 26 billion DKK. This year, the plan for investments is 45 billion, not far from doubling. The increase is indicative of the company's future ability to generate revenue, but not immediately translatable year by year – it can take up to five years between the investment decision and a finished facility. They also need to hire, train, and certify staff. It is in this light that we should see the company's acquisition of three units from Catalent, as we described in last month's newsletter. The capital markets days were crowned with the news that Wegovy had been approved in the USA for the indication of MACE – major cardiovascular adverse event, which further expands the company's market.

Two companies among the top ten positions in TIN Ny Teknik, Surgical Science and Chemometec, announced CEO changes within less than 24 hours of each other. The events could not have been more different. Surgical Science issued a well-articulated press release with its own authority and held an investor meeting on the same day. CEO Gisli Hennermark will leave in March 2025 after ten years, following a clear lifestyle-driven decision, and will remain involved in the company he claims to love. This includes contributing to the recruitment and onboarding of a new CEO.

On the other hand, Chemometec released a brief press statement that the CEO they had hired in August 2023 had been fired and then remained silent. This left the market in great uncertainty. With a history that includes a dramatic CEO change in December 2019, which led to the temporary suspension of stock trading, it would be reasonable to expect better handling of this situation. Only the day after did they hold a number of shorter investor meetings arranged by various banks. Allow us the rhetorical question: guess which stock went down two percent and which went down 22 percent? We have been in contact with Chemometec and expect a clear improvement in the company's communication going forward.

Differences are also evident in the ownership structures of the companies, where the founder and vice chairman of Chemometec holds just over three percent, while the two main owners of Surgical Science control over a quarter of the company and have been involved with it for over 20 years. We will certainly miss Gisli after experiencing all that he and the rest of the team have achieved in the operation and the value the company has created. Surgical came to the stock market in 2017 as a nanocap with a market value of 170 million kronor. After three early identified and well-executed acquisitions, it now has a market value of over seven billion. Admittedly, shares have been issued to partially finance the acquisitions, but anyone who bought shares at the IPO and has held them until now has seen their value increase 12x. In less than seven years.

Rumors have been circulating for a while that Embracer (like Novo Nordisk, a holding in both funds) would sell Saber Interactive. On March 14, the company announced that it had reached an agreement with Matthew Karch, founder and CEO of Saber and the third-largest shareholder in the group, to sell most of Saber to a newly formed company controlled by Karch. 3,000 employees in the sub-group, including all those working in Russia, will leave Embracer, while 800 will remain within the company. In this way, the company reduces its geopolitical risk while divesting projects that are in the heaviest investment phase. Thus, it reduces Embracer's investment needs, cuts costs, and decreases business risk. The resulting improved cash flow provides additional room to manage the repayment of the net debt we all want to see reduced.

The deal differed significantly from the rumor that "Embracer is about to sell Saber for $500 million" and turned out to be more complex. The purchase price consists of so-called seller's promissory notes, which in some camps can raise doubts that the buyer will have the funds available to complete the deal. Here we likely find the reason that what should have been a relief rally in the stock instead became a sharp decline. This was exacerbated by the background of approximately 13 percent of Embracer's outstanding shares being shorted – that is, borrowed and sold by investors speculating on a continued decline.

Two weeks later, on the last trading day of the month, came the next divestiture from Embracer. The majority of Gearbox will be sold to Take-Two Interactive (another holding in both funds). The deal is logical since Take-Two publishes many of the games that Gearbox develops. Embracer is selling the most development-intensive parts of Gearbox, thus getting rid of this significantly negative cash flow. The payment is made in shares, at a net valuation of about twice the revenue, roughly double what Embracer as a group is valued at.

If the sale of Saber was a jab, the divestiture of Gearbox is a hard right hook. At least from the perspective that the company would not be able to repair its balance sheet without having to issue new shares. When the deal is fully completed, the company's ongoing ability to generate profits ("earnings power") will remain intact, cash flow will be greatly improved, and net debt will be significantly reduced. The stock was also rewarded with a substantial increase. Take-Two also saw positive development after the deal was announced.

Hardware is (also) eating the world

Marc Andreessen is not only the founder of Netscape during the internet's adolescence but also a successful venture capital investor and notably famous for his 2011 essay 'Why Software is Eating the World'. Indeed, we have seen a tremendous development in many software companies since then. The 2010s were unequivocally the decade of software, and we continue to see very good opportunities for these business models to grow structurally and scalably with good profitability.

However, during the 2020s, it seems that software will have to share the spotlight with, in some sense, reborn hardware companies. Both the pandemic and the war in Ukraine have reminded us that hard things are needed. Not just vaccines and tanks, but robust supply chains and energy systems. Dictatorship-free electricity production, if nothing else. Software generally drives deflation, while (excess) demand for hardware often drives inflation. We can all see the shift from the 2010s' deflation and zero-interest rates to the 2020s' inflation, which at least partly seems to be structurally sustainable. This is a strong indication that hardware, in a broader sense, has made a comeback.

