December 10 2021

Summary from Pareto Securities’ Tech panel discussion

On Thursday December 2nd Pareto Securities arranged a Christmas lunch at Operaterrassen in Stockholm for selected clients. In addition to a delicious lunch, the guests were able to listen to an exciting panel discussion about digitalisation and trends in tech. The panel consisted of Per Brilioth at VNV Global, Carl Armfelt at TIN Fonder, Erik Syrén at Monterro and Pareto Securities' co-head of Research and tech analyst Stefan Wård. Matilda Karlsson was moderator of the debate.


The acceleration in cloud-based services, digitalisation of healthcare and web 3.0 are the most important trends in tech, according to Carl Armfelt. He believes that the "cloudification" is still at an early stage, but something we will see more of. Referring to Microsoft, tech as a share of GDP will double from 5% to 10% in ten years. Per Brilioth sees cloudification as important for his portfolio companies but also highlights other digitisation factors as important. "With today's technology and software solutions, our portfolio companies can develop fast", says Brilioth. For example, Brilioth sees excellent growth potential in Alva, the next generation LinkedIn, Karla, a platform for used electric cars, and Kavall, which will change how we shop our everyday food. To illustrate how rapidly the companies can grow today, he draws the comparison to one of their other portfolio companies, VOI, which in only three years has managed to achieve a record turnover of 20 million dollars during one of its stronger summer months.

According to the panel, the digitalisation of healthcare has become increasingly relevant during Covid-19. The healthcare sector is one of the sectors that has lagged, but in recent years is becoming more and more online, as the corona pandemic has accelerated the digitalisation of the industry. "The healthcare sector has been difficult to digitise because it is conservative and differs greatly from country to country," Brilioth points out. Armfelt agrees that the sector is conservative, which is why it has slipped behind. He also adds that it is probably through digitalisation that the healthcare crisis is being solved. "I do not think you will go to a healthcare centre again to do simple checkups", Syrén adds and continues, "The first thing they did during covid-19 was to procure Ipads for the staff so they could manage their patient meetings digitally. After the pandemic, this will only continue ". Stefan Wård, who closely follows the developments of one of the companies of VNV Global’s portfolio, the MedTech company Babylon, believes that the company has done the right thing to get ahead. "Babylon has been good at creating growth in contracts and users", Wård explains. He also says that healthcare is a huge market with 18% of GDP is being spent on healthcare.

The tech sector has traded volatilely in 2021, and the general tech pressure has harmed many stocks. However, the panel does not see this as particularly worrying. Stefan Wård puts this year's development in perspective to the historical development of the tech sector, “If you go back and look at a 20-year’s perspective, it has been impossible to beat the market if you have not been exposed to tech. The tech sector has driven the US stock market, and it is today 40% of the S&P 500“. Wård refers back to what Armfelt said earlier about tech as a part of GDP that will double in 10 years, and reinforces that tech investments will continue to be relevant. "There may be years where tech has temporarily underperformed the market, but tech has been the strongest trend for the past 25 years, and I think it will continue to be the strongest trend for the next ten years, where software services will be super important."
Syrén implies that we had an upward valuation of the tech sector during Covid-19 and believes that it is healthy with a pullback so that the companies have a chance to grow into their valuations. Armfelt agrees and points out that many companies are still growing well, even though share prices have fallen. “Many companies grow over 25% organically and trade below 20x EBITA 2022's estimates. So, in a short time, many companies have grown to catch up with their values ”.

The panel concluded the conversation with topics in other tech trends such as Web 3.0, metaverse, VR, NFTs and Cyber Security, and everyone in the panel was able to answer which tech investment they thought would be most vital in 2022. Outpost 24, Lemonsoft, Alva and Palantir were the answers.