Markus Larsson’s and Kenneth Blomqvist’s thoughts on how investors are starting to find their way into Micro Caps again

European Micro Cap, Nordic Micro Cap

2021-04-26

The two Micro Cap Funds managed by Fondita – Fondita Nordic Micro Cap and Fondita European Micro Cap have performed well during both last year and in the beginning of this year. “We see that investors are starting to look at the smallest companies on the stock market again” comments Kenneth Blomqvist, one of two Micro Cap portfolio managers at Fondita. For a while now Micro Caps have outperformed the broader stock markets in both Europe and the Nordics. One of the reasons is the fact that Micro Cap companies are often local champions and when the economy starts to recover, these entrepreneurial and agile companies are almost immediately benefitting from an increase in the demand. Fondita Nordic Micro Cap has risen with 16% so far this year and 149% since the fund bottomed in March 2020. Fondita European Micro Cap has risen 19% this year and 112% since the fund bottomed last year. Now that investors are predicting a recovery in the global economy, they naturally start to look at these local niche- players. The beauty of this situation is that we at Fondita, who have been investing in Micro Caps since 2006, already are invested in these companies. When the general investor starts to invest in this area, we are already owners of these more illiquid quality company stocks, Markus Larsson adds. The strategy of both funds is to find growth companies that are in an early phase of their growth curve, a growth that is mainly driven by a long-term structural change. Growth drivers that we have identified are 1) the digitalization of the society, 2) the strong focus on peoples own daily health and an increase in healthcare investments, 3) the increase of environmental and climate related investments due to legislation and 4) a strong investment trend what comes to automatization of the Manufacturing Industry worldwide.

One theme that has contributed to both funds’ performance during last year is the fast-growing pet industry, both what comes to pet equipment and pet medicines. Here we are invested in Finnish Musti Group, Swedish Swedencare, French Vetoquinol and British Animalcare. Micro Cap companies in the funds that will profit from the economy recovering are German PVA Tepla and British DiscoverIE in Europe and Swedish Hexatronic and Finnish Detection Technology in the Nordics. The Future looks very promising for many Micro Caps as they are growing both locally and they also have the possibility to grow internationally in the future if they would like to, Kenneth Blomqvist says. We see these companies growing both organically and via acquisitions a combination that we at Fondita like, Markus Larsson adds.

Text written by

Markus

           Kenneth

Markus Larsson                 Kenneth Blomqvist
Portfolio manager              Portfolio manager

 


 

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