Månadsbrev januari 2020

Monthly newsletter January 2020

The Global Security Fund had an excellent start to 2020, gaining 5.87 percent during the month. A very strong result compared to the comparison index which was up 2.16 percent or the Swedish OMX TR index which was up 0.64 percent.

January began with increased geopolitical unrest, which had the predictable effect of weakening global equity markets sharply, with the exception of defense stocks which went against the grain with positive returns. The period at the beginning of January is a clear example of the value of investing in companies with a geopolitical exposure. The tense situation between Iran and the United States is one of several geopolitical risk examples that may have a negative impact on this year's stock market performance, which underlines the importance of creating a robust and resilient portfolio.

The best performing company of the month was Harris Technologies, which was up over 11.85 percent. Even if the company does not report until February, the month's stock market performance is proof of investors' confidence in the company's positioning. The company works actively in communications, electronics, space technology and avionics, and is particularly active in the fight against electronic warfare. The company benefits from the trend we see where states increasingly focus on an open architecture strategy in their procurement. This enables Harris to collaborate with other companies such as Boeing on the unmanned MQ-25 project. Defense giant Lockheed Martin also performed strongly during the month, returning 9.95 percent. Lockheed Martin has seen strong demand for the F-35 fighter jet and in its quarterly report reported significantly better-than-expected sales, up more than 10.4 percent compared to Q4 2019. Revenue was also above market expectations and the company's forecast was raised for the coming year. Northrop Grumman also performed strongly during the month, up 8.8 percent.

Security firm Booz Allen sees stronger growth for the year ahead, rising 9.71 percent during the month. A trend we believe will also benefit CACI, which was up 7 percent.

As reported in last month's letter, the fund has reduced its allocation in Boeing to close to 0, but is following the company's development closely. For the first time since 1997, the company reported an annual loss and has raised its total cost for the 737Max crisis to USD18.5bn. Despite this, the company was only down 2.3 percent during January. Viasat landed a defense contract for new tactical radios worth $90 million, but the company was still severely punished by the market, retreating 13 percent. We eagerly await the company's report in February.

The investment case for the defense and security sectors is strong and we believe the beginning of the year with increased geopolitical risks will return, with a negative impact on most markets, but where global security companies, both historically and in the near term, have proven to perform have good conditions to perform well .