*** Plutos – Switzerland Fund Update *** R&S Group in the supercycle *** Dampened analyst expectations – justified? ***
The Plutos Switzerland Fund can increase slightly by 0.2% in April, despite the sharp, negative market correction at the beginning of the month.
Following the tariff announcements by the new US administration, which were significantly higher than expected, stock markets around the world collapsed, and after the announcement that tariffs would be extended to chips and pharmaceuticals, everything was simply sold off, regardless of whether there was US exposure or not.
Even our portfolio companies, which have no US operations or already produce locally and are therefore unlikely to be affected by tariffs, were hit hard. Many investors likely sold passive products, and these don't distinguish between good and bad, US exposure or none, and strong and weak companies. This selling pressure met with a veritable buyer's strike, and often stocks without high volumes fell significantly. The US government's zigzag economic policy will likely continue to see increased volatility and a certain degree of nervousness among investors.
But long-term investors buy at such exaggerations and take advantage of the panic of the majority: We have taken the opportunity to re-build positions in Belimo, Holcim and Partners Group, three companies that are undoubtedly of the highest quality. We have also increased our weighting in ams OSRAM at rock-bottom prices.
Especially Belimo was a strong performance contributor with almost 60% unrealized price gains: the climate specialist published a surprisingly good performance in all market regions and raised its annual outlook – a positive profit warning is not something you see often.
Also Kouros Biosciences and DocMorris significantly supported the recovery, as both were able to report a positive first quarter.
R&S Group delivered as we expected a more than solid FY24 result. The departure of CEO Laesser at the end of May 2025 represents a bitter pill to swallow. However, former Siemens Transformer CEO Terzi is a highly qualified, industry-experienced successor.
On the last day of the reporting month, ams OSRAM, the world's leading provider of lighting and sensor solutions, reported another strong quarter. Revenue and operating profit exceeded expectations, and ams OSRAM anticipates a stronger second half of the year – and plans to accelerate its debt reduction.
Aryzta finally clears the CHF 2 hurdle – what a success story which is far from over.
Comet was able to exceed expectations with Q1 sales and confirms its full-year forecast – however, the good result was lost in the noise surrounding customs, and the share price is still trading at too low a level. We have decided to focus our semi-exposure on Comet for valuation reasons.
Swatch Group finds buyers at a ridiculously low level – the somewhat better watch exports may have helped here.
Adecco, Straumann and Accelleron have not yet returned to their best form– they trade at significant discounts to our fair value. Holcim has not yet been able to recover from the excessive price decline, despite solid Q125 results and outlook.
Temenos disappointed with organic growth in the first quarter, and although the 2025 outlook was confirmed, serious doubts about its achievability emerged. This is likely to weigh on the stock for some time, so we are holding off on any acquisitions.
As already mentioned, we acquired new positions in Belimo, Holcim and Partners Group. We have completely sold the shares in Kuehne+Nagel, VAT and Zehnder as we are somewhat more skeptical about a European economic recovery – US tariffs will likely dampen companies' willingness to invest. Nevertheless, a huge number of Swiss stocks continue to offer excellent entry opportunities.
«Risk isn't optional if you want to win. It's what separates the players from the spectators."
Jordan Belfort, US motivational trainer and former stockbroker (1962)
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.
R&S Group in the supercycle
The currently largest position, R&S Group with a weighting of over 6%, did not leave me in the lurch with its very solid 2024 results:
Compared to the previous year, order intake increased by 15%, order backlog by 50%, sales by 30%, EBIT by 119%, the EBIT margin by 23% (100 basis points), net profit by 254%, EPS by 228% and the dividend by 100% – these are impressive figures.
If semi-finished and finished products (excluding Kyte Powertech) were included in sales, organic growth on a reported basis would have been around 17%, significantly higher than the official 9%.
Cash conversion was also very strong – customer prepayments increased significantly from CHF 34 million to CHF 18 million. The Kyte goodwill of CHF 180.7 million was directly offset against equity – therefore, equity was negative at the end of the year, but is now positive again. The net debt/EBITDA ratio of 1.4x is also healthy. It is expected to decrease from 2025x in 0.9 to 2027x in 0.2 – assuming, of course, that no acquisitions are pending.
