Last year did not end well for H&M Hennes & Mauritz AB, and this year has started with a controversy over a “monkey hoodie.” However, Sweden’s top-performing large-cap fund is betting on a turnaround.
“They have a better insight of the disease and measures now,” Nordea Asset Management chief investment officer John Hernander said by telephone on Monday.
“A lot of the initiatives by the company will have a positive effect in the coming year,” he added.
H&M last year plunged after sales growth weakened, especially in the fourth quarter.
About 51 percent of analysts advised clients to sell the shares, the biggest proportion of negative ratings since at least early 2003, data compiled by Bloomberg showed.
H&M’s stock is down more than 55 percent since reaching a high in March 2015.
The market has priced in “extremely low” growth and additional pressure on margins, said Stockholm-based Hernander, who oversees 100 billion kronor (US$12.2 billion) as head of Nordic, Finnish and Swedish equities.
“The H&M stock has reached a point where a very negative scenario is priced in,” Hernander said. “An investment in H&M here and now will be a good deal long-term, but you don’t know exactly when you will be paid.”
Hernander manages Nordea Swedish Stars with partner Filippa Gerstadt. They invest with a horizon of three to five years and use a bottom-up process with a focus on companies.
The fund last year returned 18 percent, which was the best among Swedish large-cap funds, Morningstar Inc said.
H&M is its second-largest holding after the fund bought the stock throughout last year.
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