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Swedish Holding Company Investor AB Is a Textbook Value Stock

- By Holmes Osborne, CFA

Investor AB (IVSBY, IVSBF) is a Swedish holding company that has been in operation for over 100 years. The stock trades at a small discount to NAV and has grown NAV nicely over the last 20 years.

The company has 767 million shares and trades at a market cap of SEK229 billion ($26.5 billion). It takes 8.64 krona to buy one dollar. The dividend is SEK7 and the dividend yield is 2.3%. The net asset value per shares as of the end of June was SEK339, thus trading at a 13.7% discount. NAV plus the dividend has grown at 9% over the last 20 years. The A shares offer one vote and B shares offer 1/10 of one vote.

I'm going to use the Second Quarter's numbers for the listed companies that AB owns. AB owned SEK38.406 billion ($4.44 billion) of Swiss automations company ABB (ABB), SEK44.587 billion ($5.1 billion) in Swedish diesel manufacturer Atlas Copco (ATLKY, ATLKF), SEK25.974 billion ($3 billion) in Astra Zeneca (AZN), SEK11.838 billion ($1.37 billion) in Finnish ship engine manufacturer Wartsila (WRTBF, WRTBY), SEK11.134 billion ($1.3 billion) in Swedish telecom Ericsson (ERIC), SEK11.061 billion ($1.3 billion) in Swedish biopharma Sobi, SEK11.861 billion ($1.37 billion) in Swedish appliance manufacturer Electrolux (ELUXF, ELUXY), SEK10.364 billion ($1.2 billion) in NASDAQ (NDAQ), SEK8.565 billion ($1 billion) in Saab (SAABF), and SEK6.059 billion ($701 million) in Swedish chainsaw and lawnmower manufacturer Husqvarna (HUSQF). Its private equity division, EQT, has a value of SEK13.272 billion ($1.536 billion). AB's Patricia Industries holds several smaller investments and has a value of SEK55.221 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 hold shares. Management of both fund companies like stocks trading at discounts to NAV that can grow NAV.

The balance sheet is extremely strong. There is SEK16.5 billion ($1.9 billion) in cash and SEK50.62 billion ($5.9 billion) in debt. The debt is AA-rated by S&P.

Ericson's CEO Hans Vestberg was recently ousted by shareholders for underperformance. The group of dissatisfied investors was led by Investor AB and Industrivarden, both of which held 37% of the voting rights.

The krona has been weak against in the dollar in the last few years. It now takes about 12 cents to buy one krona. In 2014, it took almost 16 cents to buy one krona.

So is the stock a buy? It's not exactly trading at a huge discount to NAV. The underlying businesses are European blue chips, so you have to have an opinion on Europe. AB is expanding into private equity and smaller deals too. It's been a great stock but Europe will have to continue to grow for AB's stock to grow.

We do not own any shares mentioned.

This article first appeared on GuruFocus.