BMC Global Technology

BMC Global Technology is a global fund whose objective is to create a high positive return over time for our shareholders through what we call "an investment in the future". We must do this in a sustainable, balanced and risk-adjusted manner.

With the global stock markets as our equity universe, we select about 35 of the most exciting investment ideas that we think exist in the technology sector or among companies that benefit from technology. This is where we differ from many other technology funds as companies that "benefit from technology" are not the typical technology companies we hear about on a daily basis. At least 50% of the portfolio will be invested in companies that are in the MSCI IT or MSCI communications indexes (this is where you will find the typical technology companies) and the remainder will be companies that benefit from technology. For example, it could be a company like Johan Deere whose tractors now have a very high level of technology with self-driving, satellite connection, integrated AI modules, etc. It could also be a company like Nordnet and Avanza whose business would not have existed without a technical solution or an industrial company whose products are absolutely necessary for cooling servers in data centers.

A challenge that the technology index and the majority of technology funds have today is that there are a few companies that make up a large part of the index or the fund's total investments, which means that the return is very dependent on how exactly these develop. In BMC Global Technology, we have chosen not to have more than 5% in a single holding in order to reduce the concentration risk around individual holdings and because our management philosophy is based on the total number of holdings in the fund not to be too many. Since we believe that the companies we invest in are the best companies for the fund here and now, we also want these to have a sufficient weight to be important for the return.

An important part of the work to find the best companies is to visit companies and meet the management and other company representatives. But we are not content with that, we also visit competitors of the companies we own. It gives us a more comprehensive picture of a company and its industry and sometimes it leads to great investment ideas.

Put simply, we invest in companies that have growing profits and/or far too low a valuation given that growth. The most common sequence of events in the stock market over time is that if the company's profits grow, the stock price also rises because the stock market is actually rational in the long term. If we look at our holdings in the fund, profits grow on average 15–25 percent per year for basically all companies. We make sure that all our companies have strong balance sheets, which also reduces the volatility of the fund's share value. We also only invest in companies that are listed on the world's largest and most regulated stock exchanges.

We consider our task to be managing our unitholders' capital to ensure its growth over the long term. We also believe the best way to do this is to always own quality companies. We thus often have only a minimal cash position in the fund, typically less than 1%.

A mix of Champions and Special Situations

Champions are leaders in their industry or sector, have pricing power, solid balance sheets, and good profit growth—often 10–20% per year. The business models of Champions feature high entry barriers, such as patents, known brands, and economies of scale. Another common characteristic among Champions is that they invest a large proportion of their free cash flows in further development of their business, share buy-backs, or acquisitions.

Special Situations, on the other hand, are companies that are temporarily out of favor with the equity markets, often because the market does not believe in the company's ability to grow its profits. These shares typically trade at a sizable discount to their historical average. When we invest in a Special Situations stock, we often see a large discrepancy between our view of the company and the market's opinion. These investments are generally for a shorter time horizon and are more opportunistic. Our analysis often places us one step ahead, identifying internal or external drivers that allow the company to surprise the market with better profits than expected. Examples of industries where we typically find our Special Situations are construction, agriculture, real estate, and the automotive industry.

Our Champions make up the largest part of our portfolio composition (around 80%), while Special Situations account for a smaller share. This mix of Champions and Special Situations gives us the possibility to generate positive returns in a variety of stock market conditions. In simple terms, Champions have a growth focus, while Special Situations have a value focus.

The reason why we have a global investment mandate is that we want a broad swathe of companies to choose between and not have to feel confined to a specific region. Different parts of the world are good at different things: the US is good at tech, France excels in luxury goods, and Sweden is good at industry, etc., which means that the best of each of such companies can often be found in certain countries.

A crucial part of this work in discovering these is company visits and meeting senior management and other company representatives. But we don't stop there; we also visit the competitors of the companies we own. This provides us with a comprehensive picture of the company and its industry.