Monday, October 22, 2018

Wallenberg Investing: "Sweden's Most Powerful Family Braces For The Next Global Crisis"

One of the reasons we care about what the Wallenberg's care about is ABB, one of the class acts of the engineering/power business and one of those companies that would qualify under Buffet's "Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years." rule.

Via ZeroHedge, October, 20:
When it comes to families that exercise undue influence over their country, the Kochs, the Morgans, the DuPonts, even the Rothshilds and the Bushes pale in comparison with the Swedish Wallenberg family. 

Here's why: the Wallenbergs are renowned as bankers, industrialists, politicians, bureaucrats, diplomats; they are present in most large Swedish industrial groups, like Ericsson, Electrolux, ABB, SAS Group, SKF, AIK, Atlas Copco and more. In the 1970s, the Wallenberg family businesses employed 40% of Sweden’s industrial workforce and represented 40% of the total worth of the Stockholm stock market

And now they are preparing for the next global crisis.
According to Bloomberg, the Wallenberg family’s holding company Investor AB - which today owns stakes in a fifth of the companies listed on the country’s large-cap index - is preparing for the inevitable downturn in global economy, and to do so it is making sure the holdings in its 372 billion-krona ($42 billion) portfolio of stocks are "agile and flexible" enough to handle a "changed outlook" after leading indicators started pointing to a softer demand environment. To shore up liquidity while it can, not when it has to, the company recently also sold a €500 million bond.
"There are a number of things that we need to watch," Investor CEO Johan Forssell told Bloomberg in an interview after reporting third-quarter results on Wednesday.
"But I don’t have a crystal ball. For us the most important part is that we’re prepared, and that’s why we issued a big bond and why we work closely with our companies to make sure we’re flexible and can adapt to different environments as good as we can."
Forssell may not have a crystal ball, but the signs are clear: the CEO has been evaluating the leading economic indicators out of China, Europe and globally, observing the recent weakened. He is also worried about the softer demand on the automotive side, as well as risks stemming from Brexit, Italy and the currency devaluations in Argentina and Turkey. Finally, there is the looming threat of a full-blown global trade war.

And unlike most investors who keep "buying the dip", the warden of Sweden's greatest family fortune, is preparing for the worst.
"With the combination of these risks, it’s of course necessary to be prepared," Forssell said, adding that the risk of trade wars constitutes one of the biggest fears. That’s because "having an open market with free trade creates efficiency and is better for the global economy," the CEO said.
A global trade war would hit Sweden especially hard: for Sweden's small and open economy, where half of economic output is made up of exports, the stakes are high.

Sweden is home to global companies such as vehicle makers Volvo AB and Volvo Cars, furniture giant Ikea and clothing retailer Hennes & Mauritz AB and is a major exporter of cars and trucks, machinery, paper and pulp products, iron and steel, technological equipment and medical and pharmaceutical products.

And Investor AB holds stakes in many of these listed companies, which apart from Ericsson and Electrolux include Atlas Copco AB, Husqvarna AB, Swiss-Swedish engineering giant ABB Ltd. and U.K.-Swedish drugmaker AstraZeneca Plc. It also has a raft of unlisted holdings and private-equity investments through EQT....