Carsten Dehn and Ulrik Ellesgaard manage Lannebo Europa Småbolag, which is up 24.31% YTD. How do you explain the increase?
– The main explanation for the fund’s high return so far this year – 8 percent over the index – is our stock picking. Out of Europe’s 8,000 small caps we have selected approximately 40, where 94 per cent of them have reported better or in line with expectations for Q4 2016 and Q1 2017. We have a strict discipline for both buying and selling our holdings, which has generated good returns.
What do you see as the challenge for finding investment opportunities right now?
– In general, there are many exciting investment opportunities in Europe. As an asset manager, the foundation of our investment philosophy is to pick companies where the fundamentals are promising, that are market leaders and that we believe have good growth opportunities. We encounter interesting investment opportunities all the time. We are now paying particular attention to valuations – it is important to find the balance between a company’s fundamentals and its valuation on the stock market. When the market is booming, there are, of course, companies that are overvalued – and we do not want to overpay. But with an investment universe consisting of eight thousand small caps there are always investment opportunities and we find ourselves in a “sweet spot”.
Which industries do you see as most promising over the next six months?
– We are over-weighted in engineering and specialized finance companies, for example credit management and fin tech. The business environment is good in Europe and markets are strong – which gives small caps an advantage. Europe represents 70 per cent of revenues for Europe’s 8,000 small caps, while European large caps have 70 per cent of their sales outside of Europe. So, if you want exposure to Europe, which you want, then small caps are the way to go.
Tell us about some of your portfolio companies.
– Asetek is a company that successfully combines innovative technology solutions with a leading environmental philosophy. They provide cooling systems for servers and computers worldwide and enable powerful energy conservation, improved performance and a greener planet. Asetek is a good example of companies we like – they are market leaders in a well-defined segment, they have a strong balance sheet and they make environmental challenges and sustainability part of their business model.
– Another favourite is Aumann, which also represents energy efficiency and, among other things, provides equipment for large scale production of electric motors. We participated in the company’s IPO and we are positive about the investment. Aumann has a strong position within a segment that we believe in, and the company expects a 40 per cent annual growth rate over the next five years.
What differentiates your approach to working with fund management?
– We are genuinely driven by active management which for us means being extremely disciplined in our investment process, maintaining a long-term view and being conscious of any risks.