Sola's opinion on the Swiss stock market (Episode 34)

The Plutos Switzerland Fund After a strong start to the year, the company suffered a significant decline of 7.7% in March – 6.5% in the last four trading days alone. The broader Small Mid/Cap Index also lost significantly, dropping 3%. This indicates a seemingly exaggerated buyer strike.

Investor sentiment is particularly bleak on the American stock exchanges, where the Dow Jones, Nasdaq, and S&P 500 have been trending weakly since the beginning of the year. The 'Trump Recession Correction' continues, fears of stagflation have returned with a vengeance, and fears of an escalation of the tariff conflict have increased due to US President Trump's statements. In particular, economically sensitive technology stocks, where a positive countermovement from the likely oversold territory is still pending, suffered enormously.

While the Swiss stock market was able to escape the already very sharp declines on the US markets at the beginning of the month, our indices also came under increasing pressure and ended the reporting month with significant losses. It is and will likely remain a political stock market, and even though there are rumors that these markets have short legs, investors don't seem to want to take advantage of the opportunities.

Nevertheless, some values ​​could increase: for Adecco The German stimulus plan is important because temporary jobs are central in the first phase of an upswing. The R&S Group increased after the transformer company had already published its FY24 key figures, benefited from a price target increase by the largest Swiss bank and also OC Oerlikon saw a rating increase. Aryzta always finds buyers in times of increased uncertainty. Meyer Burger was able to conclude another supply contract, but the position is far too small to make a significant difference to the fund. The cyclicals Zehnder, Forbo and Bucher were able to hold their own and at least record a small increase.

The vast majority of positions ended the month with some significant price declines: the automotive-related Pierer Mobility, Komax and ams OSRAM suffered particularly. Even the team known for its defensive qualities Accelleron came under heavy pressure. Straumann The opinion that their business was cyclical obviously prevailed again. Of course, the tech stocks Lem Holding, VAT and Comet the aforementioned lack of a Nasdaq rebound. The Investor Day of Kuehne+Nagel brought no new impetus to the shares and even SKAN, which once again delivered an impeccable result and a strong outlook, suffered losses.

Disappointed again DocMorris: The unambitious growth outlook compared to competitor Redcare and, of course, the announcement of a capital increase unfortunately proved the short sellers right. The communication was also intellectually dull: announcing a capital increase while simultaneously withholding a more comprehensive outlook on short- and medium-term expectations from investors and only wanting to announce it later demonstrates a lack of understanding in dealing with the stock market.

The GAMThe results were less than informative: The cost optimization initiatives, whose full impact is expected to be felt in 2025 and beyond, led to a 20% reduction in expenses. The 'strong progress in implementing the turnaround strategy' and the confirmation that break-even is expected in 2026 were overshadowed by still high losses of around CHF 70 million.

In the reporting month we increased our position in Cembra Closed – we see higher interest rates for Europe, which argues against investing in the fund. Cembra has been included in the fund since its launch on October 18.10.22, 40. After a XNUMX% price gain, our price target has been reached.

Some investment firms have suspended their previous strategy of gradually strengthening the cyclical profile of their recommendations and have decided to increase defensive exposures. This is a consideration that we, too, must evaluate.

"When you find yourself on the side of the majority, it's time to pause and reflect."

 Mark Twain, American writer (1835–1910)

Of course, I am happy to discuss these and other Swiss companies ​​and, of course, the Plutos-Switzerland Fund with you, and thank you for your interest.

In times of high market nervousness and negative exaggerations, it is important to remember the fundamental analysis of companies, their strengths, weaknesses, opportunities and risks.

In the following lines you will find the Q12025 Highlights, Lowlights, Nolights of our portfolio companies. These do not explicitly refer to their stock performance, but rather to the current situation and outlook, both for 2025 and in the medium term.

Highlight: Accelleron always delivers

The Baden-based turbocharger manufacturer never disappoints and, as usual, delivered impressive FY24 results, even exceeding ambitious analyst estimates and showing a 2025 outlook that shines with high margins and solid growth – but it hasn't helped much in these politically driven markets. Pointing to the justifiably lofty valuation, analysts refrained from heaping much-deserved praise on the Baden-based company.

