Starting signals can vary greatly. For a sprinter, the sound travels to the ear, from which a signal to the brain activates a new signal to all muscles to start moving. Typically, this process takes less than half a second. For an average participant in the Vasaloppet, the world's biggest cross-country ski race, the starting signal is a distinctly different experience. Standing on the field, packed together with thousands of others, a distant muffled bang is heard. And then nothing. People look around. Maybe someone makes an expectant movement but goes nowhere. If you are not taller than everyone else, you cannot see anything ahead either. Finally, after what feels like a much longer time than it actually is, the mass slowly starts moving forward, only to bottleneck again at the first hill.

Some market events resemble the sprinter’s experience, others the Vasaloppet. Often, one does not clearly perceive a market shift until later, with the benefit of hindsight. In an environment long dominated by interest rates and central bank actions, how do we view the Riksbank’s cut in May? It was clearly not a signal to the market that the floodgates are open; it’s not time to buy everything as if there’s no tomorrow. However, we notice some tentative shift in the market. Small caps, which have been ice cold compared to large caps for a longer period than we’ve previously experienced, have begun to show signs of life. The trend is not yet broad, more anecdotal than widespread. We also see interest in small caps from actors who have stayed away for a long time.

We also note that the rate cut hasn’t harmed the Swedish krona, quite the opposite. A weak krona may have benefited the profit development in many Swedish companies in recent years, but combined with falling prices and poorer liquidity (trading on First North decreased by over 80 percent between 2021 and 2023), the weakness contributed to a reflexive downward movement for our domestic market. The smaller the company, the worse it has been. Conversely, a recovering krona could help foreign investors rediscover Sweden as an investment region.

Company fundamentals – the growth and profitability and the cash flow they can generate – undoubtedly determine how stocks perform in the long term. However, there is no natural law that keeps stocks strictly in line with what companies actually achieve. Companies can be gradually valued higher or lower, and stock prices can diverge from what is often called intrinsic value for long periods. Profits didn’t rise by 70 percent in 2020, nor did they fall by a third in 2021 – 2023. On the contrary, profit development has been very good over the past three years, which we’ve commented on many times. This reporting period also generally confirmed the strength in the companies’ business models. There are always exceptions, both temporary and structural.

BioGaia‘s report might not have looked remarkable at first glance. But with a particularly strong comparison, even a slight decrease in children’s health can be seen as good for an individual quarter. More importantly, adult health grew by 32 percent, and the company continues to penetrate digital channels, especially Amazon. The company largely holds its fate in its own hands through innovation and launching new products within its core areas. The latest example is a skin cream for infants and children with dry and sensitive skin, Aldermis. There are also opportunities to integrate vertically into more markets and take over countries where they have previously gone through distributors.

Another report on the theme of “sometimes good, sometimes bad” was Surgical Science. Just as Biogaia has children’s health/adult health, Surgical Science has on one hand, products for education (Educational Products), and on the other hand, software sold to industrial partners (Industry/OEM). The Education business area experienced a significant drop that went beyond the strong comparison figure from last year. Temporary disruptions in China, India, and the absence of large procurements made Q1 a very weak start to the year. On the other hand, there are signs that the long-term investment in OEM customers, whose full impact will be felt from 2027 onwards, is now starting to bear fruit. Sales of customized simulators to medical technology companies quadrupled. Despite an 18 percent total decrease in revenue, the company sees opportunities to grow for the full year 2024, and the financial targets for 2026 remain unchanged.

Besides reports, some companies have also met with investors to discuss their business more long-term during so-called capital market days. Fortnox opened its headquarters in Växjö to investors and shed more light on its business model and, above all, its plans to try to increase revenue per user. The company has been questioned this year, both by short sellers and in an article in the Financial Times. The main criticism has been that Fortnox will have difficulty growing with a focus only on one market – Sweden. A country also facing an economic challenge with an increasing number of bankruptcies, which are assumed to hit Fortnox’s customer base the hardest. The company has also been accused of exaggerating the number of addressable customers. On top of this, the stock enjoys a higher valuation than most others, a difference that has increased as many other companies have seen significant drops in stock price/valuation.

