Swimming against the tide: Nordea portfolio manager Jon Hille-Walle says salmon sector earnings don't justify the share price.

Bank warns salmon shares are overpriced

Scandinavian banking giant Nordea has repeated last year’s warning to investors that shares in salmon companies are overpriced.

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Financial website Bloomberg reported an interview with Nordea Asset Management portfolio manager Jon Hille-Walle, who said: “The sector is even more expensive now. Earnings haven’t moved, while pricing has increased.”

The attraction of salmon stocks to investors is clear in the figures. According to Bloomberg, the Oslo New Seafood Index rose 53% last year while the Oslo Stock Exchange Benchmark Index fell 1.8%. Hille-Walle’s fund Nordea Norge Pluss struggled declined by 11%.

‘Usually they disappoint’

“We’re just as sceptical as last year,” he said. “Volumes are a bit up but usually the companies don’t manage to deliver the volumes they forecast. Usually they disappoint. So, it will again be demanding to get earnings growth and in the worst case there will be an earnings fall this year.”

Nordea is not the only Scandinavian financial institution to warn that salmon stocks have reached their limit for now.

Last month DNB Markets, part of Norway’s biggest bank DNB, downgraded the sector to negative and advised shareholders to take profit. Both banks have said stocks of the world’s biggest salmon farmer, Mowi, are overpriced.

Seafood index up 1.8%

Regardless of the warnings, the seafood index is up 1.8% so far this year.

“It’s a cyclical industry but now it’s priced as if it wasn’t cyclical,” Hille-Walle told Bloomberg. “There are biological issues that change supply and the price and then there’s volatility. We think that we should go back to historical pricing that reflects the cyclicality.”

The Nordea Norge Pluss Fund is reducing its holding in Mowi. The fund favours instead energy, shipping and oil service stocks, which are recovering from a slump in spending by oil companies.

“It looks like a gradual recovery is playing out,” Hille-Walle told Bloomberg. “We’re still cautious and like companies with good balance sheets.”