Volvo is a Swedish automobile company with commercial roots going back nearly a century.
Volvo Car was bought by Ford Motor back in 1999 amidst a wave of consolidation amongst international car manufacturers. But in 2010, Ford sold the loss-making Volvo Cars to a Chinese auto company – Geely Automobile – for US$1.5 billion.
After owning the company for nearly a decade, Geely decided to list Volvo in the Stockholm Stock Exchange. Both companies remained separate entities. Last year, Geely sold about 1.2 million cars last year; Volvo Cars about 770,000.
Volvo’s IPO (Initial Public Offering) was the second largest listing in the country. The currency denomination of Volvo shares is in Swedish Krona (FX ticker SEK, Krona is sometimes written as crown). Currently, the GBPSEK exchange rate (the number of Krona per pound) is about 11.5.
Many brokers offer international dealing service. Investors can buy and sell Volvo shares with reasonably ease. One reason for this is because the Swedish Stock Exchange is a popular international stock market with many sector-leading companies, such as Ericsson.
For UK-based investors, you can access Swedish shares through some of the normal stock broking accounts. Below is a brief summary for three major UK stock platforms.
- Interactive Investors – Yes, you can buy Swedish shares from an II account, but only by phone orders. Apart from dealing commissions, there is a 1.5% charge on foreign transaction fee.
- Hargreaves Landsdown – Yes, Hargreaves customers can buy Swedish shares listed on the Stockholm Stock Exchange. There is an additional foreign exchange charge.
- AJ Bell Youinvest – Yes, account holders can buy and sell Swedish shares and there is a dealing charge, plus a laddered foreign exchange dealing charge. Phone orders incur more expenses.
Overall, major investment platforms have the capability of buying and selling Volvo shares for UK customers.
Buying international shares like Volvo can be done via normal stock or Individual Savings Accounts (ISA) from the UK.
There are many advantages of buying into foreign companies. One, you diversify your portfolio beyond the swings of the local UK economy. Two, some sectors could be growing faster in other countries, and you are tapping into this growth. Lastly, there are many world-class companies outside the UK, such as Apple or Tesla.
For Volvo, there are several considerations you need to watch out for:
- FX change rate movements – the GBPSEK exchange rate can move substantially over time. Whilst it can improve your returns (if the Kronor appreciates) the rate can equally move against your position.
- Volvo share price – buying an IPO is a risky venture that may or may not work out over time.
- Transaction costs – investing in a foreign share incur more transaction costs than, say, buying UK stocks, especially if you have to use phone orders.
- Auto sector consolidation – the auto sector is currently experiencing a great upheaval induced by electric cars. Whether Volvo will be able to prosper in this new world remains uncertain.
- Supply chain issues – currently the entire global auto sector is being disrupted by component issues, such as computer chip. This may reduce car sales and impact profits.
Apart from owning Volvo stocks directly, you may invest in European ETFs that own some of Volvo shares.
The biggest news about Volvo Car this year is its IPO on Nasdaq Stockholm (28 October). The list was oversubscribed.
The car company received about $2.4 billion from the listing and will channel the capital into the next generation electric car models.
Earlier, the car company promised to move all its models to full electric mode by 2030. This dramatic shift in its business model is to ensure that the company will not be left behind by Tesla (TLSA).
In fact, Volvo Car already has a high-end electric performance division called ‘Polestar‘. The latest model is Polestar 2. This division is slated to be listed in the US via a blank cheque, special acquisition vehicle (SPAC) called Gores Guggenheim next year. The new company is estimated to be worth $10-20 billion.
Overall, Volvo is positioning itself well in the new electric world.
Being a new stock on the Stockholm Stock Exchange, technical analysis (chart analysis) does not offer much use because of limited history.
However, its trading pattern in the early days reveals the sentiment towards the stock. For Volvo, it scored an impressive victory after prices surged in its first-day trading; its share price jumped by more than a fifth to SEK65.
But after two sessions, Volvo Car share price has regressed into the high 50s. The jury is still out on whether the share can hold above its IPO price over the medium term.