Artificial intelligence, perhaps the epitome of software, also requires massive investments in hardware. Data centers, where all AI is born, trained, and thrives, are solid buildings filled with tangible items. More explicitly, AI exists on hardware in the form of processors and semiconductors. The semiconductor sector was for a long time a difficult sector to invest in – massive investment budgets, oversupply, and fierce competition, constant price pressure fundamentally driven by Moore’s Law, and cyclicality driven by fluctuations in volume and price that are accentuated throughout the chain from factory to the final product in a consumer's hand.

Let us address these challenges one by one. The industry has tackled high capital expenditure requirements by becoming fabless, meaning focusing on designing semiconductors and letting TSMC and other so-called foundries bear the investment costs. These companies, thanks to this concentration, have been able to stay at the forefront of technological development, which has gradually reinforced this tendency over time. On the back of this outsourcing, there arose a need for tools and design software to create tomorrow's semiconductors. Here, Cadence and Synopsys (both holdings in TIN World Tech) have taken the lead and grown strongly, both organically and through acquisitions. Synopsys recently made a bid for another simulation company in the fund: Ansys. The semiconductor industry itself has also consolidated through acquisitions and mergers, which in the case of Xilinx (acquired in 2020 by AMD) has contributed to the returns in TIN World Tech. This has significantly contributed to more reasonable competition and a better balance between supply and demand.

Moore's Law – the prediction that computer performance can be expected to double approximately every two years – has been one of the cornerstones of technological development over the past 50-60 years. Sharply decreasing costs of computing power ("cost of compute") have served humanity well but have been difficult for the semiconductor industry to balance, as price erosion has consistently been high and gross margins difficult to defend over time. New and more demanding tasks are really the only counteracting force. A company like Nvidia has successfully navigated from one specialized niche to another over decades, where the increase in demand for computing power has more than offset Moore's Law. From gaming computers (3D calculations increase cubically, while Moore's Law is quadratic) through data centers and crypto to artificial intelligence.

Data, which is what all AI requires to be trained and become efficient, has been called the "New Oil". According to Sam Altman of OpenAI, it is rather computing power ("compute") that is today's most valuable raw material. If you will: sand (silicon) is the new oil. The demands for training and inference – all the queries thrown at the model – are increasing far faster than Moore's Law, which currently gives Nvidia strong pricing power. Whoever can help meet the need for compute will be able to generate value for a long time to come. Nvidia (and its investors) can expect future challengers, as the incentives are too strong for this not to happen.

Cyclicality remains and can probably never be completely eliminated. Again, industry consolidation has somewhat alleviated the situation, as has the shift to contract manufacturing. Right now, we see few signs of cyclical movements for semiconductor companies with operations related to AI. Herein lies the challenge for the investor: in some segments, there is currently no cycle to be seen. At all major shifts, people in general and investors in particular tend to overestimate the course in the short term, while underestimating the power of the change in the long term.

We strive to balance risks against opportunities by trying to find ultimate winners, especially related to AI. Preferably by investing in picks and shovels rather than gold diggers. Nvidia remains a medium-sized position in the fund. During the period, TIN World Tech bought shares in ASML, Applied Materials, and TSMC. These investments were financed by divestitures of Diasorin, Seek, and Unity.

TIN New Technology

Last month, the share value increased by 2.5 percent. During the same period, the value development for the broader comparison index for Nordic small companies VINXSCN was +6.4 percent. Since the fund's inception on February 4, 2019, the fund has risen by 57.3 percent, while the index has increased by 77.1 percent. The three largest holdings in the fund at the end of the month were Novo Nordisk, Evolution, and Surgical Science. For a list of the top ten, see

The holdings that contributed most to the return during the month were Novo Nordisk, Embracer, and Nemetschek. Among holdings that negatively impacted during the month, we find Genovis, Fortnox, and Chemometec. The fund's largest segment is Software, which makes up 39 percent of managed capital, followed by Health at 34 percent and Digital Brands at 14 percent.

TIN World Tech
Last month, the share value increased by 4.6 percent. During the same period, the value development for the broader comparison index MSCI World was +7.3 percent. Since the fund's inception on June 12, 2020, the fund has risen by 40.9 percent, while the index has increased by 93.3 percent. The three largest holdings in the fund at the end of the month were Microsoft, Salesforce, and Novo Nordisk. For a list of the top ten holdings, see

The holdings that contributed most to the return during the month were Nvidia, Edwards Lifescience, and Novo Nordisk. Among holdings that negatively impacted during the month, we find Adobe, Palo Alto Networks, and Unity. The fund's largest segment is Software, which constitutes 56 percent of managed capital, followed by Health at 20 percent, and Digital Brands at 10 percent.

Carl Armfelt
Erik Sprinchorn


Risk information
Historical returns are no guarantee of future returns. The money invested in the fund can both increase and decrease in value and it is not certain that an investor will get back all the invested capital. Please read Fact Sheets (PRIIP) and prospectuses available on our website or contact a distributor.
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