“Engineering and industrial companies have impressed,” says Esbjörn Lundevall, equity strategist at SEB.
For a long time, Saab was considered a troubled child within the Wallenberg sphere on the stock exchange, with its stock stagnating for years.
Then came the war. Sales soared, and so did the stock price. In just the first half of the year, the stock surged by nearly 70 percent. Consequently, the defense industry group tops the list of large-cap winners in the first half of 2024.
“It’s not just Saab that’s a winner; they’re also pulling up other industrial companies that are subcontractors. AB Volvo, Peab, and Skanska are some examples,” says Joakim Bornold, investment manager at the savings company Levler.
Also on the top five list is Mycronic, with an increase of over 40 percent.
“Mycronic manufactures, among other things, semiconductors, and the rise is likely driven by that and an AI hype,” says Esbjörn Lundevall, equity strategist at SEB.
The Stockholm Stock Exchange saw a lot of positive movement in the first half of the year. Both OMX 30 and the broader index, OMX Stockholm PI, rose between 7 and 8 percent.
“The profitability of the large engineering and industrial companies has impressed me. Margins have been better than expected,” says Esbjörn Lundevall.
“Traton is a prime example of this,” he adds.
The German truck giant, which owns Scania, ranks third on the winners’ list, up 48 percent, partly after a strong quarterly report this spring.
Interest-Sensitive Companies Performed Worst
Other winners include Lundin Mining, operator Millicom, and IT company Addnode, all up over 40 percent.
Robert Oldstrand, equity strategist at Swedbank, notes that large-cap companies have driven the market’s rise. At the same time, many stocks are still in the red.
“It’s been difficult to pinpoint individual winning stocks in the first half of the year,” he says, continuing:
“Half of the companies have performed worse than the index, and about a third are in the red,” says Robert Oldstrand.
The two large-cap companies that performed the worst in the first six months of the year are debt collection company Intrum and Nibe Industrier, which sells heat pumps, down by about 55 and 35 percent, respectively.
“In both cases, these are obviously interest-sensitive companies,” says Esbjörn Lundevall at SEB.
Intrum has weak finances and large loans, so high interest rates directly impact its results.
“In Nibe’s case, the whole investment equation involves being able to take loans to finance the heat pump. When interest rates are high, loans become expensive, and customers choose to wait.”
Global Influence on Sweden
SEB’s Esbjörn Lundevall expects a more cautious stock market for the rest of the year after a strong spring and early summer. He also believes that international unrest could dampen market sentiment, mentioning the upcoming elections in the US and France. He anticipates consolidation, meaning a stock market curve that moves more sideways than upwards this fall.
Robert Oldstrand at Swedbank emphasizes that the Stockholm Stock Exchange is characterized by many export-dependent companies. This becomes significant when looking ahead.
“Many companies, especially in the industrial sector, have markets outside Sweden, so global economic conditions affect the Swedish stock market. As growth prospects improve and interest rate cuts are implemented, there is potential for the market to rise, despite already having gone up,” says Robert Oldstrand.
He is not alone in pointing out macro factors such as inflation and interest rates as crucial for market development.
“At the same time, much of this has already been factored in, with valuations in the higher range. Now, continued strong profit growth and no more inflation are required,” says Arne Lundberg at Max Mathiesen, adding:
“When many are optimistic about the market, one should be a bit cautious.”
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