The fourth part of our series of articles focusing on investing in Life Science companies deals with value creation in drug development companies through M&As and licensing agreements.

Sampo Group’s top line growth remained strong and underlying trends positive in January-September 2024, driving underwriting profit growth in a mixed claims environment.   

The second part of our series of articles focusing on the basics of investing in Life Science companies deals with the likelihood of successful drug development.

Buy low and sell high is the most overused phrase in the investment world. Theoretically, a strategy based on this phrase is probably one of the best investment strategies in hindsight, but often the cheap or expensive nature of a stock or investment can only be determined after the fact.

We are starting a series of articles focusing on the basics of investing in Life Science companies. This first part of the series describes the clinical phases of drug development that most drug development companies have to go through before they can apply for marketing authorization and commercialize a drug.

The first half of 2024 saw continuity of strong top line growth and solid underlying development, supplemented with robust investment returns.

On 17 June 2024, Sampo and Topdanmark entered into a combination agreement. In this IR blog entry, Sampo address questions shareholders might ask regarding the offer at this point.

The point of stock picking is to get better returns than from index funds. If stock picking does not deliver excess returns, the investor always has the option of capturing index returns with a low-cost index fund. As the tech giants have continued their strong rise, their relative weight in equity indices has increased. When a smaller group of stocks drives the index up faster than the rest of the group, it means that more investors are missing out on index returns. Stock picking has worked well in recent years, if it has focused primarily on the largest companies. This may not continue forever, but there are good reasons for this trend.

As fellow investors will have noticed, Nasdaq Helsinki hasn't seen many new listings for a couple of years. The IPO boom of 2021-22 has been followed by a post-bubble hangover. However, investors can expect further IPOs within a year, unless the economy falters again. 

Stock markets around the world are hitting new highs, but for those investing in small companies, the last few years have not been easy. Large companies have dominated the top of the returns lists. It is generally believed that smaller companies, while riskier, can deliver better returns over time because they have more room to grow. But this is not always, if ever, the case.

What if China invaded Taiwan? A war would probably lead to a global economic collapse worse than the financial crisis, and there would be no point in owning stocks.

The stock market is said to anticipate economic developments, although it is prone to excesses and over-interpretation. You sometimes hear the joke that the stock market has predicted nine of the last six recessions. The global bull market that started Autumn 2022 appears to have correctly anticipated the resilience of the global economy, with recent economic data pointing to a renewed acceleration in growth, including in Europe.

As the bull market matures, accelerating earnings growth should support a continuation of the upturn. Stocks have rebounded globally from the bear market of 2022 and the S&P 500 index, for example, is up 50% from its fall 2022 lows. However, the S&P 500’s “earnings per share” have not yet grown properly.

The global bull market has spread almost everywhere, even to the godforsaken Nasdaq Helsinki. The broad-based increase reflects a healthy market, fueled by optimism about earnings growth. For example, since the fall of 2023, the S&P500 index is up 20% and gold is up over 30%. The Finnish nickname of the domestic stock exchange has changed from Hesuli to Hebulli with a 10% rise. Incidentally, the OMXH25 index on the Nasdaq Helsinki is up about 20% from its October lows, which some consider to be the bull market threshold.

Central banks cannot tighten monetary conditions too much because of the sheer amount of debt in the world. If we assume that the average maturity of debt was five years, we would have to refinance over 60,000 billion of debt each year. This is equivalent to about 70% of total annual global GDP.

The much-maligned Helsinki Stock Exchange (also playfully known as Hesuli in Finland) has hoisted itself back above the mythical 10,000-point mark. While stock markets in other parts of the world generally bottomed out in the fall of 2022, HEX continued to find new lows as late as last fall. An upturn in the European and global economies and the easing of corporate headwinds should, however, pave the way for Nasdaq Helsinki to rebound. 

Warren Buffett, the world's most successful investor in absolute terms, does not see many buying opportunities in the stock market right now. Buffett simply does not see sufficiently attractive opportunities in the market.

Sampo Group achieved strong top line growth, while the positive underlying margin trends continued. However, the underwriting result was materially affected by very challenging Nordic winter conditions.

The Helsinki Stock Exchange has had a sluggish earnings season. Most companies reported lower revenues and profits, which was of course to be expected.