May: Again a strong month for the Global Security Fund

Facebook
Twitter
LinkedIn

It was a good month for the Global Security Fund, which was up 1.7 percent and 1.6 percent for the share classes R and S, respectively. The trend we have seen during the year with value-oriented companies performing better than growth companies was broken in May. Fantastically good price development was demonstrated by a number of technology-oriented companies owned by the fund. Again, we see this as strong figures given the weak dollar, which was down 2 percent against the krona in May.

The cybersecurity allocations performed best in May, led by Norton Life Lock. The company reported on May 10 and beat profit expectations by a good margin. As a result of the growth that the company has had, the outlook looks better than before and the company has raised its forecast for the coming years. The market's reaction to the news was strongly positive with a share price up 24.5 percent for the month with a contribution of 1.1 percent to the fund.

After reporting in April with better earnings and adjusting earnings per share without any significant market reaction, FireEye gained some momentum at the end of May, which led to an increase of 10.5 percent for the month with a contribution of 0.45 percent to the fund. The company was the first to report on the cybercrime at Solar Winds last year and is once again working with the authorities, this time around the data breach at Colonial Pipeline. The Colonial Pipeline, which transports oil between New York and Texas, was the victim of a "ransomware" attack on May 7.

Crowdstrike, which reports on June 14, was up 4.5 percent during the month with a contribution to the fund of 0.3 percent. The company has had a calmer start to the year compared with many other cyber security companies after a very strong period in which the company's share price has more than quintupled. Despite a high valuation, the company is considered to be the best in endpoint detection with developing products in a hot industry. The growing trend of cybercrime benefits the company which sits on a large pipeline of orders.

The cybersecurity company Fortinet released a strong report on April 29, which points to great growth and good profit margins. The share price of the company, which manufactures products in the network segment, is up over 49 percent for the year and was up over 5 percent in May with a contribution of 0.3 percent.

When Raytheon Technologies reported on April 27, the company increased its dividend by 7 percent. The company pointed to a recovery in the aviation industry and better synergies after the Raytheon / United merger. In the space segment, Raytheon Intelligence & Space was awarded a contract by the US Space Force for a control system for a constellation of GPS satellites. Here in Sweden, we have now taken part in the first Patriot system delivery as a result of the trade agreement in 2018.

The merger between Teledyne and Flir went through in May. Both companies have a niche in drone manufacturing and there are now a lot of synergies to exploit. Demand and growth in unmanned vehicles and drones is high and the combined company is well positioned for future growth. Despite this, Teledyne fell 8.1 percent in May while Flir was down 6.2 percent. This resulted in a negative contribution of -0.17 percent.

Saab was down 4.4 percent in May, resulting in a negative contribution to the fund of 0.13 percent. The company's share price development has been weak, which is partly due to the fact that the market for the company has been the most affected during the Covid pandemic. The company's management believes in increasing defense budgets and it will be interesting to follow the development from the NATO meeting to be held in Belgium on 14 June.

Other companies with negative price development in May were Microsoft, Lockheed Martin and General Dynamics, which were down 2.8 percent, 2.1 percent and 1.5 percent with negative contributions to the fund of 0.12 percent, 0.12 percent and 0, 1 percent.

With a few exceptions, all companies have now reported in the second quarter with largely good prospects. When NATO members meet in two weeks' time, the agenda will be defense in 2030. It is seven years since the decision to increase budgets to 2% of GDP, and many of its members are still lagging behind. Strengthening the alliance and cooperation between the OECD countries is an important development and how one chooses to invest will affect the companies in different ways. The statement we have received from the United States so far indicates that the budget will increase in line with long-term GDP growth, but that there is a will to increase further. In connection with a society that opens up, we believe in a production rate that returns to normal.

Read the full report here.

More to explore