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More than half of the fund's holdings reported during the month of October, but even though the companies beat expectations in most cases, October was a weak month, both for the fund and for the world's stock markets. Uncertainty surrounding the presidential election in the United States weighed heavily on the stock market and most stock exchanges in the world showed red figures. The Global Security Fund also retreated with 6.62 percent and 6.85 percent respectively (S – class and – R – class respectively).
Most of the companies, both in the fund and other listed companies, had negative stock market trends in October. One of the fund's holdings, the Norwegian Kongsberg Gruppen, was the shining exception. The company reported on October 30th, smashing earnings per share expectations by over 90 percent! SEK 2.46 compared to SEK 1.28 per share. Despite revenues being largely unchanged during the year, the EBITDA margin for the group was 15.8 percent. The background to this has been good market adaptation, lower costs and efficient project implementation. The fact is that the integration of Rolls-Royce Commercial Marine is well ahead of schedule, which also contributes positively to the good earnings trend. The company's board decided to distribute an additional NOK 10 per share, which corresponds to a total of NOK 1,800 million, and also to initiate a buyback program of up to NOK 200 million. The company was up 7.4 percent for the month, which affected the fund's return by 0.5 percent.
Saab was the first of the fund's holdings to report during the month. The report was clearly below the market's expectations, both in terms of sales and results. The company retreated 22.7 percent, which negatively affected the fund's return by 1.5 percent. Covid-19 has had a major impact on Saab as many of Saab's suppliers have had limited capacity and Saab has also had problems visiting these and getting products certified. Saab's goal of an operating margin of 10 percent feels distant at the moment, but the sharp decline in October feels exaggerated. There is no doubt that Saab's share price has been volatile, but we expect the company to recover significantly after Covid-19.
One of the fund's largest holdings is Crowdstrike. It was also the company that had the biggest negative impact on the fund during October. Crowdstrike retreated 10.4 percent, which affected the fund by -1.8 percent. The company's development during the month was not a result of a weaker report, but rather the movement should be seen as a price correction, which feels entirely reasonable given the company's very strong stock market performance in 2020. The fund has reduced its allocation to Crowdstrike and at the end of the month the company was the fund's third largest holding, with an allocation of 6.4 percent.
Lockheed Martin reported stronger-than-expected sales and earnings, but subdued growth expectations sent its share price down 8.8 percent on the month, undermining the fund by 1.1 percent. With a solid order backlog, we believe the company's growth expectations for 2021 are conservative and that the company will exceed these. Northrop Grumman is a company that usually gives conservative expectations and usually beats them - which was once again the case in October. The company reported stronger than expected sales and increased 6 percent compared to the previous year, as well as a stronger than expected result. Despite that, the company retreated 8.7 percent in October, which affected the fund by -0.85 percent. We believe that a strong order backlog will benefit the company and after a three-year price consolidation there is a lot of upside for the share price.
Boeing reported in October and although expectations were negative, the outcome was not as negative as expected. It is clear that there is huge uncertainty in connection with Covid-19 for the company, but with a relatively growing share from the space and defense group, which now accounts for 50 percent of the revenue, it feels like the company has taken a lot of beating given potential future prospects.
Huntington Ingalls Industries doesn't report until next month but was up more than 4 percent for the month — benefiting the fund by 10 basis points.
The fund has sold its holdings in Viasat and Textron. At the same time as the fund has reduced its holding in Crowdstrike, the fund has taken up positions in cyber security companies FireEye, PaloAlto Networks and Fortinet. All three companies are considered large cyber security companies measured by sales and have good prospects. The fund previously owned FireEye, but the company's relative valuation made the company less attractive compared to other cyber security investments. FireEye which reported in October, and which beat expectations, we judge to be cheap given future expected earnings development. Palo Alto Networks and Fortinet are equal companies that both manufacture network solutions, but the companies have developed in different directions. Fortinet has focused on organic growth while Palo Alto Networks has been active in acquiring cybersecurity players. Both companies offer attractive growth that we believe has good opportunities in the coming years.