Finnish stock market - Hidden value?
Moving past pessimism to identify the true value
I have been very bearish for Finland long time; if you wish to read some doomer’s stuff, then here you go: 1 2 3
This piece dives into the Finnish stock market, questioning its value and management choices.
It is not so bad; now, the majority is getting bearish on Finland. Buy low, sell high is the strategy. There are some wonderful assets and companies in Finland, and there will be for a long time - This erosion will take decades.
The sentiment is extremely pessimistic, and even major newspapers are wondering why the OMX is just a big pile of shit. Buy from pessimists and sell to optimists. Finnish people are huge fans of Warren Buffet and value investing, but I don’t see much critique towards management nowadays. From Intelligent Investor:
The primary job of a CEO and the board is to allocate capital efficiently. That means reinvesting profits in areas that will generate good returns, buying back stock when it's undervalued, or paying dividends when there aren't better investment opportunities.
Conservative Accounting
Management should communicate clearly and transparently with shareholders.
Biggest problem?
In the ever-evolving world of sports and business, it's astonishing how organizations, especially within industries like the NHL, still treat leadership roles as a never-ending carousel of familiar faces. We here in Finland love hockey and critique why no young and innovative European coaches ever get a chance… It's even more egregious in the context of Finnish corporations. The results are poor. Or what do you think? Little to no critique, just circlejerks everywhere.
It's not uncommon to find boardrooms and executive suites dominated by figures who arguably reached their peak in the early 2000’s. This sort of regressive leadership strategy not only stifles innovation but actively corrodes value. Investors should be wary. After all, if companies play musical chairs with the same worn-out tunes, where's the promise of future growth?
It's high time to question the purpose of these antiquated maneuvers and demand more forward-thinking leadership. The results speak for themselves, and value is being destroyed. I mean, how hard can it be? Do good business, help communities, be fair to everybody, and compensate. This should be normal by now - I am confused. They focus on the wrong things and hope things will be okay.
Few random picks from last week's results: These are very rudimentary reviews of results just a glance.
“Deep value” means little when overshadowed by poor management.
Stora Enso's results were horrible:
Annica Bresky has been recognized as one of the newer-generation leaders. We must still critique what Stora Enso did for the last 20 years. It is too early to critique Annica too much.
Group sales were 2,374 million euros, a year-on-year decrease of 22%, and the Operational EBIT decreased by 93% to 37 million euros with an EBIT margin of 1.6%
She comments that demand is weak, margins are low, and everybody expects the same will continue. What will they do? What will you do as CEO, I haven’t seen much yet this year, and 2024 will truly show if she is a good CEO or excellent CEO. I only bet the best ones.
They mention: the company's strategic initiatives to improve resilience, competitiveness, and profitability. This includes restructuring to improve future business profitability, cost-competitiveness, and asset footprint.
They also focus heavily on sustainability; this stuff was “hot” in 2012, but now they focus on these heavily. I want to see sustainability in action, not just on paper. Too many companies will kill themselves with this. Renewed focus for almost all Finnish companies seems to be hope and sustainability.
Given the weak market demand and decreased sales, what strategies are being implemented to improve the company's financial performance?
How does the company manage the high input costs that pressure margins?
Could you share more about the company's sustainability commitments and how the Green and Sustainability-Linked Financing Framework will help achieve these commitments?
Let’s give her credit, too the acquisitions look nice, at least on paper. Let’s see how they help the result in the future.
Finnish companies are no joke, and Stora Enso is also no joke. They have 8bn of Forrest assets, and the current market cap is 9bn. I wish I knew something about how these assets are valued or had better clarity on how their value will grow. I have to ponder to own a little bit of Finnish forest, and maybe it is now a good time to do that. It is a beautiful asset. At the moment, I know nothing of this.
Everybody is screaming that the new EU plan of “conserving biodiversity and ecosystems” is terrible for forest owners. I get hugely interested when everybody is bearish; there might be a huge opportunity. This could also be huge for Stora Enso, so one more question for Stora Enso management:
How does the company plan to leverage its forest assets in the context of the new EU directions on biodiversity and ecosystem conservation?
Who owns Stora Enso?
Nice that they also have FAM AB owning 10%. This is good. They are 10x more intelligent than the government and some pension/institution fund losers. My interest will grow in Stora Enso when the Solidium starts to sell.
The companies that will truly stand the test of time don't just talk about sustainability but intertwine it with profitability. It's not about choosing between the planet and profit; the smartest businesses will find a way to champion both.
Sustainability rhetoric won't fuel economies; only actual profit can.
Nokia's Faded Glory
Once the leader of innovation and an investor's delight, now a masterclass in “how not to pivot in the tech era”. Private investors clinked their coffee cups in its heyday, toasting Nokia's consistent triumphs.
