Sometimes the best forecast for tomorrow's weather is 'the same weather as today.' Similarly, September followed the previous month with essentially the same negative development. Thus, the third quarter truly lived up to its seasonally poor reputation in the stock market.

The mood in the market – the sentiment – remains subdued. We see an almost embittered market, a widespread resentment. This is not only expressed in falling prices. In a recent Gallup survey, a record number of investors were found to be negative towards the healthcare sector, while the proportion describing themselves as 'neutral' remained unchanged. Since 2001, the distribution has been approximately 40/40 positive/negative with 20 percent neutral. Now, 60 percent are negative while the neutral/positive are divided 20/20. This effectively means that half of those who were previously positive have switched sides and are now negative. The process has occurred gradually since 2015 but has accelerated strongly during 2022 and 2023

We see this expressed among Nordic companies as well, not just in pure research companies, which we sometimes somewhat carelessly label as 'gold diggers,' but also among more stable, profitable companies that supply the gold diggers with picks and shovels. We mentioned in the newsletter for August how Surgical Science was severely punished after a report that we thought was good. The stock has continued to decline in September, and the price is now lower than before their value-driving acquisition of Simbionix in 2021. This observation becomes particularly interesting since the integration of this Israeli company, which has a larger turnover than the 'old' Surgical Science, has succeeded far better than we dared hope.

Chemometec's journey from a stock price over 1000 DKK to the current listing around 325 is directionally more understandable, as we all (including the company itself) have learned more about how smaller biotech startups have driven demand in recent years. The downside of this becomes less demand when the conditions for financing startups change. One can ponder the magnitude of the movement. Trying to explain the force of the movement without emotions can be helpful for the future. We can observe that reflexivity works both upwards and downwards. If an external factor (for example, a relatively rapid movement in the interest rate market) affects return requirements and overall investment willingness, the enthusiasm for both Chemometec and its customers will be subdued. As the customers become cautious, the sentiment around Chemometec is further dampened in a self-reinforcing loop. Given that 1) consumables continue to grow as expected, 2) the company likewise expects increased revenue from services, 3) prices are raised by about five percent, and 4) the company launches a new product expected to carry three times the price, the company's guidance for the fiscal year 23/24 implies a 25 percent decrease in instrument sales. The company has a history of always guiding cautiously initially, and we do not believe the new CEO, Rasmus Kofoed, wants to break with all traditions the first thing he does.

Biotage – a smaller holding in TIN New Technology – is another good example of how sentiment within the healthcare sector has deteriorated. The hangover after COVID is now almost complete with a stock price we haven't seen since the total panic following the outbreak in spring 2020. Here too, there is uncertainty around instrument sales, while reagents and other consumables offer stability. The acquisition of Astrea materially changes the ownership structure in Biotage, and shareholders have to assess whether the valuation was reasonable and whether the acquisition will materially contribute to the company's organic growth. Without certain answers, these questions in this environment can only mean that the glass is half full. Or?

Another way we can measure sentiment is how company earnings multiples develop. The P/E ratios for Nordic small companies have been at today's levels only four times in the past ten years: during the 2014 Flash Crash, immediately after the pandemic outbreak in 2020, last fall, and at present. For Nordic small companies (generally, all sectors) to return to their historical average valuations, a stock market rise of 35 percent is required. Investing in small companies often involves greater fluctuations than sticking with the biggest companies on the stock market, but it is usually worth the trouble. We have seen periods of up to two years when large companies have performed better than small ones, but never as long as now. We have now experienced 800 days of this trend, and counting.

A negative sentiment in public markets tends to eventually attract interest from actors operating in the private environment – private equity (PE). We have feared the risk that both industrial buyers and PE would take the chance to acquire companies 'too cheaply' in this cycle, thereby depriving existing shareholders of the opportunity to reap the benefits of the acquired companies' profits and cash flows under a future more positive market regime. This appears to be the case with Adevinta, where Permira and Blackstone (PE) have expressed an indicative interest in taking over the company. We mentioned in last month's newsletter that Adevinta's transaction revenues increased by 53 percent during Q2. This and other positive indicators for the future should be reflected in any potential bid. We also expect the existing industrial owners Schibsted and eBay to act responsibly in this situation, especially if they intend to 'roll over' their holdings or parts thereof into a private structure.

Over time, stocks go where the profits go. A truism we have repeated many times. Those with good memory know that after every reporting period since we started TIN Fonder, we have been able to note that the companies in the portfolios are in good health and that profit development has been strong. This is especially true for the very largest positions in the funds, those that mean the most for the average profit development. The top 20 companies have increased their operating results between 2019 and 2022 by an average of 80 percent in TIN World Tech and by 200 percent in TIN New Technology. The discrepancy between result and share price development can remain large in the short term and even grow. Valuations alone do not represent a lower limit; rather, the bear market is simply over when it is over. Over longer periods, on the other hand, profits act as a strong magnet for how prices should develop.

TIN New Technology
Last month, the share value decreased by -7.3 percent. During the same period, the value development for the broader comparison index for Nordic small companies, VINCSCN, was -3.1 percent. Over the past 12 months, the fund has decreased by 1.1 percent, compared to +14.0 percent for the index. Since the fund's inception on February 4, 2019, the fund has increased by 33.2 percent, while the index has increased by 48.9 percent. The three largest holdings in the fund at the end of the month were Evolution, Novo Nordisk, and Paradox Interactive. For a list of the top ten, see tinfonder.se/holdings-tnt/.

The holdings that contributed most to the return during the month are Adevinta, Trustpilot, and Senzime. Among the holdings that negatively affected performance during the month, we find Embracer, Chemometec, and Paradox Interactive. The fund's largest segment is Health, which accounts for 31 percent of managed capital, followed by Software at 31 percent and Digital Brands at 21 percent.

TIN World Tech
Last month, the share value decreased by 6.5 percent. During the same period, the value development for the broader comparison index MSCI World was -4.8 percent. Over the past 12 months, the fund has increased by 14.2 percent, compared to +19.1 percent for the index. Since the fund's inception on June 12, 2020, the fund has risen by 19.6 percent, while the index has increased by 62.4 percent. The three largest holdings in the fund at the end of the month were Microsoft, Nintendo, and Salesforce. For a list of the top ten holdings, see tinfonder.se/holdings-twt/.

The holdings that contributed most to the return during the month were Adevinta, Novo Nordisk, and Roblox. Among the holdings that negatively affected performance, we find SolarEdge Technologies, Xero, and Straumann. The fund's largest segment is Software, which accounts for 53 percent of managed capital, followed by Health at 22 percent and Digital Brands at 12 percent.