Cliens Sverige Fokus's July 2025 Moves: Uncovering Small-Cap Industrial Gems in a Shifting Market

In July 2025, the Cliens Sverige Fokus fund delivered a 2.8% return, outperforming its benchmark by 0.9 percentage points. This performance, driven by strategic shifts in its concentrated portfolio, highlights a growing focus on small-cap manufacturing and industrial companies. With global trade agreements reshaping tariff landscapes and the U.S. Federal Reserve signaling potential rate cuts, the fund's July adjustments reveal a calculated bet on undervalued industrial plays poised to capitalize on macroeconomic tailwinds.

The Fund's Strategic Shift: From SKF to OEM International

The fund's July report, authored by manager Thomas Brodin, underscores a pivot toward early-cycle industrial stocks. While it sold its stake in SKF—a bearing manufacturer that had outperformed expectations—the proceeds were reinvested in OEM International and Storskogen, two small-cap industrial companies with compelling growth narratives.

OEM International, a serial acquirer in the industrial sector, has a 30% return on capital employed (ROE) and a history of 13% annual earnings growth. In July, the fund viewed its recent acquisition of a U.S.-based logistics firm as a catalyst for margin expansion. Despite a 4.3% dip in Q2 2025 earnings per share (EPS) to kr0.96, the company's ROE of 24.8% and strategic alignment with EQT—a private equity firm known for aggressive growth strategies—position it as a high-conviction holding.

Storskogen, a diversified industrial conglomerate, also attracted the fund's attention. After a 5% decline in Q1 2025 net sales due to strategic divestments, the company reported a 50% surge in quarterly profit to SEK 216 million. Its refinanced EUR 345 million term loan facility, maturing in 2027, provides flexibility for further acquisitions. With a debt-adjusted operating profit multiple of 10x—well below the 30x valuation of top-tier industrial acquirers—Storskogen represents a value-driven opportunity in a sector where margins are normalizing post-pandemic.

Why Small-Cap Industrials?

The fund's July moves align with broader market trends. Small-cap manufacturing and industrial stocks have surged 9% in July alone, outpacing the S&P 500. This outperformance is fueled by three key factors:
1. Valuation Dislocation: The Russell 2000 trades at a 55% discount to large-cap peers by P/E ratio, making small-caps attractive for capital-efficient growth.
2. Macro Tailwinds: New trade agreements pushing tariffs above 10% and Fed rate-cut expectations have reduced borrowing costs for debt-heavy industrial firms.
3. Earnings Momentum: Companies like Astronics Corp. (ATRO) and Industrial Logistics Properties Trust (ILPT) have seen year-to-date gains of 119.9% and 63.7%, respectively, driven by defense contracts and e-commerce infrastructure demand.

Risks and Opportunities

While the fund's concentrated portfolio (20–30 stocks) offers upside, it also exposes investors to sector-specific volatility. For instance, Vimian—a previous holding—plunged after its CEO's abrupt departure, despite strong long-term fundamentals. Brodin's decision to add Bure, a mixed-ownership asset manager, reflects a hedging strategy: Bure's 60% listed and 40% unlisted portfolio offers diversification in a market where small-cap valuations remain depressed.

Investment Takeaways

For investors seeking exposure to the industrial renaissance, the Cliens Sverige Fokus fund's July playbook offers a roadmap:
1. Prioritize Quality Over Size: OEM International and Storskogen demonstrate that smaller firms with strong ROE and disciplined capital allocation can outperform.
2. Monitor Macro Catalysts: Trade policy shifts and Fed rate decisions will continue to drive industrial valuations.
3. Balance Growth and Value: The fund's mix of high-growth serial acquirers (e.g., OEM) and undervalued cash-flow generators (e.g., Storskogen) provides a resilient portfolio structure.

In a world where large-cap dominance is waning, small-cap industrials like those in Cliens Sverige Fokus's portfolio are emerging as the new frontier for value creation. As Brodin notes, “The industrial sector is entering a phase where mispriced assets will be rewarded by a market hungry for earnings growth.” For those willing to navigate the volatility, the rewards could be substantial.