The facts: Accelleron exceeded the USD 2024 billion revenue mark in 1. Operating profit increased disproportionately by 17.4% to USD 261,9 million, with the corresponding margin rising to 25.6%. The dividend will be increased to CHF 1.25. The company forecasts currency-adjusted revenue growth of 2025-4% and an operating EBITA margin of 6-25% for 26.

Accelleron will always be represented in the Plutos Switzerland Fund. Its strong market position, high margins, and good management, coupled with a business model that is very difficult to replicate, are, in my opinion, almost unique. Accelleron will play an enormously important role in decarbonization in the coming years and decades. Shipping accounts for approximately 3% of global CO2 emissions and is expected to become climate-neutral by 2050. This will be impossible without Accelleron's turbochargers.

Highlight: Adecco – the liberating dividend cut

Despite a significant, yet rather liberating, dividend cut, the staffing provider's share price rose significantly in March. A cyclical upturn, particularly in Europe, which probably accounts for around 50% of revenue, will initially be reflected in an increase in temporary staff. Adecco improved margin potential and free cash flow through cost reductions while still gaining market share.

Cutting dividends makes much more sense than financing a dividend through higher debt.

The facts: Adecco experienced a 2024% decline in revenue, a 4% decline in operating profit, and a lower margin of just 28% in 3.2. However, the group's bottom line was 6% higher than the previous year. These figures were thus slightly better than the even weaker estimates. Looking ahead, the company expects the markets to recover this year. Volume development already stabilized during the fourth quarter of 2024. Meanwhile, a slight increase in the gross margin is expected in the first quarter of 2025.

As an early cyclical stock, Adecco is the perfect stock to bet on a European economic rebound.

Highlight: ams OSRAM – better quarter after quarter

At ams OSRAM, the dam has finally broken. With its Q4 results, the Austrian company has added another solid quarter to its already strong performance and delivered a positive surprise with its profitability and free cash flow. Not to mention: ams OSRAM was trading at over CHF 23 before Apple's microLED cancellation – currently, the share price is (again) below CHF 8.

Of course, ams OSRAM is also dependent on the automotive market, but the homework it has already begun long ago is far more important for its short-term success. As early as April 30, ams OSRAM will be able to demonstrate that its positive trend is continuing.

Highlight: ARYZTA – solid on the road

Aryzta had already reported in mid-January that the wholesale baker had already achieved its 2025 medium-term targets in 2024. The final results were released at the beginning of March: with sales largely unchanged from the previous year, operating profit increased by 5.4% and the corresponding margin to 14.6%. The start to the year has been successful, with Q125 3 pointing toward organic growth of 2,8%. The operating margin and profit growth are expected to continue to grow, while the leverage ratio is expected to decrease to XNUMXx EBITDA. A reverse stock split (share split) will make the stock heavier and thus no longer a penny stock.

I'd sum up the last three years as having done everything right. And as 'Bake-Off' continues to gain ground, albeit not in terms of profits, Aryzta is likely to remain an investor favorite—because that's what the stock has become. Perhaps the only threat to the share price.

Highlight: Bucher – Demand low overcome

Bucher Industries expects some markets to recover starting mid-year. The one-third decline in profit in 2024, a corresponding margin of 9%, which clearly falls short of Bucher's expectations, is more than priced into the share price. While the dividend will be cut, Bucher plans a share buyback program over the next two years. The outlook is rather cautious, typical of Bucher, and predicts stable sales on a comparable basis and an operating profit margin at the previous year's level.

The latest CEMA (European Agricultural Machinery Association) survey from mid-March showed a value of -5 (on a scale of -100 to +100). While the improvement is still marginal compared to February's value (-11), it is an initial positive sign for the industry. The latest year-on-year value of +50 indicates a continuously growing positive momentum compared to previous months (February: +41; January: +19; December: +11).

Bucher's quality is high and if demand picks up again as expected and dealers' warehouses empty, the share is simply significantly undervalued at its current level.

