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Shares of large companies have had a “sad evolution” in recent years, believes Pierre Mellström. The reason is low economic growth and the weakness of the banking sector.
The pandemic has hit Europe hard, partly because it has been difficult to cope with the crisis, but also because the composition of the stock market is cyclically sensitive.
But despite the darkness at the moment, the outlook for the European stock market looks better next year, says Pierre Mellström. This is especially true for small and medium-sized European companies, especially growing companies, which, with the help of their own innovations, have the power and opportunity to grow on their own, despite the level of growth of the world economy. .
“These companies don’t get as much attention from equity analysts and are therefore less transparent. So a solid self-analysis gives a better chance of finding companies that can do well on the stock market, ”he writes.
Materials for smartphones
Some additional criteria for the selection of companies are that they must have structural growth and value creation that is supported by solid business models and specific sustainability requirements.
The first favorite that Pierre Mellström highlights is the French company Soitec which makes energy-efficient materials that are used in smartphones, among other things. Soitec is well positioned and, for example, Apple uses the company’s technology in the new Iphone 12.
The other favorite is the German battery manufacturer. Varta, It has developed a technology to produce small batteries that store more energy than other manufacturers have achieved.
Batteries are used in hearing aids, which has made the company dominant in this market. Varta is also growing in wireless technology, where there is a high demand for small “high energy density” batteries.
Strange niche
The third favorite is Strix, based in the Isle of Man. According to Pierre Mellström, a slightly different company, with a special niche, patented safety control, which is used in many kettles.
The market share is large for a technology that is profitable and is used in more than 1.2 billion products a day. The company is also growing in more product categories with “components and units in water heating and temperature control, steam management and water filtration.”
No: In the Europa Småbolag fund, investments are selected from smaller companies, defined by a market capitalization of between € 1 billion and € 10 billion.
