– By Holmes Osborne, CFA
Investor AB (IVSBY, IVSBF) is a Swedish holding company that has been in existence for over 100 years. The stock trades at a small discount to net asset value and has increased net asset value well over the past 20 years.
The company owns 767 million shares and trades at a market capitalization of 229 billion SEK ($ 26.5 billion). It takes 8.64 crowns to buy a dollar. The dividend is SEK 7 and the dividend yield is 2.3%. The net asset value per share at the end of June was SEK 339, thus trading at a discount of 13.7%. The net asset value plus the dividend has increased by 9% over the past 20 years. A shares offer one vote and B shares offer 1/10 of a vote.
I’ll use the second quarter numbers for listed companies owned by AB. AB owned SEK 38.406 billion ($ 4.44 billion) from Swiss automation company ABB (ABB), SEK 44.587 billion ($ 5.1 billion) from Swedish diesel maker Atlas Copco (ATLKY, ATLKF) ), SEK 25.974 billion ($ 3 billion) to Astra Zeneca (AZN), SEK 11.838 billion ($ 1.37 billion) to Finnish ship engine manufacturer Wartsila (WRTBF, WRTBY), SEK 11.134 billion ($ 1.3 billion) in Swedish telecommunications Ericsson (ERIC), 11.061 billion SEK ($ 1.3 billion) in Swedish biopharma Sobi, 11.861 billion SEK ($ 1.37 billion) in the Swedish manufacturer appliances from Electrolux (ELUXF, ELUXY), 10.364 billion SEK ($ 1.2 billion) to NASDAQ (NDAQ), 8.565 billion SEK ($ 1 billion) to Saab (SAABF), and 6.059 billion SEK ($ 701 million) in Swedish chainsaw and lawnmower maker Husqva rna (HUSQF). Its private equity division, EQT, is worth SEK 13.272 billion ($ 1.536 billion). AB’s Patricia Industries owns several smaller investments and is worth SEK 55.221 billion ($ 6.4 billion).
The company was founded over 100 years ago by the Wallenberg family, who still own 23.2% (according to Bloomberg). First Eagle and Third Avenue both own shares. Managing two fund companies, such as stocks traded at a discount to net asset value, can increase net asset value.
The balance sheet is extremely solid. There is SEK 16.5 billion ($ 1.9 billion) in cash and SEK 50.62 billion ($ 5.9 billion) in debt. The debt is rated AA by S&P.
Ericson CEO Hans Vestberg was recently ousted by shareholders for underperformance. The group of dissatisfied investors was led by Investor AB and Industrivarden, both of whom held 37% of the voting rights.
The krona has been weak against the dollar in recent years. It now takes about 12 cents to buy a crown. In 2014, it took almost 16 cents to buy a crown.
So, is the action a buy? It’s not exactly trading at a huge discount from the NAV. The underlying companies are European blue chips, so you need to have an opinion on Europe. AB is also expanding into private equity and small transactions. This has been a great stock, but Europe will need to keep growing for the AB stock to grow.
We do not own any of the shares mentioned.
This article first appeared on GuruFocus.