Ferd Invest - 2010 summarized
Ferd Invest operates as a financial investor in a limited number of companies that we believe offer exceptional qualities. We aim to maintain a long-term ownership interest in such companies, subject to the pricing remaining attractive. Our objective is to generate a higher return than investors generally achieve in the stock markets in which we invest.
Ferd Invest aims to invest in companies with particularly good products, better than average profit margins and management that prioritises long-term value creation. We believe that by focusing on a limited number of good companies we will achieve a better return than the stock market as a whole in the countries where we invest. Ferd Invest currently invests in the Norwegian, Swedish, Danish and Finnish stock markets. Ferd Invest will be close to fully invested at all times, and does not wish to gear the portfolio with borrowing or sell shares it does not own (short selling).
Main features 2010
- Another good year for Nordic stock markets, with strong growth in share prices
- The market value of our portfolio increased considerably, but not to the same extent as the Nordic market as a whole
- We have a cautiously optimistic view of the outlook for stock markets in 2011
2010 was a very good year for Nordic stock markets seen as a whole, with share prices improving by 28%. The Swedish, Finnish and Danish stock markets all showed increases of around 30% when converted into Norwegian kroner, while the Norwegian market fell a little behind with an increase of 18%. Market conditions benefited from an even stronger performance by the global economy than one dared hope for at the start of the year, and corporate earnings were also better than expected. In addition, we saw a marked improvement in investors' risk willingness.
The market value of Ferd Invest’s total portfolio gained 22% in 2010, which was 6 percentage points weaker than the Nordic market as a whole in terms of our benchmark index.
On the positive side, we can mention that a number of companies we held delivered very good growth in share prices. The best examples of this were RCCL, Assa Abloy, SKF and Modern Times Group.
The common feature of the investments in the portfolio that were weak performers in 2010 was that the assumptions on which we based our investment decisions were not fulfilled. The weakest investments in 2010 were Vestas, Nokia, Seabird, Orkla and Saga Tankers.
The members of the Ferd Invest team are, of course, committed to outperforming the stock markets each and every year, regardless of whether these markets perform well or badly. However, it is even more important for the Ferd group that we generate a good long-term return. Looking at the last four years as a whole, our share portfolio has achieved a significantly higher return than the markets with which we compare ourselves. In order to achieve a good margin of outperformance over the longer term, we attach importance to structuring our portfolio so that its market value falls less than the market as a whole when market conditions weaken, while at the same time we want the portfolio to improve in line with markets when market conditions improve. Over recent years, we outperformed the market in 2007, a year when markets rose, we strongly outperformed the market in the disastrous year of 2008, and we again outperformed a rising market in 2009. While we did not match the market growth in 2010, our overall results over the last four years show that NOK 100 invested in our portfolio at the start of 2007 would have been worth NOK 133 at the close of 2010. The value of an investment of NOK 100 in the benchmark for the markets we measure ourselves against would have risen to just NOK 105 over the same period.
At the close of 2010, the market value of the Ferd Invest portfolio was NOK 3.9 billion. The portfolio is invested in the Norwegian, Swedish, Danish and Finnish stock markets. The largest investments at the close of 2010 were in ABB, Statoil, H&M, RCCL and Assa Abloy. We aim to concentrate our portfolio to relatively few shares, and at the turn of the year these five largest investments accounted for around 40% of the total value of the portfolio.
Since we concentrate principally on stock picking among Nordic companies, there is no particular requirement for geographic limits within the portfolio. At the close of 2010, investments in Norwegian and Swedish companies accounted in round terms for 90% of the market value of the portfolio.
While our portfolio is permitted to invest in both large and small companies, a significant proportion of our investments are in medium-sized Nordic companies. In order to emphasise this approach, we changed the benchmark index against which we measure our performance to the MSCI Nordic Mid Cap Index with effect from the end of 2010.
There were no changes to the Ferd Invest team in 2010. The three members of the team have between them some 40 years' experience of working in the financial markets.
At the time of writing, relatively strong optimism holds sway in the Nordic stock markets. This is typically a bad sign, and we are therefore a little more cautious in our view of market prospects for 2011. Even so, we think it may yet be too early to base our strategy on expectations of falling share prices, noting that we are nonetheless still at a relatively early stage of an upturn. We therefore expect 2011 to be a year with repeated short-term corrections, but with an underlying positive tone resulting from many companies still proving able to report improved earnings.