More Swiss Than the SMI: What 36 Stocks Cover That 20 Don't

Nestlé, Novartis, Roche and UBS didn't make the cut to be part of the Obermatt Swiss Pearls Index. If you asked me, before I had looked at a single number, which Swiss stocks are "the best of Switzerland," I would have named all four without hesitation. That is simply how most of us are trained to think about Swiss quality. Four global giants, each one older than most countries, each one a fixture in nearly every European pension fund.

Not including these big players is not an oversight: it's the result of our investment strategy.

For anyone newer to the OMSP1, the mechanism behind it is worth a quick reminder. Every stock in the index earns its place through the same test, the Obermatt 360° View, which blends Safety, Growth, Value and Sentiment into one comparable score. Once a month, the index sells the holding with the lowest 360° View and buys the Swiss stock not yet included with the highest one. At least once a year it's rebalanced back to roughly equal weights, so no single stock ever dominates.

When we run Nestlé through the Obermatt ranks, the 360° View comes out at 16, Novartis lands at 29 and Roche at 34. All three sit well below every one of the 36 companies currently in the index. The surprising part is where that weakness actually comes from, as all three post Profit Growth Ranks near the very top of the scale, 100 for Nestlé and Roche, 98 for Novartis, so the underlying businesses are performing just fine. The drag comes from Safety, and more specifically from Leverage. Nestlé's Leverage Rank sits at just 10, Novartis' at 11 and Roche's, a little better, at 19. In plain terms, all three currently carry more debt relative to their size than most of their global peers, at a moment when Obermatt's method is rewarding companies with cleaner balance sheets. Reputation says these are the safest stocks in Switzerland. The numbers say they're currently financed in a way that looks risky.

UBS's story is a different one entirely. Its 360° View sits at just 1, the lowest of the four, but the drag here is not Leverage. Its Value Rank is 1 as well, driven largely by a Dividend Yield Rank of only 1, and its Refinancing Rank, a specific piece within Safety, also sits at just 1, even though its underlying Leverage Rank of 41 and Liquidity Rank of 83 look comparatively fine. Growth, oddly enough, is strong at 90. It's a reminder that exclusion from the OMSP1 rarely comes down to one single flaw. Sometimes it's debt. Sometimes it's how a business is refinanced. Sometimes, as with UBS, it's simply a valuation and a market mood that haven't caught up with an otherwise growing business.

That gap between brand and balance sheet, or in UBS's case, between growth and valuation, is exactly why the OMSP1 looks the way it does, and it shows up well beyond just these names.

Both the SMI and SPI lean structurally on the 20 biggest companies, and in Switzerland's case that has long meant pharma plus Nestlé, with the three giants alone making up more than half of the SMI. When two sectors carry that much weight, buying "the Swiss market" quietly turns into a bet on two industries rather than what the Swiss economy really is.

The OMSP1 is built to avoid exactly that, and the effect is visible in more than one dimension. On sector, it spans more than twelve industries, and no single one dominates the way pharma does elsewhere. Industrials currently have the largest exposure at 36.60%, but that figure is not one company, it is a blend of names like VAT, Belimo, Sulzer and Burckhardt Compression, each contributing a few percent rather than the whole picture resting on a single balance sheet. The next layers down, Healthcare at 16.60% and Real Estate at 10.25%, tell the same story: broad and shallow rather than narrow and deep.

That same logic runs through company size, and here the contrast with the SMI is even starker. By weight, 63.18% of the SMI sits in the XX-Large class alone, a handful of giants carrying most of the index. The OMSP1, by comparison, holds just 6.35% in XX-Large, with the bulk of its weight spread across Medium (35.95%) and Small (27.11%) companies, the parts of the market the SMI barely touches.

Names You Won't Find in the SMI

Some of the OMSP1's best-ranked companies occupy corners of the Swiss economy the SMI does not reach at all. Real estate and tourism have no meaningful presence in the SMI, yet the index currently holds PSP Swiss Property (360° View: 90), Allreal (92) and HIAG Immobilien, alongside Jungfraubahn, the operator of the Jungfraujoch railway. Specialist instrumentation and engineering, essential to industry but largely invisible to the end consumer, is represented through Inficon (94), Sensirion, VAT Group and Huber+Suhner. Regional, relationship-based banking is represented through Valiant, a segment the SMI's universal banks do not cover. None of these companies are large enough or well known enough to qualify for the traditional benchmarks. That is precisely why an index built on financial merit rather than market capitalization ends up holding them.

Two of the index's current leaders make the point even more directly. Alcon sits at the very top of the OMSP1 with a 360° View of 100. It spent decades as Novartis's eye care division before being spun off as an independent company in 2019, the same Novartis that carries a 360° View of just 29 today. Bachem (93) is anchored by a near-perfect Liquidity Rank of 100 and a Safety Rank of 98, and SoftwareONE (89) carries a strong Leverage Rank of 86. Details like these, not just a company's size or sector, are exactly what the 360° View is built to surface.

Whether all this discipline actually pays off is a fair question, and the numbers answer it. Since inception, the OMSP1 has produced a Jensen Alpha of +2.46% against the SMI, meaning it has delivered 2.46 percentage points more return per year than its market risk alone would predict. Its Beta of 0.64, against 0.70 for the SMI, tells a similar story: Beta measures how much an index moves relative to the broader market, so a lower number means the OMSP1 swings less. Add a slightly higher Sharpe Ratio (0.63 versus 0.62) and the picture is consistent rather than dramatic: a bit more return for a bit less risk, built by systematically avoiding the concentration at the heart of the traditional benchmarks. For the investor, that's the real advantage: a simple buy-and-hold position, with all the ongoing work of avoiding concentration and financing risk handled every month, without you having to pick a single stock yourself.

Invest in a professionally managed index of 36 stocks selected each month using the Obermatt method. Available for retail investors on the SIX Swiss Exchange (Ticker: OMSP1). Learn more