Highlight: R&S Group grows and thrives

At the beginning of March, the Swiss supplier of electrical infrastructure components published its preliminary key figures for 2024: they show organic growth of over 13%, with a high EBIT margin of 23%. This is above the guidance of over 12% growth and an EBIT margin of around 20%. Order intake and

Inventory levels are at record levels. R&S thus confirmed its growth trajectory, strong profitability, and solid cash conversion. The outlook for 2025 and the medium-term outlook – net sales growth of 12% and an operating margin of approximately 20% – were confirmed.

The R&S Group is still relatively unknown to many investors, but that is likely to change soon – the final FY15 results will be released on April 24. The high-margin business model, external growth drivers, niche position, and the smart acquisition of Kyte Powertech last year make the investment case very attractive.

CGS's share placement at the end of January was not well received, following a substantial sale of shares by a board member at the end of the year. The shares appear to have fallen into weak hands: the placement at CHF 19.30 was followed by significantly lower prices. This represents a perfect opportunity for new investors to acquire a position. I remain convinced that the R&S Group, especially with last year's acquisition, will continue to bring us great joy—in other words, performance.

Highlight: SKAN uses the sweet spot successfully and long-term

Even though revenue fell short of the 2024 guidance due to the postponement of certain projects, SKAN's results were once again very strong: order intake of +22% implies a robust 224% H52 1 growth, the order backlog offers good visibility with a healthy book/bill ratio of 15.8x, the EBITDA margin of 18% implies an increase of 2024% in the second half of 48, EPS increased by 14%, and the dividend will be increased by 50% – 2025% of which is tax-free. The outlook for 14 is solid: revenue growth in the mid-teens and an EBITDA margin between 16-XNUMX%.

The Equipment & Solutions segment (the new machinery business, 75% of revenue) will improve, while Services & Consumables (25% of revenue) will improve significantly with a high margin. In the medium term, a 50/50 revenue split should be possible, leading to the medium-term forecast of a gradual increase in profitability into the upper teens. Thereafter, there is potential for further growth beyond the medium term. Since SKAN originally assumed that the machinery business would not grow as strongly, which fortunately has not been the case, Services & Consumables could not keep pace with the growth. M&A will therefore definitely take place in S&C and increase the margin, meaning the 50/50 revenue split will be achieved quickly.

SKAN is and remains a flagship company within the Plutos Switzerland Fund – Buy & Hold & Buy more.

Lowlight: Comet and VAT suffer from Nasdaq weakness

The X-ray and radiofrequency specialist Comet increased its operating profit by 12% last year, with a 34% increase in sales. The margin was 13.6%. However, the outlook for the current year was below expectations: Net sales are expected to be between CHF 480-520 million, and the EBITDA margin between 17-20% – all solid figures, although the consensus had been for CHF 538 million or 21.5%. The share price had to take a significant hit for this 'cautious' outlook, but the investments in growth and R&D make a lot of sense to me. The confirmation that the semi-cycle is slowly but surely gaining momentum and my discussion with CEO Haferl make me optimistic. Unfortunately, the market reaction came at the worst possible time, as the current weakness in the Nasdaq doesn't allow for even the slightest downside.

VAT fared very similarly, although the reaction to its annual figures was significantly more positive, meaning expectations were already lower. Operating profit was only slightly lower, and the margin, at 31.2%, was in line with consensus. The bottom line resulted in an 11.3% increase in profit. The Q125 275 outlook of CHF 295-2025 million is above consensus. For the current fiscal year XNUMX, order intake, revenue, EBITDA, the corresponding margin, net profit, and cash flow are expected to grow by a similar amount.

I can argue at length that both Comet and VAT are of inescapable relevance to the chip industry—if the Nasdaq falls, they're on the sell list. It's that simple—albeit incorrect in the medium term.

Lowlight: Komax – Visibility is missing

The market leader in cable processing solutions suffered a slump in operating profit to CHF 2024 million in 16, and the bottom line even fell into the red at CHF 3 million. The 16% decline in sales was previously communicated. Consequently, the dividend has been canceled. Due to the uncertain situation, the company is also refraining from providing an outlook, but its medium-term targets are being confirmed.

