Should you buy Scandi stock? These are the gems that can pay off

Women in a hundred countries will unwrap something sparkly from Pandora this Christmas. The Danish company, valued at 100 billion kroner (or £11.5 billion) on the Copenhagen stock exchange, is the world’s largest jeweler.

CEO Alexander Lacik says the trinket sector’s dominance is based on tapping into customers’ life stories. He says the lab-grown diamonds and charms dangling from the bracelets have as much emotional significance as precious gemstones when celebrating milestone moments.

In 2023, sales across Pandora’s 7,800 points of sale, including 2,800 company-owned stores, amounted to £3.1 billion. Sales in Britain, the second largest market after the US, amounted to £448 million.

Adverts for the jewelery are all over British TV, but its stock is a hidden gem. They’re up 339 percent in the last five years – so would you be better off asking for Pandora shares in your stocking, rather than a little something?

Pandora is one of the leading Scandi supertrooper stocks, along with Danish company Novo Nordisk, maker of the weight-loss drugs Ozempic and Wegovy.

Accessibility is the secret: you don’t have to be rich to buy a £25 charm for your bracelet. That’s why 50 million are sold every year.

The company sold 107 million pieces of jewelry in 2023, ranging from those £25 charms to the diamonds Pamela Anderson wore to the Met Gala in New York. The 57-year-old actress, who is a brand ambassador, wore 200 carats of pink and white laboratory diamonds – believed to be worth around £1,800.

About 40 percent of Pandora’s sales are made at Christmas, so when Lacik flew to London for 48 hours this month, he was on a mission to put more Pandora goodies under Britain’s Christmas trees.

Lacik, 59, was born in Czechoslovakia. After the Russian invasion in 1968, his parents fled to Sweden, where he grew up from the age of three.

After stints at consumer goods companies Procter & Gamble and Reckitt, he took over at Pandora in 2019. His predecessor resigned after a profit warning in 2018.

“There was a story that Pandora was going to disappear,” he recalls cheerfully. The previous management, he says, had lost focus and introduced too many new products that weren’t quite right, followed by a flood of discounts.

Under Lacik, Pandora has regained its luster despite struggling with the pandemic. Shares are up 36 percent this year despite pressure on profit margins from higher gold and silver prices and a tough backdrop for the broader jewelry sector as customers tighten their belts.

Pandora is well-positioned to take advantage of people looking for affordable decorations. Lacik says his jewelry is “all about sentiment” and not about spending big bucks.

“We serve a profound human need to tell stories,” he adds, referring to jewelry’s role as a keepsake, a sign of love or pride, and marking some of the most important moments in women’s lives. We have found a way to do this through jewelry. If we were a tech company, we would have invented TikTok or Meta.” It sounds like an exaggerated way to describe costume jewelry. But the philosophy helped Pandora evolve to its current heights from a single store in Copenhagen opened in 1982 by goldsmith Per Enevoldsen and his wife Winnie.

The company is still based in Copenhagen, although the charms have been produced in Thailand since 1986.

The chain has 240 stores in the British Isles and three more are due to open next year. More are coming in the US, where there are already 479 stores.

In the group’s most recent third quarter, profits rose 7 percent to £110 million, while sales rose 9.5 percent to £682 million.

Skeptics may believe that the company and its stock price are vulnerable to the whims of fashion. The best-known item is the charm bracelet, but Lacik wants to “open up a significantly larger market” by targeting the engagement ring industry with lab-made diamonds.

According to Statista, the annual market for these gemstones – which are considered more ethical than mined diamonds – could reach £20 billion. They are as much as 90 percent cheaper than mined stones, increasing their appeal to Pandora’s young and price-conscious customer base.

Lacik insists they are as “real” as any other diamond, but somehow they are considered less meaningful.

Would he give Pandora jewelry to his wife? Yes, he says. He recently gave her a £90 North Star charm and there may be another piece wrapped under the Christmas tree this year.

But for investors looking for Santa to bring other Scandinavian treats from his Scandinavian haunts, there’s plenty to choose from.

MORE NORTH STARS

The Nordics may be small, but some stocks are mighty – and you can invest directly through leading platforms in Britain, such as Hargreaves Lansdown and Interactive Investor.

There are also managed funds, such as Fidelity Nordic, where an expert chooses stocks for you.

Or consider a fund that tracks the performance of a relevant index, such as the Amundi Nordic Exchange-Traded Fund (ETF).

“The costs are higher because you have to factor in currency conversion, but I think it’s as simple as buying UK listed shares,” says Ben Yearsley, director of Fairview Investing.

Novo Nordisk: 589 Danish crowns

Despite losing £82 billion in value at the end of last week, the Danish maker of weight-loss drug Ozempic has had a great two years. It has become Europe’s most valuable listed company since French luxury goods giant LVMH was knocked off the top spot in September 2023.

Skeptics point to increasing competition in the sector. But Derren Nathan, head of equity research at Hargreaves Lansdown, says if operational issues, including soaring demand, are overcome, “investors could be further rewarded”.

Recommendation: BUY

Carlsberg: 830 Danish kroner

The Danish brewer has had a tough 2024 after a cold, wet summer in Europe that hit sales, and the poor reception to its takeover of tonic water maker Britvic, which has just been given the green light by competition watchdogs, for £3.3 billion.

“It’s going to be a decent year,” said Jeremy Fialko, a research expert at HSBC. He adds that there could be a rebound in sales in China and calls the 19 percent share price decline over a year “unwarranted.”

Recommendation: BUY

AstraZeneca: £102.56

Most British investors consider AstraZeneca British, but it is Anglo-Swedish. The drugs giant overtook Shell as Britain’s most valuable company in April.

It has done well over the past decade, although its shares have been hit recently by allegations of corruption against senior staff in China.

Nathan says: ‘The reaction seems a bit exaggerated and could be an opportunity to gain exposure with a quality name in the sector. However, until further clarity comes from China, further volatility can be expected.”

Recommendation: BUY

Zealand: 728 Danish crowns

A minnow compared to the other pharmaceutical companies, the Danish group Zealand has seen a share price increase of 105 percent this year. The company is testing a new weight loss drug that could pit it against Novo Nordisk and Eli Lilly.

Susannah Streeter of Hargreaves Lansdown points to ‘hurdles’ in bringing the drug to market, but says: ‘It is clear there is huge interest in developments in this area, given the strong appeal of weight loss drugs in developing markets.’

Recommendation: BUY