Stockholm (HedgeNordic) – Adrigo Small & Midcap L/S has surged into the top five best-performing Nordic hedge funds for the year, boasting a return of 22.4 percent following a 10.9 percent gain in May. A significant contributor to its May performance was the biopharmaceutical company Calliditas, which received a public cash offer from the Japanese firm Asahi Kasei. The offer reflects a premium of 83 percent over the closing price prior to the announcement.
“May was indeed a splendid month,” remarks Staffan Östlin, the fund’s portfolio manager, signaling out Asahi Kesei’s cash bid for Calliditas as “the main event of the month.” Adrigo Small & Midcap L/S invested in Calliditas during its initial price offering in 2018 and has actively traded around the position over the years. “The premium of 83 percent is obviously very attractive, although we have mixed feelings,” reflects Östlin. Calliditas is entering an interesting phase with full approval for its kidney disease drug Tarpeyo in the fourth quarter of 2023 and accelerating sales, he notes. “European approval is on the cards for 2024, a year in which the company is expected to show profits and very strong cash flows.”
“May was indeed a splendid month.”
Staffan Östlin, CIO and Portfolio Manager of Adrigo Small & Midcap L/S
Staffan Östlin employs a stock-picking approach to identify long and short opportunities in the Nordic small- and mid-cap segment. Adrigo Small & Midcap L/S maintains a concentrated portfolio of 25 to 30 long positions, categorized into three building blocks: Core Five, High Potential, and Dynamic. The fund’s larger holdings in companies such as Pierce Group, an e-commerce entity specializing in motorcycle and snowmobile gear, and Initiator Pharma, a Danish clinical stage life science company, contributed positively to performance in May. Mid-sized positions in companies like Smart Eye, Cint Group, and Enea, all specializing in various tech sectors, also contributed favorably.
“Pierce Group reported good numbers for the first-quarter results and returned to organic growth and profitability,” notes Östlin, highlighting the positive momentum as the stock gained 20 percent in May and 40 percent year-to-date. Östlin attributes this success to CEO Göran Dahlin’s swift actions following his appointment last summer, which included cost reductions and organizational restructuring. Looking ahead, Östlin anticipates a transition year in 2024 but expects “margins to increase significantly in 2025 and we see good potential in the stock despite the recent good performance.”
“We continue to find attractive investment opportunities in the space.”
Staffan Östlin, CIO and Portfolio Manager of Adrigo Small & Midcap L/S
Adrigo Small & Midcap L/S has achieved an annualized return of 14.1 percent since its launch in late 2017. After its record-breaking year in 2020 with a return of 44.5 percent, the fund faced a loss of 5.7 percent in 2021 and a decline of 5.1 percent amid the challenging market conditions of 2022. Adrigo Small & Midcap L/S swiftly rebounded from this two-year drawdown, posting a gain of 14.6 percent in 2023 and a sharper increase of 22.4 percent in the first five months of 2024. Despite the recent strong performance, Östlin remains optimistic about future prospects. “We continue to find attractive investment opportunities in the space,” he says. Östlin has also observed a clear rise in takeovers in recent months. “This is perhaps not surprising, given that small caps are now clearly undervalued from a historical perspective.”
