Kroner Firms


My favorite currencies at this time are Scandinavian.

Our last lesson looked at how I remain highly diversified from a currency point of view.  Here is my current currency breakdown.

Currency Distribution of Investments:

Danish kroner    24%
Euro                     24%
British Pound      8%
US Dollar            12%
Canadian Dollar 3%
Norway kroner   4%
NZ Dollar             3%
Sweden kroner    7%
Brazil real             3%
Hungary Forint   6%
Turkey Try            6%

With more than a third of my liquid position in Danish, Swedish and Norwegian kroner, my Scandinavian  position  are seriously over weighted in terms of global market size.

One reason is because these are such a small country located on the sea.  This means that their histories are composed of  travel and trade.

A nation’s heritage reflects in the value of its currency strength. This fact helped me answer this question from a reader.

“Gary, Will future strength in DKK be bad for equities denominated in that currency?”

Here is my reply.

Most of the Danish companies you would buy are global companies.

Because Denmark is such a small market any large Danish company is doing most of its business out of Denmark  so a lot of their success depends on the type of business business and where the company actually manufactures and sells its products.

Plus look at the margins built into the product.

One benefit in Scandinavia is their very highly educated population. A recent Time magazine article shows that Finland (not Scandinavian but Baltic and Finland’s currency is the euro – otherwise I would have Finmark in my portfolio as well) ranked number one for educational performance of 15 year olds in math. Denmark was number 10, Sweden number 15 and Norway number 23… all ahead of the US (number 25).

Finland was number one for reading performance of 15 years olds as well.  Sweden number seven, Norway number 10 and Denmark number 16. The US was number 15.

This means that the products produced in these nations will tend to be high value.

For example Novo Norsk makes insulin.  I suspect that the margins are substantially high.

Ditto for novozymes that makes enzymes for environmental purification.  These are firms where there is likely to be a great deal of value added into their product.

Vestas, makes wind turbines. and may be more affected by a strng kroner if they do a lot of manufacturing in Denmark but are having and sales in the US and especially if their competitors manufacture in the US or other countries where the currency is weak.

Until next lesson good global investing.

Gary

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