Fast forward to the present, and I wouldn't be surprised if those same cups are filled with a potent brew of hope and a splash of delusion—possibly with a side of anti-anxiety pills. It's the same chorus every year: 'They're undervalued now! This is the time to buy!' Yet, since 2000, the management's track record resembles a broken record stuck on a less-than-inspiring tune. I recall the optimistic refrains of 2008, and I can't help but wonder: What's in those investors' cups today when the quarterly reports roll in? Perhaps a stiff drink to brace for the next verse?
Just look at their website: https://www.nokia.com/
What do you see? I have seen better roadmaps/visions/Mission for some startups, Crypto scams, and NFT projects. Nice new logo?
Ok, solid profitability of 11%. Good job and resilience shown by stable sales. Still the same story as Stora Enso's “Period of Uncertainty Ahead.”
They have a solid balance sheet and liquidity position to wither this uncertainty +3.6bn. However, monitoring how this balance evolves is essential, especially in a challenging economic environment. With Pekka Lundmark at the helm since August 2020, it's perhaps premature to pass judgment. But as for the management preceding him? Their legacy reads like a textbook chapter on “How Not to Navigate a Tech Behemoth in the 21st Century.” A tale of missed opportunities, indeed. As a Fin, I hope all the best for Nokia and that Pekka can steer the ship in the right direction and Finnish small investors get to drink that sweet “Nokia coffee”.
The results do not provide a clear and detailed strategy on how Nokia plans to navigate these challenges and ensure growth. Can you find it in these results? Or presentations? I can’t find it. Again huge focus on these ESG initiatives and jargon on how to turn it into a competitive advantage. No thanks.
While ESG initiatives are commendable and align with global trends, how does Nokia plan to translate these initiatives into tangible financial results?
Given the vague forward guidance provided in the Q2 2023 results, can Nokia's leadership provide a clear, detailed, and actionable 5-year roadmap?
Again not asking much. On paper, Nokia seems cheap, but can Pekka steer the ship in the right direction? Not much confidence seems like based on the recent performance of the stock.
Nokia is still no joke. They have a massive Patent Portfolio: Nokia has a robust patent portfolio, evident from its various licensing agreements with major companies. For instance, they signed a new long-term patent license agreement with Apple.
Nokia's patent portfolio is a significant competitive advantage and a valuable asset. Nokia's patent portfolio is built on over 140 billion euros from the early 2000s. Again I am not a patent valuation expert, but can this be an untapped gold mine?
Examples of good management and new hope?
UPM has been a well-managed company for a long time. Jussi Pesonen has done a tremendous job since 2004:
Jussi will retire in 2024 and also Björn Wahlroos (Chair) will step down (from 2008). Exiting to see what happens, UPM is the only stock I want to own from Finland.
Plenty of well-managed companies. Let’s not forget that the OMX index was one of the best performers in recent decades.
As the economic landscape becomes increasingly complex, the value of exceptional management cannot be overstated. Top-tier management teams are essential for creating value. Can they keep the ship steady amidst the stormy seas of tomorrow's economy?
New exceptional CEOs are molded in uncertainty. E.g., let’s see how Heikki Vuorenmaa performs. He just took over at YIT (a big finish construction company), which must be a tough spot now. The same can be said for Annica Bresky too.
I don't need reality TV in the theater of markets and money. Watching CEOs like Heikki Vuorenmaa and Annica Bresky navigate stormy waters is the
only real-life drama I tune into. This isn't just finance for the hobbyist investor—it's prime-time entertainment. Beyond mere speculation, I genuinely wish for your prosperity. I respect the grind. Rise, redefine, and reignite the future.
Conclusion - Where to next?
Benjamin Graham: 'The stock market is a voting machine rather than a weighing machine.' Today, the masses are voting, but it's the weight of true value that long-term investors seek.
Making money is easy; just bet the “Magnificent Seven.” It is time to get cautious. Making money is never easy. Get your hands dirty, and start digging into those undervalued gems—Finland's Price to Earnings ratios whisper opportunities, especially compared to the global clamor.
The Finnish market currently tugs at my interest, and I am not yet poised to deploy capital. I will dig deeper soon. A cyclical company's P/E can be a mirage; genuine value emerges only from rigorous analysis.
Every price tells a story.
Warren Buffett once mused that investing is a game of patience and discipline. In the age of instant gratification, where quick wins are chased, remember this: true value is seldom discovered on the surface. I am just starting my journey to the Finnish stock market.
The easy mode of investing is ending? I can’t wait for the playoffs to start. Many will throw in the towel, cry so hard that their stomach hurts, and puke. Wander in the forest and question what the fuck now. Rise, redefine, and reignite the future. Like the CEOs rising from adversity, the true investors will stand tall.
Who are your top management teams steering Finnish companies? Which “hidden value” gems have caught your eye in Finland?