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The Fourth Swedish National Pension Fund is one of five so-called buffer funds that together constitute about 15% of the country’s pension system and helps to cover future pension disbursements.
AP4, as the fund is known, had assets totaling 356.6 billion Swedish kronor as of the end of 2017, or about $43.3 billion. The year saw a net return of 9.1%. The fund gained 30.1 billion kronor in 2017 while contributing 7.4 billion kronor to the pension system. AP4 has generated an average annual return of 7.3% in the last 10 years and an average annual return of 6.1% since its inception in 2001. The fund is doing its job in more than meeting the long-term annualized return target of a 4.5%.
How does a fund with such a crucial mission make its numbers? Perhaps the answer is in bulking up on well-known U.S.-traded equities, which totaled $6.6 billion in AP4’s portfolio. In the fourth quarter, the fund ponied up the kronor to buy truckloads of Apple (ticker: AAPL), General Electric (GE), Starbucks (SBUX), JPMorgan Chase (JPM) and Exxon Mobil (XOM).
AP4 bought 217,200 more shares of Apple in the fourth quarter, raising its total investment to 1.5 million shares of the iPhone maker. Apple shares soared 48%, excluding dividends, in 2017, more than doubling the 20% gain in the Standard & Poor’s 500 Index. Upbeat news about the iPhone X release gave a fourth-quarter boost to the stock price. So far in 2018, Apple has eked out a 4% gain through Wednesday’s close, despite fears that iPhone X is facing tough competition in Asia. We believe Apple is one of seven stocks investors should consider in a volatile market.
GE ended 2017 flat on its back with a 43% dive. Unfortunately, shares are down another 16% so far in 2018. We’ve detailed in a recent cover story why we don’t think the stock is a value play at this point. Here’s a new sore point: tariffs. The conglomerate could be one of the companies most at risk for higher steel and aluminum prices. AP4 bought 403,500 more GE shares in the fourth quarter to end the year with 2.5 million shares.
Starbucks has seen better years than 2017 when it eked out a gain of 5%. Investors were jittery that growth in the cafe chain’s rewards program was slowing. Yet, we say it’s also one of the seven stocks investors might want in the midst of uncertainty. We note an analyst thinks Starbucks can grow earnings per share “by more than 12% annually for years to come.” The fund has gotten jump on the stock after buying 66,600 more Starbucks shares in the fourth quarter, ending the year with 412,000 shares. Shares are essentially flat so far this year.
JPMorgan gained 27% in 2017 and has tacked on another 8% this year. The financial giant recently pointed to strong earnings and dividend growth in the future, two stars in the night sky that investors like to navigate their boats toward. We’ve even recently highlighted JPMorgan as a choice for safe payouts as interest rates rise. “JPMorgan should be able to keep lifting its dividend, barring a major downturn,” we noted. AP4 bought 149,000 additional shares and ended 2017 with 989,200 JPMorgan shares.
Exxon shareholders may resent the downwardly mobile stock. Shares of the energy giant slipped 4% in 2017 and are down another 10% so far in 2018. On Wednesday, during an analyst meeting Exxon Chairman and Chief Executive Darren Woods declared “we are confident we can reliably grow the dividend at $40-per-barrel oil,” although he declined to specify a growth target. AP4 was pumped to pick up 166,700 more Exxon shares in the last quarter of 2017, raising its investment to 1.17 million shares.
Despite the increased Exxon investment, AP4 also supports the Fossil Free Sweden initiative, whose top declaration reads, “The world needs to become fossil-free. We welcome the fact that Sweden is taking the lead. It creates a better environment, more attractive cities and new opportunities for jobs.” Another Swedish pension fund, AP7, exited Exxon last year on an environmental stand. But, at least through AP4, Exxon is still in the system’s tank.
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