Monthly newsletter March 2020

The revaluation of risk premiums we saw in February escalated in March, leading to a further decline in world equity markets and a sharp rise in the US dollar. Central bank interventions combined with large bailouts from all quarters helped to calm the markets, leading to a strong recovery in the stock markets. Shares have largely been sold across the board, which also affected the Global Security fund, which retreated by 12.9 percent.

Given the situation, we have increased the frequency of our communication with more detailed information, in addition to the monthly reports. The material is available on the website in the news archives. There is also a video conference presentation with pictures where we talk about our view on why we think the investment situation will benefit the price development of the companies that are held in the fund. Later this week we will publish a more extensive report on this.

The fund has become more concentrated and we have reduced our holdings from 27 to 22 companies. Our exposure in the US dollar has increased to over 90 percent as we believe in a significantly stronger dollar rate this year. So far this year, we have seen that the risk premiums for growth companies have increased relative to the value of so-called value stocks. This has benefited the more technology-oriented companies in the portfolio and also niche IT consulting companies such as Mantech and Booz Allen that work closely with government customers with security solutions.

During market turbulence you sometimes find good investment opportunities and we took the opportunity to buy into CrowdStrike at $32. CrowdStrike is a cyber security company which has been on the radar for a long period but which we did not buy as we considered the price to be too high compared to other companies. The company went public last year at 34 dollars and traded up to a rate of 100 dollars in a short time. With a high double-digit sales growth driven by, among other things, world-leading products, we believe the company will reach annual sales of 1 billion dollars before 2023. The company is now one of the five largest holdings in the funds, and even if we expect an increased level of volatility in the market, we believe that this is one of the companies that will benefit after this crisis. Five days after the purchase, the company traded at over $57. We have also taken the opportunity to increase our holdings in Microsoft.

Many of the traditional security companies were down sharply during the month of March, in line with the rest of the stock market. We feel safe owning these companies because they work directly with states as customers, which means that they will not be affected in the short term by this crisis, unlike companies aimed at private individuals and companies. Most of the fund's holdings have signed contracts secured by more than twice annual sales, providing a fantastic short-term buffer. The world has been largely unprepared for this crisis and as a result we believe that security will be highlighted as one of the most important focus areas going forward. We believe that the strong investment trend that existed before the crisis will increase in pace. Being able to buy companies like Lockheed Martin now at a PE number of 13 will be considered cheap in retrospect. The fact that the fund has many such examples of companies makes us feel confident that we have good conditions to navigate through the storm.

You can download the report here