The fund was up, 0.57% for the R-class during the month, despite a sharp race in the stock market. The Stockholm index OMSX30 was down – 8.32 % and the global stock index MSCI World was down – 7.77 %.
High inflation data and the FED's sharp interest rate hike of 75 basis points affected the markets. Central banks around the world can be judged to be late in their actions and will therefore have to act forcefully to overcome inflation, so expectations of high interest rates affect the valuations of technology stocks. The FED may try to orchestrate a mild recession to reduce demand and thus inflation.
The fund's technology holdings were characterized by large declines in Cloudflare, Intel, and Honeywell, while Crowdstrike and Science App developed strongly. The fund's holdings in space and especially defense developed stably and well for the month.
Boeing recovered during the period and had strong returns of 4.17%. We note that Saab continues to contribute with a strong return of 80 % Ytd and has good conditions to increase its revenues. Saab's development is remarkably strong compared to market development in general, which is probably largely driven by Sweden's increased defense budget. In recent weeks, the news came that Sweden has ordered two GlobalEye reconnaissance aircraft from Saab, to a value of just over SEK 7 billion.
We believe that the reason why the portfolio shows such good resilience is that the fund is well diversified and exposed to three super trends that will provide the conditions for good growth and profitability for the companies in these industries. The portfolio is also clearly weighted towards the US with around 95%. Even if the risk of a recession in the US is high, it is likely to be lower than in Europe, and in that case should also be milder. Europe also has greater challenges in terms of energy supply and structural problems to deal with.
There is a relatively high consensus that growth may be lower in the future and that globalization is slowing down, which may even lead to deglobalization. This is closely linked to geopolitical tensions and that countries and regions need to ensure more reliable supply chains. Many believe that it will be increasingly difficult to generate returns for the next 10 years compared to the previous 10. For that reason, we believe that you should seek exposure to growth sectors that are likely to grow more than the market in general and companies with already strong cash flows, as the less profitable companies run a greater risk of financial difficulties.
Exposure to the three supertrends of defense, cyber security and space, we believe are sectors that, at least on a relative basis, can beat the market from a risk-adjusted perspective. Cyber threats are growing rapidly and investments are necessary and to a large extent planned for by companies and government institutions. This is a trend that is expected to increase more and more in the coming years as digital quality information becomes increasingly important. Defense growth is evident from increased budget allocations, which can also lead to a follow-John effect. Space already forms a central part of our infrastructure and in line with the continued digitization and strong demand for intelligence data for defense, we, and other analysis institutes, assess that the space market will see strong growth in the future