Slovenian stocks have jumped 20 percent this year. Are they still a good opportunity?

Croatian stocks have been on a significant rise for two years, but in neighboring Slovenia, there is a similar stock market optimism, if not stronger. Last week, news circulated in the region that the stock index of the Ljubljana Stock Exchange, SBI TOP, has surpassed the value of 2000 points. This brings it back to levels from the spring of the now distant 2008. Just this year, the SBI TOP has jumped 21.5 percent, which is an incredible result for such a short period. Recall that last year, the Slovenian stock benchmark strengthened by a fantastic 33 percent.

Marko Bombač, the newly appointed CEO of the Ljubljana Stock Exchange, emphasizes several reasons for the strong performance of the Slovenian index. – Petrol, which carries a 20 percent weight in the index, has risen by 45 percent, while Krka (30 percent weight) and NLB (20 percent weight) have increased by 18 and 16 percent, respectively. On average, the remaining components of the index recorded a growth of 15 percent – Bombač points out. However, for investors, it is more appropriate to take a longer-term perspective, adds the head of the Slovenian stock exchange. For example, from its lowest point on August 24, 2012, the index has increased by almost 300 percent, and when dividends are taken into account, the total return exceeds 670 percent, even surpassing American stocks (S&P 500) in the same period.

Low base

– Two key factors stand out for this performance. The Slovenian stock market in 2012 was affected by fears stemming from the European debt crisis, which also impacted the Slovenian economy. As a result, initial valuations in 2012 were low, particularly reflected in the price-to-book (P/B) ratio. More importantly, Slovenian listed companies have, on average, shown strong business results over the years. Their profits and dividend payouts have multiplied, leading to improvements in the P/E ratio and dividend yields of the SBI TOP index, even as stock prices have significantly risen. Looking ahead, business results are likely to remain a key driver of returns over the next decade – Bombač emphasizes.

The Slovenian index peaked at 2674.69 points on August 31, 2007, reminds Đivo Pulitika, a fund manager at InterCapital Asset Management (ICAM). Looking solely at the price component, the SBI TOP has not yet recovered (it is down 23 percent). – However, with Slovenia, it should be noted that it is a market that, during that period, provided an average of five percent dividends annually. Therefore, if someone had actually invested in the index components in 2008, while receiving and reinvesting dividends, they would be up 71 percent today – Pulitika points out. He also agrees that the main driver of the SBI TOP’s growth is primarily the growth in company profits.

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Đivo Pulitika, fund manager at InterCapital Asset Management

photo Rene Karaman

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– For example, despite a yield of 42 percent, the SBI TOP started 2024 with a P/E multiple of 8.3x and ended with 7.7x. In other words, company earnings have grown even faster. Part of the growth this year can likely be attributed to investors recognizing how ‘cheap’ the index was. Some of the growth is also attributed to preparations for the introduction of investment accounts in Slovenia. One proposal is that tax incentives through such accounts are recognized only if a certain percentage of the portfolio consists of domestic stocks. And of course, there are expectations for results for the fourth quarter, as well as for the entire 2025 year (some companies have already announced expectations indicating that this will also be an excellent year) – Pulitika explains.

More money is flowing in

All of this positively reflects on the liquidity of the local stock exchange. In January, the trading value reached 59.2 million euros, which is a significant 90 percent compared to the average turnover in January over the past five years, the Ljubljana Stock Exchange informed us. – International investors held 53 percent of the turnover share in 2024 and represent an important group of active investors in Prime Market companies. So far in 2025, their share has remained at the same level as the previous year – notes Marko Bombač.

Despite the significant growth in recent months, Slovenian stocks remain an interesting ‘commodity.’ As Đivo Pulitika states, Slovenian companies, especially the largest ones, are mostly recording business growth in combination with still lower price-to-earnings (P/E) ratios and higher dividend yields compared to Europe.

– For example, a comparison of stocks with large weights in the SBI TOP against MSCI’s European sector indices, according to Bloomberg data, looks like this: Krka is currently trading at 13x P/E, with a 4.5 percent dividend yield (MSCI Europe Healthcare is at 18x and two percent). Petrol is at 12x P/E and four percent dividend yield, which is roughly in line with the average of the European Energy and Consumer Staples sectors. NLB Bank is at a P/E of 5x, with a 7.5 percent dividend (MSCI Europe Finance is at 10.8x and 4.5 percent). Slovenian insurers are slightly cheaper than the European financial sector by P/E, but also offer a slightly lower dividend (Triglav has a P/E of 8x and a dividend of 3.7 percent, while Sava Re has a P/E of 9x and a dividend yield of 3.3 percent). Thus, in relative comparison, Krka and NLB stand out. Petrol is the stock that has seen the highest value increase this year, but the company has also announced strong business growth this year – Pulitika notes.

ETFs are becoming increasingly popular

Investing in individual stocks always carries risk, which can be mitigated by investing in the entire index. For such an approach, exchange-traded funds (ETFs) are a good solution. ICAM listed an ETF tracking the movement of the Slovenian index on the Zagreb Stock Exchange a few years ago. According to data from the Zagreb Stock Exchange, in January of this year, this ETF recorded a convincing highest turnover among this type of securities at 2.3 million euros. Investors can access this ETF through other channels (Ljubljana Stock Exchange or primary issuance for institutional investors), and since the beginning of the year, it has raised a total of 5.6 million euros in new investments. The total size of the ETF is now 25 million euros. Đivo Pulitika expects that interest will remain strong as the market is healthy.

– This year we have record interest on the Ljubljana Stock Exchange (although still weaker than in Zagreb), and the growth of the total assets of the ETF makes it interesting to some larger players, who usually have investment restrictions (for example, they cannot invest more than 10-15 percent of the total value of a given ETF). Therefore, when the ETF is small, they do not invest in it, as the total level of investment is too small compared to their own portfolio. However, these restrictions now mean that such investors can invest two to three million euros, so we believe that this ETF could become a primary (or at least supplementary) way for some of them to gain exposure to the Slovenian capital market – Pulitika asserts.