Bellevue Entrepreneur Swiss Small & Mid

Swiss small and mid caps as measured by the SPIEX Index declined 2.6% in the month (SPI -2.0%), in line with European small caps (-2.5%) and outperforming SXXR (-3.4%), MSCI World (-4.6%) and S&P (-5.8%). March was tumultuous with widespread imposition of tariffs by the US. Investors became increasingly concerned about a possible US stagflation scenario with higher inflation and very weak economic growth. Europe confirmed its fiscal shift moving towards significantly higher defence spending, while the incoming German coalition proposed a key reform of the constitutional debt brake to permit higher defence spending, alongside a EUR 500 bn infrastructure fund. Encouragingly, European PMIs increased for a third consecutive month (50.4 after 50.2), led by the manufacturing component (26m high at 48.7), with a notable increase of the output (50.7), for the first time in two years. In Switzerland, the procure.ch PMI fell to 48.9 from 49.6 in February, missing market expectations of 50.5, with more than half of the industrial companies surveyed expecting an increase in protectionist measures over the next 12 months. More positively orderbooks increased 0.4 to 50.1. From a market sector perspective, consumer staples (+4.6%), real estate (+4.4%) and financials (+2.7%) performed best, while information technology (-9.5%), consumer discretionary (-9.2%) and health care (-8.2%) lagged the most.

Against this backdrop, the fund declined by 3.5%, underperforming the SPIEX by 82 bps.

Main detractors in the month were Straumann (-13.2%), Galderma (-14.9%) and Also Holding (-11.7%). Medtech stocks continued their derating on the back of tariffs concerns and a weakening US macro picture with fears of around US consumer sentiment. Straumann was no exception. Galderma presented disappointing FY results with weaker injectable filler demand and comments suggesting a weaker US market. With the actual macro backdrop we remain underweight both Straumann and Galderma. After last month strong share price performance linked to the publication of its encouraging 2025 guidance, Also suffered from profit taking as a few competitors indicated that the beginning of 2025 will be slow, which came as no surprise to us. At a 12 month forward EBIT of ca. 10x, valuation looks attractive at this point of the cycle, while the Westcoast acquisition and the new US push are interesting optionality’s.

Top 3 contributors in the month were VZ Holding (+10.9%), Helvetia (+8.2%) and Lindt (+4.8%). VZ Holding delivered strong FY figures with better than expected top line growth and profitability. Revenues increased 13.2% with net new money up 17.7%. The management guided for somewhat lower growth in 2025 but consensus EPS was slightly upgraded with a higher 2024 base. Helvetia reported FY numbers beating expectations by ca. 2%. The non-life business showed strong improvement in the underlying underwriting profitability and investment margins were good. Management kept guidance unchanged. Consensus 2025 EPS were upgraded by ca. 5%. After having released a strong FY24 organic growth of 7.8% earlier in the year, Lindt reported a 2024 EBIT up 8.7% to CHF 884 mn, implying a margin of 16.2%, 10 bps above consensus. FCF came in at CHF 635 mn up 33% yoy, boosted by a strong contribution of the working capital, another sign that Lindt is navigating through the cocoa price roller coaster well.

Macro and the top down narrative continue to dominate and markets show nervousness ahead of Trump’s further tariff announcements, also tipping European and Swiss markets in to the red in March. Against the odds, European and Swiss equities have experienced a surprising positive start to the year, strongly outperforming the US. From the Trump Put attention has pivoted to the Merz Bazooka and a newfound European fiscal optimism. With its much higher weight in healthcare and medtech and with this a higher exposure to the USD as well as tariffs uncertainties, the SPIEX Index is tracking behind Europe in terms of performance. We stay underweight the sector, preferring industrials and cyclicals benefiting more from the expected improvement in German and European business activity.