by Jonas Cho Walsgard (Bloomberg) Fish farmers will need to get more kroner out of every fish to provide the next lift for the Oslo exchange’s best-performing sector over the past five years.
That means making their product less a commodity and more a consumer friendly, ready-to-eat staple to provide more stable earnings, according to Leif Eriksrod, head of equities at Alfred Berg Kapitalforvaltning AS in Oslo.
“There have been very good years, so it’s fully priced in the short horizon,” Eriksrod said in an interview at his office in Oslo on Friday. “We still like the sector but the levels are so high that we have to wait for the next rise to start.”
After surging 400 percent over the past five years, propelled by rising salmon demand and higher prices on a global market, the Oslo Seafood Index has slid 12 percent this year. Besides packaging and marketing, the companies are also bumping up against stalled production growth in Norway, the world’s largest exporter of salmon.
But some of the bigger companies such as Marine Harvest ASA and Leroy Seafood ASA are already well on their way in reaching out more directly to consumers in the U.S. and Europe. Marine Harvest, part-owned by billionaire John Fredriksen, is making headway in the U.S. through Wal-Mart Inc., while Leroy is big in Europe and cracking into the German market, according to Alfred Berg.
Keeping the smallest customers in mind, is also key, Eriksrod said.
“If they find a bone in a fish they won’t eat fish for six months,” he said. “It’s important for them. Kids love salmon fillets as long as there aren’t any bones. That has a lot to say about the traction you can get in the market.”
Eriksrod’s Alfred Berg Gambak has an average annual return of 19 percent in the past five years, which makes it the top-performing Norway equity fund, according to Morningstar.
It has been overweight fish stocks while staying away from energy related stocks amid a plunge in oil prices. The bet against oil-related stocks has now been pared down to a more neutral position, snapping up “asset-light” companies and those with strong balance sheets, including Subsea 7 SA, Aker Solutions ASA and TGS-Nopec Geophysical Co. ASA
Aker Solutions is also a good bet given the merger speculation swirling around the company. Its main owner, Aker ASA, has weighed a sale of the company, with recent reports naming Halliburton Co. as a potential buyer.
“There are some companies that are missing the subsea division of Aker,” said Petter Tusvik, who helps oversee the funds with Eriksrod. “Halliburton was in the paper, but you could also see GE. We think there’s something in there.”
Alfred Berg is betting again on the finance sector, with most banks now having met up to the stricter regulations and capital controls.
“The banking sector is where it’s easiest to see some upside left,” said Eriksrod. “Because there’s relatively low pricing. And they have met their capital requirements. And dividends are going to increase.”
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