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I don’t want to use clichés like the Swedish wonder of information technology or the new economy. On the other hand, I have identified four successful companies that work with digital products and have a market capitalization of at least SEK 100 billion.
Here are the HEES companies and their operations:
Hexagon (measurement technology, software)
Embracer (computer and video games)
Evolution (live casino provider)
Sinch (courier services)
Sinch hit SEK 100 billion in market value this week. A milestone that Embracer reached at the beginning of the month. Hexagon and Evolution are valued at more than SEK 200 billion.
I wish I had Storytel, but with a market capitalization of 15 billion, they just aren’t that big on the stock market yet. The Fortnox growth pearl is also too small and they also have operations only in Sweden.
All four HEES companies like acquisitions, even though Evolution has long grown primarily organically. The growth of the four companies has been rapid for many years, often between 10 and 50 percent and sometimes more than that, including acquisitions. For example, Sinch’s sales growth during the fourth quarter was 43 percent without acquisitions and 95 percent overall.
Embracer and Evolution are also growing very fast, while the large Hexagon companies had a true mid-year of 2020. The Ola Rollén creation is expected to return to the growth path in the future through product launches and acquisitions.
At high price levels, we shouldn’t jump into the stock, but looking at five to ten years from now, we shouldn’t stay on the sidelines either. One suggestion is to buy at least small security posts, because it will be easier to keep track of interesting businesses if we have at least one small neighbor.
Isn’t that some kind of warning sign that the stock market peak is near, that I will find HEES companies as an equivalent to FAANG? Well, a little closer and there are many other signs that the stock market is hot right now. It does not say much about the moment and as long as the price trend of the stock index is stable upwards, we should not be afraid. Typically, there will be long peak formations before there are any actual stock market dips. Spring 2020 was unusual in that it was just a slight handicap.
Next time it will undoubtedly be different and although the courses go down a year, the digitization of society has not ended. Good companies, sooner or later, acquire their values.
