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Non-Tech : petal's Swedish stock picks

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To: Paul Senior who wrote (36)	6/7/2024 2:38:31 PM
From: petal	Read Replies (1) of 56

Evolution (EVO / EVVTY) has come down still more now – trading at P/E 19 on current earnings, 15 on estimates. EV/EBIT 17. Way too cheap IMO for one of the best businesses I've ever seen. Downsides: * I don't fully understand the business (and I have a better track record with super-easy-to-understand things such as retail) * Things have perhaps gone "too well for too long" for them? * "Competitors will come". However, it doesn't seem so easy to compete, as EVO's margins have kept going up rather than down. Antitrust legislation of some sort would seem more likely. * The runway has to end eventually... right? Or maybe not. It seems important for the long term growth potential that the US market opens up more. Seems unlikely that they won't do so eventually, though! Upside: * Looks a lot like Swedish Match (SWMA) did before Philip Morris bought it out for a pretty nice premium. Like SWMA, it appears to be perpetually "less expensive than it should be" because "natural buyers" (i.e. Swedish funds and pension funds) won't buy because of goodie-goodie-ESG concerns. To me, the multiple could quite easily be 50 % or even 100 % higher without it looking unreasonably expensive. * There aren't too many well-run gambling co.'s left on the Swedish stock exchange. While Evolution is now one of the largest companies in Sweden, it might still be small enough for some larger international player to swallow. (Don't know who that would be though – perhaps it would need to be someone outside the gambling industry, as even household names as MGM would be way to little fish. Perhaps EVO doesn't need to be bought up –– perhaps they should rather start buying up others –– perhaps they are themselves already the biggest fish in the pond.)

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