Investment AB Latour (publ), the Swedish investment firm, is known for its long-term approach, focusing on companies with strong growth potential and solid fundamentals. While their recent financial data paints a picture of stability and consistent returns, a deeper dive into their cash flow statements reveals a tantalizing possibility that may have flown under the radar of many analysts. Latour might be gearing up for a significant acquisition.

Examining Latour's quarterly cash flow statement for the period ending March 31, 2024, we see a curious anomaly. Despite a slight dip in revenue compared to the same period last year, their total cash from operating activities remains robust at SEK 630 million. This, however, is coupled with a decrease in cash and cash equivalents, indicating a significant outflow of funds.

The question arises: Where is this cash going? While capital expenditures remain at zero, a closer look at the "investments" line item reveals an outflow of SEK 572 million. This signals a deliberate strategic move by Latour to deploy its capital, and a major acquisition seems like the most plausible explanation.

This hypothesis is further strengthened when we compare this quarter's cash flow with the previous year's data. Throughout 2023, Latour engaged in several share buybacks, evidenced by the negative "other cash flows from financing activities" figures. This strategy shifted significantly in the first quarter of 2024, suggesting a change in priorities. Instead of returning capital to shareholders, Latour appears to be conserving its cash, potentially for a large-scale investment.

Let's consider some historical context. Latour has a proven track record of making strategic acquisitions, bolstering its portfolio with companies that align with its long-term investment philosophy. In 2018, they acquired the remaining shares of Swegon, a leading ventilation technology company, demonstrating their commitment to owning high-performing businesses outright. Could another such acquisition be on the horizon?

Further fueling speculation is Latour's impressive cash position. Their cash and cash equivalents, while slightly lower than the previous quarter, still stand at SEK 2.277 billion, providing ample firepower for a substantial investment. This, combined with their consistently strong operating cash flow and minimal debt levels, positions Latour perfectly to seize a compelling opportunity.

Cash Flow from Operations vs. Investments

The following chart visualizes the relationship between Latour's cash flow from operations and its investments over the past few quarters. Notice the significant increase in investments in Q1 2024.