DNB Asset Management S.A.

DNB Nordic Equities – Update Q4 2022

The last quarter of the year was once again driven by political uncertainties in Europe with the ongoing energy security crisis and high power prices. While governments are seeking to diversify away from Russian gas, they are at the same time keen to get re-elected which has meant for example setting up subsidies to support consumers with their increasing energy bills. And to fund these subsidies, they have used windfall taxation and price caps on electricity which has caused a lot of uncertainty for the green companies.

Norway, Finland and Sweden saw stock markets increase in the fourth quarter, with positive performance of around 10%, while Denmark increased with 15%.  In terms of sector performance, energy was the losing sector together with IT, while health care and industry had a very strong quarter. This was quite in contrast to the overall year of 2022, where the winning sectors have been mostly energy and materials.

Fund performance and positioning
The fund underperformed its benchmark by 2,96% in Q4 with an absolute performance of 8,85% (institutional EUR share class). The reasons for the underperformance were mainly the trend shift (value to growth) in November, led by improving macro data, as well as the poor performance of green stocks during the quarter. The main contributors during the quarter were ISS, Equinor, Ericsson, Neste (Finnish oil refining company) and Vestas. On the detractor side, we have seen poor performance from the main green names. Bonheur (Norwegian utilities) and Orsted (Danish wind developer) have been hit by the windfall taxation which caused uncertainty on their earnings expectations. While Nibe (Swedish heat pumps) and Otovo (Norwegian solar panel installer) benefit from consumers’ high electricity bills as they offer products that can bring those bills down.
In terms of portfolio positioning, Vestas was increased back into a top ten position. As a producer of wind turbines, Vestas has suffered from the high commodity prices, but has now very credible guidance to come back to normalized margins and will benefit from the structural growth in the sector.  We also increased Investor, the Swedish investment company as a play on Sweden; we added to Essity, the tissue company, which has suffered from raw material inflation but now benefitting from prices coming down again. We also added to Mowi, the salmon farmer as the stock has come down a lot since the salmon tax introduced recently and since we still see good profitability, stable demand and a potential change in the proposed tax legislation. In terms of decreased positions, we sold out Telia, due to poor performance and we also decreased exposure to Nokia, as the growth of 5G seemingly will be lower than we hoped in 2023-2024.