Fortnox gave good counterarguments during its capital markets day. Admittedly, they are still trending below their plan for how many customers they should be able to acquire by 2025, but customer intake during Q1 was a record-breaking 20 thousand new customers. The company has several initiatives aimed at increasing the number of customers who come in through accounting consultants to start using the platform. In this way, they see the potential to increase revenue for this type of customer by up to 20x. For customers who come directly through their own platform, they can increase revenue for this customer group by about 35 percent in symbiosis with consultancy firms. Overall, they see user growth, not customer growth, as the most important for Fortnox. Since 2020, they have increased the number of customers by 50 percent, while user growth has been 200 percent. The plan for 2025 includes more than doubling the user base from today’s level.

Some investors might have been disappointed that Fortnox did not set any new financial goals during its capital markets day. The plan is to launch new goals for 2030 at a capital markets day next year. For now, we have to settle for the outlook for 2025. This bodes well for continued fulfillment of the “Rule of Fortnox,” which is the company’s version of the Rule of 40, a popular way to evaluate software companies (the sum of a company’s revenue growth and operating margin should be over 40). The Rule of Fortnox is to exceed 60, which the company does with margin. Very soon, Fortnox’s software will constitute the heart, a totally business-critical software, for a quarter of Sweden’s GDP. What price, what valuation, should be placed on such a position?

Even the medical technology company Biotage invited to a capital markets day, which was the company’s first ever. The focus was primarily on Astrea, which they acquired last year and is the company’s strongest growth engine. Historical growth for Astrea has been around 75 percent, compared to “old Biotage” where organic growth has been closer to 10 percent. Many investors were skeptical of Biotage in connection with the acquisition, and the sector as a whole has had much lower growth in the post-Covid period. A clear message from the capital markets day was that Biotage’s management feels more confident in reaching its financial goals for 2025 thanks to increased visibility for individual customer projects. Overall, the capital markets day provided a better understanding of how they plan to grow with existing and new customers. It was also clear that there is a very strong and competent management team within Astrea, which is not normally seen in connection with quarterly reports.

At the end of the period, we held our latest stream from the office. We want to thank everyone who participated with great questions. The stream can now be viewed afterward here.

TIN New Technology A

 In the past month, the fund’s unit value increased by 1.0 percent. During the same period, the broader benchmark index for Nordic small-cap companies, VINXSCN, rose by 5.4 percent. Since the fund’s inception on February 4, 2019, it has gained 56.1 percent, while the index has grown by 88.8 percent. At the end of the month, the fund’s three largest holdings were Novo Nordisk, Evolution, and Surgical Science. For a full list of the top ten holdings, visit tinfonder.se/en-us/funds/tin-new-technology.

The holdings that contributed the most to the returns during the month were Biogaia, Chemometec, and Genovis. Among the holdings that negatively impacted performance were Evolution, Surgical Science, and Paradox Interactive. The fund’s largest segment is Software, representing 39 percent of assets under management, followed by Healthcare at 36 percent, and Digital Brands at 13 percent.

TIN World Tech

In the past month, the fund’s unit value decreased by 1.5 percent. During the same period, the broader benchmark index MSCI World dropped by 1.7 percent. Since the fund’s inception on June 12, 2020, it has risen by 34.2 percent, while the index has grown by 90.1 percent. At the end of the month, the fund’s three largest holdings were Microsoft, Nvidia, and Novo Nordisk. For a full list of the top ten holdings, visit tinfonder.se/en-us/funds/tin-world-tech.

The holdings that contributed the most to returns during the month were Nvidia, Globus Medical, and Volue. Among the holdings that negatively impacted performance were Salesforce, Veeva Systems, and Autodesk. The fund’s largest segment is Software, which makes up 55 percent of assets under management, followed by Healthcare at 19 percent, and Digital Brands at 11 percent.