Even before the Covid-19 pandemic broke out one of the strongest global growth themes has been ”our society going digital”. Today this is an even stronger theme for the long-term investor. For us at Fondita, digitalization of society means everything from PC and console games to digitalization of production in different industries and service offerings. This also means that companies need to invest in digital security in their internal and external IT- systems. Today investments in cyber security by companies, governments, and states is a high priority. During the past years we have seen companies investing in digital solutions that make their daily operations easier and their businesses more efficient. Investing in digital solutions also means that the companies save costs, are more flexible and agile, and have the possibility to manage global operations more smoothly. Today a manager can manage and follow the development of a project or how a certain machine is doing on the other side of the globe in real-time. This means that spare parts can be ordered in time, a project can be managed without hiccups and people can be in the right place at the right time. Digital solutions also means that people can work remotely in their ”virtual offices”, which results in less traveling, less pollution and more flexibility for the employees and their families.
This is a trend and theme that is even more on companies’ agendas today than only five months ago. The terrible Covid- 19 pandemic has been an eye-opener for the whole society and has shown that many companies are not prepared and have not invested enough in digital solutions. In Europe and the Nordics, and especially among the smaller companies, we find many companies that will capitalize on this accelerating growth trend for many years to come. Especially in Germany, Sweden, Switzerland and Finland we find many interesting companies that have the possibility to grow for many years due to accelerating demand in different types of digital solutions. In Sweden we find companies that are experts in developing cloud based PC and console games. Companies like Embracer and Stillfront are pioneers in this field – companies that have grown double digit for many years and whose future still looks bright as people in all age groups play more and more games, especially cloud based games. In Germany we are invested in two companies, CompuGroup and Nexus, that are strong players in the field of digital healthcare solutions. This is a segment that is still miles behind compared to many others what comes to digitalization. Companies like German Cancom, UK based Softcat and Swedish based Enea are all companies that capitalize on the strong demand for different types of cloud- based solutions for small and mid-sized companies. Finnish Talenom is a niche player in the fragmented Nordic digital accounting market. Usually these niches and segments are very fragmented which means we see consolidation taking place here as well – companies are buying smaller competitors and being bought themselves. During the last year two companies in this space, owned by Funds managed by Fondita, have been bought. These were Norwegian Data Respons and French Ingenico that both were bought by larger competitors for a nice premium.
To summarize – there are still many segments and businesses that are going to digitalize in the years to come. This means that companies that are focusing on R&D and have the strength to adopt to changes when the industry and the demand is changing will be the winners in an overall growing market. These are companies that we at Fondita would like to find and invest in for the long run. With all this said, society and companies still need people who are thinking and executing. This is why it´s crucial to find the right companies, with the right products and business models, but over all the right people that manage and develop these companies. These are companies that we like and will be investing in.
Text written by portfolio manager