The share price suffered immensely, especially due to the lack of guidance for 2025. However, I find the communication entirely understandable, as customers are currently unsure whether capacity should best be located in Ukraine, Mexico, or North Africa. They are waiting to make a decision, particularly due to the constant fluctuations in tariffs. Hopefully, more clarity will be available soon.

Nevertheless, Komax did a lot of things right in 2024: in Germany, the production sites were reduced from nine to five, because things remain difficult for German car manufacturers – everything north of Baden-Württemberg and Bavaria is not good in terms of work morale, costs, and union influence.

Although the EBIT margin halved, it remained clearly positive at around 6%. The gross margin relative to EBIT has massive operating leverage above CHF 700 million, and a high-single-digit EBIT margin seems rather conservative.

The market in China is booming, and with the Hosver acquisition, Komax is now very well positioned, including with BYD. Tunisia and, in particular, Morocco also continue to boom, thanks to the good labor market and a certain degree of stability.

India will boom, and in South America, there could be shifts from Mexico to Nicaragua and Honduras – customer experience shows that morale and costs are better than in Mexico. Brazil could also perform well this year after 2024.

Traditional Japanese sales regions such as the Philippines and Indonesia are important for Komax customers – sales from Chinese manufacturers are increasing here.

The German car industry is receiving far too much negative attention in European communications – Stellantis and PSA are positive European examples that are doing much better. However, Komax shares are suffering excessively from the weak results from Wolfsburg, Stuttgart, Ingolstadt, and Munich.

Lowlight: Kuehne + Nagel – CMD without momentum

After Kühne+Nagel published its FY24 results at the beginning of March – sales +4%, gross profit -1.3%, and a conversion rate of 19.1% – the investor focus then shifted to the capital markets day in London.

Despite statements about growth targets, conversion rate, payout rate, and (too) many excuses such as trade uncertainties under Trump, the ongoing conflict in the Red Sea, the persistently high volatility of sea freight prices, and customer diversification among logistics service providers, there was no impetus for the share price.

Due to poor communication in 2024, it will not be easy for Kühne+Nagel to establish belief in the new guidance.

The high market share, the impressive profitability, a high ROCE of 75%, a timely improvement in NWC and the favorable valuation (EV/EBIT 2025E 15x) allow me to maintain our investment despite weak performance.

Lowlight: The Swatch Group – the market continues to misjudge its intrinsic value

Although the Swatch Group missed expectations with its 2024 annual results – sales fell organically by 12% and the operating margin was disappointing at 4.5% – the Plutos-Switzerland Fund acquired its first position, albeit only a homeopathic dose, in the Biel-based watchmaker in Q125 XNUMX.

2025 can bring substantial improvements: The key to this is further sales development in China, where Swatch generates around 33% of its sales, but the USA is becoming increasingly important.

However, I see not only an improving Chinese economy, but also the historically higher valuation difference to Richemont and the simple comparison basis for 2025 as attractive triggers.

Important: I can handle Nick Hayek's unorthodox communication and accept that he's not your average manager. I don't want to be either.

The stock is trading 50% below book value, as the real estate, brands, and gold and gemstone inventories are likely not reflected in Swatch's share price. The stock has long since reached its negative sentiment peak.

Nolight: DocMorris communicates poorly

There's still no light at the end of the tunnel for the Swiss mail-order pharmacy: Although DocMorris has announced that its goals have been achieved, the operating loss of CHF 49 million and the net loss of almost CHF 100 million send a different message. Rx growth was around 125% in Q50 200. Continued growth is expected across all areas for the current year – this is unambitious compared to competitor Redcare. At the same time, a capital increase of approximately CHF 313 million is planned, given the current market capitalization of CHF XNUMX million.

What angered me most was the very weak communication, which was intellectually undemanding: demanding fresh capital while simultaneously denying investors a more comprehensive outlook on short- and medium-term expectations and only wanting to announce it in connection with the planned capital increase demonstrates a lack of understanding in dealing with the stock market.

