European Event-Driven Analyst

Jesus Rodriguez Aguilar

Event-Driven

<a href="https://www.smartkarma.com/entities/investor-ab" target="_blank" data-smartkarma-citation="entities:22397:1" rel="noopener">Investor AB (INVEB SS)</a> is a Swedish industrial holding company, and the holding vehicle for the Wallenberg family shareholdings.
I believe that Investor’s attraction is that it offers exposure to:
<ul>
<li>a diversified blue chip portfolio, at a discount</li>
<li>Investor’s successful private equity and venture capital activities</li>
</ul>
Investor has outperformed the Swedish blue-chip index for the period I analyse in this Insight (end of Q1 2015 to date).
The discount to NAV of Investor has widened to 20.9%, above the average discount for the last five years, which is 15.7%.
I expect the current discount to narrow to 15%, and therefore recommend a trade Long Investor B/Short main listed assets, as the correlation coefficient of Investor B to its main listed assets is 0.97.
I recommend setting up a trade long Investor B/short main listed assets on a "dollar-for-dollar" basis. Main listed assets are: Atlas Copco, Handelsbanken, ABB, Astra Zeneca, Ericsson, Sobi, Nasdaq, Epiroc and EQT. For details of the calculations, please read further in the note.
<ul>
<li>This effectively hedges 63% of Investor’s assets and leaves exposure to its private equity activities and the unlisted new ventures.</li>
</ul>
Alternately, an even more simplified version of this trade would be by shorting just the top four shareholdings in the portfolio (49% of NAV): Atlas Copco, Handeslbanken, ABB and AstraZeneca on the short side. The correlation coefficient with INVEB SS would be higher, 0.93, and the exposure would mainly be to Patricia industries' portfolio (exposure to healthcare) and private equity.
<ul class="">
<li>The discount tends to increase on market shocks and meltdowns.</li>
<li>In this coronavirus crisis we could soon witness another capitulation and equity funds outflow momentum, if and when the volatility diminishes, the discount could tighten to 15%. It would be the moment to unwind the trade and wait for the spread to widen before re-entering the trade again.</li>
<li>There is currency exposure, which can be hedged. </li>
</ul>
The Investor B shares are currently trading at a premium of 1.1% to the A shares (they are more liquid). This, I think, it is an anomaly because voting rights are valuable, even more so in a family controlled company.
I believe the B shares should trade at a discount, and we can see in the chart that there is a trend towards the reduction of the premium to which B shares have traded vs. the A shares. That premium was nil as recently as 23 March. Therefore a trade long Investor A shares/short Investor B shares makes sense, although I would probably wait for the spread to reach 2%.

Investor AB (INVEB SS) is a Swedish industrial holding company, and the holding vehicle for the Wallenberg family shareholdings.
I believe that Investor’s attraction is that it offers exposure to:

a diversified blue chip portfolio, at a discount
Investor’s successful private equity and venture capital activities

Investor has outperformed the Swedish blue-chip index for the period I analyse in this Insight (end of Q1 2015 to date).
The discount to NAV of Investor has widened to 20.9%, above the average discount for the last five years, which is 15.7%.
I expect the current discount to narrow to 15%, and therefore recommend a trade Long Investor B/Short main listed assets, as the correlation coefficient of Investor B to its main listed assets is 0.97.
I recommend setting up a trade long Investor B/short main listed assets on a "dollar-for-dollar" basis. Main listed assets are: Atlas Copco, Handelsbanken, ABB, Astra Zeneca, Ericsson, Sobi, Nasdaq, Epiroc and EQT. For details of the calculations, please read further in the note.

This effectively hedges 63% of Investor’s assets and leaves exposure to its private equity activities and the unlisted new ventures.

Alternately, an even more simplified version of this trade would be by shorting just the top four shareholdings in the portfolio (49% of NAV): Atlas Copco, Handeslbanken, ABB and AstraZeneca on the short side. The correlation coefficient with INVEB SS would be higher, 0.93, and the exposure would mainly be to Patricia industries' portfolio (exposure to healthcare) and private equity.

The discount tends to increase on market shocks and meltdowns.
In this coronavirus crisis we could soon witness another capitulation and equity funds outflow momentum, if and when the volatility diminishes, the discount could tighten to 15%. It would be the moment to unwind the trade and wait for the spread to widen before re-entering the trade again.
There is currency exposure, which can be hedged. 

The Investor B shares are currently trading at a premium of 1.1% to the A shares (they are more liquid). This, I think, it is an anomaly because voting rights are valuable, even more so in a family controlled company.
I believe the B shares should trade at a discount, and we can see in the chart that there is a trend towards the reduction of the premium to which B shares have traded vs. the A shares. That premium was nil as recently as 23 March. Therefore a trade long Investor A shares/short Investor B shares makes sense, although I would probably wait for the spread to reach 2%.

Investor AB (INVEB SS): Blue Chip Portfolio at a Discount

Sweden

EQT AB operates as an investment firm. The Company invests in equity, ventures, infrastructure, and real estate properties. EQT serves customers worldwide.

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

EQT (EQT SS)

Investor AB (INVEB SS): Blue Chip Portfolio at a Discount

Investor AB (INVEB SS) is a Swedish industrial holding company, and the holding vehicle for the Wallenberg family shareholdings. I believe that...

Jesus Rodriguez Aguilar

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)