November 2020 Newsletter: Enjoying historic November rally

This November came up with additional evidence to the historic statistics of being among the best months of the year, following April and December. Equity markets’ rally was to a great extent driven by the long-awaited news on vaccine trial read-outs, announced by three pharma companies – Pfizer, Moderna, and AstraZeneca. US elections turned out to be positive for the markets as well. As a result, the US stock index S&P 500 grew by 10.9%, while European equities climbed 13.8%. Baltic companies were not far behind the leading world indices, returning a solid 10.6% in November. However, both Baltics and broader Europe are still behind the peaks reached in February. On the other hand, the major US index is in very good shape, beating both February and early September peaks. The excellent performance of the US equity market is mainly a result of a strong contribution on behalf of the technology stocks, for which the pandemic turned out to be an accelerator rather than a headwind. Therefore, we saw all-time highs of all US indices: Russell 2000, Dow Jones, S&P 500.

Figure 1. Performance of Baltic, USA and European indices since the beginning of the year until 30 November 2020

Source: Alphinox, Thomson Reuters, NASDAQ Baltic

How well Baltic companies did vs. their peers?

The reporting season on the Baltic equity market is over. Therefore, we are making a short overview of the corporate results, which are particularly critical now as pandemic continues to unfold globally and a number of countries initiated second lockdowns. We compare the operational results of several actively traded Baltic companies with their traded peers to judge upon the resilience and ability to withstand the crisis. We primarily focused on sales as profits got distorted by a number of corporate actions.

Figure 2. 9M 2020 sales growth of Baltic companies as compared to peers

Ignites, the newcomer and the largest company in Baltics stayed resilient and reported a decent 9% increase in its sales, which exceeded 5% sales growth delivered by Czech utility company CEZ and was above the results of Latvian utility giant Latvenergo, whose sales declined by 9% in the first 9M this year.

Tallink remained the most resilient as compared to other international cruise companies, mainly helped by diversification brought by cargo shipping operations, as opposed to peers that have purely cruise-focused business model. However, Tallink still remains one of the most struggling companies on the Baltic stock exchange as the majority of operations are halted and are very unlikely to resume and reach pre-COVID levels until the vaccine is available to the general population.

On the other side, there are Baltic companies, which operate in very resilient industries such as food retail and telecommunications – for instance, Telia Lietuva and Tallinna Kaubamaja. As it is shown in Fig. 2, the results of Telia were not too deviated from the growth pattern demonstrated by the respective industry and, although the results were good, they did not make Telia a top achiever. Tallinna Kaubamaja also did pretty well in the current environment, especially if one bears in mind that 20% of the company’s turnover is exposed to the department store and car sales, both of which have been affected by the current crisis. Nevertheless, if compared to peers, it was lagging behind the Swedish firm with Rimi chain brand, but on the other hand, exceeded the achievements of the French supermarket chain.

Financial results vs. stock performance

Overall Baltic listed companies managed to deliver better fundamental performance as compared to the performance of the general economy, with median sales contracting by a mere 0.7%. Additionally, they have managed to cut operational costs by 2% to 3% in their search for ways to become more efficient in the current market environment. We have seen very strong results by Auga and SAF Tehnika, which have also been reflected in the share price performance. The price of the Ignitis stock also received a boost after the results, but it could not yet outweigh the downward movement incurred after IPO in October.

The best performers on the Baltic stock market in November were those companies that either enjoyed support from the vaccine news or the ones that reported poor results throughout the year and whose share price was under pressure as a result. The most vivid examples are tour operator company Novaturas and shipping company Tallink.

Figure 3. 9M 2020 Financial results of the Baltic companies vs. Stock performance

Source: Alphinox, Thomson Reuters

Excellent equity performance in November, caused by high expectations with regards to vaccine development and, hence, economic rebound, would be hard to sustain in December. However, the investors’ bullish mood continues to be supported by the very favorable monetary policy around the globe.

About Alphinox

Alphinox is part of an independent asset management group with expertise in capital management operating in accordance with Quality investment style. By combining investment expertise and long-term experience in analyzing global financial markets, Alphinox develops customized investment solutions and provides analytical research.


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