Every investor is probably wondering whether the company can continue at this pace. The 2025 outlook again calls for revenue growth of 10-13% and an EBIT margin of around 20%. The gross margin will settle at around 45%, as already communicated at the CMD.
The sales growth of 10-13% is derived primarily from the order backlog margin and should not be seen as a lower guidance (11.5% in the middle from previously 12%).
The drivers of decarbonization, decentralization, and modernization remain intact. This is also confirmed by the Hitachi CEO in a worthwhile interview: It is not a five-year bonanza, we are in a Supercycle of electrical energythat will last for ten, fifteen, or even twenty years. Increasing electrification requires energy, which can also be seen in customer spending: it is rising massively – for example, because German wind farms are located in the north and industry in the south. This electricity must be transported, which requires networks with cables or high-voltage lines. And transformers.
R&S is already feeling the impact of German infrastructure expansion: Amprion, a customer, plans to invest a total of EUR 2029 billion in expanding the transmission network by 36,4. R&S has increased its market share in Germany from 4% to 8%.
The new plant in Bochnia, Poland, will be operating at 100% capacity in May – the customer/investor event was a complete success. Over 120 customers attended and demonstrated their commitment.
CEO Markus Laesser reiterated that the company has no exposure to tariffs. Of course, the company relies on the continued smooth availability of copper, aluminum, and steel. However, the company is prepared should any problems arise due to the trade war.
I also had the opportunity to speak with CEO Markus Laesser again and asked him about the reasons behind his departure. There are no company-specific reasons; after 30 intensive years, Markus wants to devote himself to his private projects and mandates. "Fair enough," he deserves it, because under his leadership since 2021, the SPAC IPO was a complete success. He successfully positioned the R&S Group for growth. But I will miss him, as I value Markus Laesser as a very strong CEO and always enjoyed our conversations.
Successor CEO Edoardo Terzi was initially slated to join the board, but after Markus Laesser informed Chairman Heinz Kundert that he wanted to step down, Terzi was approached to see if he could imagine an executive role. He enthusiastically accepted the offer, as he was already seeking an operational role. Terzi was Head of Transformers at Siemens Energy and seemed like an ideal choice.
My conclusion: R&S is rightly represented among our largest positions – the equity story is strong, the drivers are long-term. The still somewhat low valuation of around 10x P/E and 8x EV/EBIT is likely due to the market expecting another CGS placement, which they still hold 7.5% of. But perhaps an investor will be found who will buy the position from them beforehand?
Dampened analyst expectations – rightly so?
None of the Swiss companies I follow lowered their outlook in the wake of their first-quarter results—they all confirmed their 1 estimates, and Belimo and Novartis even raised them. However, none of the press releases lacked a disclaimer that this was subject to increasing uncertainties related to global trade tariffs.
Even before 'Liberation Day,' equity analysts saw the risk that corporate expectations could be very cautious and adjusted their estimates accordingly. After April 2, 2025, as a result of Donald Trump's unexpectedly harsh tariff policy, the major American investment banks significantly revised their price targets for the S&P 500 Index for the end of 2025 downwards: JP Morgan by 20%, BofA by 16%, Citi by 11%, Goldman Sachs by 8% – only Morgan Stanley kept its estimate stable.
Swiss analysts have also largely revised their estimates downwards, predicting lower earnings per share on average. For example, UBS has reduced its earnings forecast for the SMI from 7.5% to 4% and maintains a neutral weighting for the Swiss market.
However, as mentioned, companies are painting a different picture, and since the mood among Eurozone industrial companies improved again in April – the Purchasing Managers' Index (PMI) rose by 0,4 points to 49,0 points in April compared to the previous month, for the fourth time in a row – reality and estimates are currently moving in opposite directions.
My conclusion: The fact is that we saw a huge number of negative price target adjustments in April. This is entirely understandable, given that uncertainty about what will happen after the 90-day tariff ceasefire remains high.
The very low, even nonexistent, Swiss inflation rate of 0% in April is likely to prompt the SNB to further cut interest rates, which could lead to a weaker Swiss franc and thus provide some relief for exporters. If Europe finally emerges somewhat from the cyclical low, which depends particularly on Germany, the cautiously positive corporate assumptions could prove to be correct.
I'm not so sure whether the analysts weren't acting too cautiously – but 'the proof lies in the pudding'.
Best regards,
Stephan