How difficult can it be to lay all your cards on the table and simultaneously announce capital measures? 'We'd like more money, and yes, things are going badly. We'll tell you more in two months.'

I feel like I've been taken for a fool, and if I weren't so convinced of the enormous medium-term potential of the e-prescription, the stocks would have been removed from the portfolio.

Nolight: GAM – no management commitment to be seen

GAM also continues to require enormous patience and nerves, as the FY24 results were not very revealing: The cost optimization initiatives, the full impact of which should be evident in 2025 and beyond, led to a 20% reduction in expenses.strong progress in implementing the turnaround strategy' and the confirmation that break-even is to be achieved in 2026 were lost alongside still high losses of around CHF 70 million.

I'm still waiting for an announcement that senior management and the board of directors will finally invest properly in their own company, i.e., in shares. However, the bonus plan stipulates that they will receive shares, specifically the day before the Annual General Meeting. These shares will then be released to the market as soon as possible...which, of course, the share price can't handle given the low trading volumes. I will definitely speak out about this at the AGM.

Medartis – Straumann 2.0?

Much has been written about the Basel-based medtech company Medartis this month, as it is one of the year's winners so far. However, the significant share price gain since mid-November reflects hope for new CEO Matthias Schupp rather than a strong FY24 result. In terms of revenue, earnings (+11.7%) were even slightly below the downwardly revised guidance from August 2024 (12-15%). However, in terms of profitability, the adjusted EBITDA margin was impressive at 19% – the guidance was around 15%. The outlook for revenue growth of 13-15% and an EBITDA margin in the high teens range was also very well received.

During a personal exchange with CEO Matthias Schupp and IR Fabian Hildbrand, I learned a great deal about the three most important levers for future growth (US market, KeriMedical, Value segment):

The entry into the value segment, i.e. into a more affordable offering, through the acquisition of NEOORTHO is reminiscent of Straumann, who acted correctly with the acquisition of NEODENT.

The histories of NEODENT and NEOORTHO are intertwined: Matthias Schupp spent 17 years at Straumann and successfully managed, built, and expanded the value brand NEODENT. Schupp is convinced that the value strategy has brought Straumann to where it is today.

NEOORTHO was part of NEODENT until 2012. After NEODENT was sold 2015% to Straumann in 100, Schupp acted as advisor, almost CEO, for the remaining NEOORTHO to its owners, the Thomé family. In 2021, Schupp even organized a visit to the company in Brazil for Medartis' CEO/CFO. At the time, however, former Medartis CEO Brönnimann's focus was on the acquisition of Nextremity Solutions Inc. (NSI). Although this acquisition brought with it key employees, engineers, and a production facility in Warsaw, Indiana, the purchase was not a success overall. Schupp will likely sell NSI as a brand and expects only a small sale proceeds. NSI was purchased in May 2022 for USD 70 million – however, the total price was likely never paid because the earn-out model was not met. CHF 18.5 million has now been written off, but this has no impact on the cash situation.

As of May 1, 2025, Medartis acquired a 51% stake in NEOORTHO and will likely take over the company completely by 2028/29. NEOORTHO has an EBITDA margin comparable to Medartis (19%) and has grown by around 11% in each of the past few years, which should provide some upside. The company is profitable, the machines are in place, and only a factory needs to be fully financed. NEOORTHO will approach countries like Chile directly, not via distributors, as Schupp is not a fan of distributors. After Brazil, NEOORTHO will tackle other Latam countries, and then APAC is on the to-do list. Relocating the headquarters from Sao Paolo to Curitiba will save costs. Asia is on the agenda for 2028, and India is also an interesting market that Medartis will target in the medium term.

The entry of KeriMedical into the US will also be a significant boost. KM specializes in products for the treatment of osteoarthritis. FDA approval is expected by August 2025 at the latest, at which point the stake in the above-average growing subsidiary will likely be increased to 100%.

My conclusion: CEO Matthias Schupp is a charismatic personality who knows what he's talking about. If he can repeat NEODENT's success with NEOORTHO and KeriMedical continues its success, Medartis has good times ahead. We've added the stock to our shortlist, or rather, our watchlist.

Stephan