Nordea Fund Is Sticking to Its Bet Against Salmon Stocks

(Bloomberg) -- The Norwegian equities team at Nordea Asset Management is sticking to an underweight in salmon producers.

“The sector is even more expensive now,” Jon Hille-Walle, portfolio manager, said in an interview in Oslo. “Earnings haven't moved, while pricing has increased.”

Norwegian fish stocks outperformed in 2018. The Oslo New Seafood Index rose 53 percent last year while the Oslo Stock Exchange Benchmark Index fell 1.8 percent. Hille-Walle's fund Nordea Norge Pluss struggled to keep up with an 11 percent decline.

“We're just as skeptical as last year,” he said. “Volumes are a bit up but usually the companies don't manage to deliver the volumes they forecast. Usually they disappoint. So it will again be demanding to get earnings growth and in the worst case there will be a earnings fall this year.”

The Nordea fund isn't the only doubter with DNB Markets downgrading the whole sector to “negative” earlier in March, saying it's “time to take profit.” Norway's biggest bank said then that the consensus for demand is too high and supply too low, which coupled with all-time-high share prices could prove a “toxic mix.” The seafood index rose 1.1 percent on Monday as of 9:37 a.m. and is up 1.8 percent so far this year.

“It's a cyclical industry but now it's priced as if it wasn't cyclical,” Hille-Walle said. “There are biological issues that change supply and the price and then there's volatility. We think that we should go back to historical pricing that reflects the cyclicality.”

The Nordea Norge Pluss Fund has a big underweight in Mowi ASA, the world's largest producer of Atlantic salmon. The fund favors instead energy, shipping and oil service stocks, which are recovering from a slump in spending by oil companies.

“It looks like a gradual recovery is playing out,” Hille-Walle said. “We're still cautious and like companies with good balance sheets.”

To contact the reporter on this story: Jonas Cho Walsgard in Oslo at jchowalsgard@bloomberg.net

To contact the editors responsible for this story: Jonas Bergman at jbergman@bloomberg.net, Stephen Treloar

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