The GDS Fund got off to a great start in 2020, increasing by 5.87 percent during the month. A very strong result compared to the benchmark index which was up 2.16 percent or the Swedish OMX TR index up 0.64 percent.
January began with increased geopolitical concern, which led to the predictable effect that global stock markets weakened sharply, with the exception of defense stocks that went against the current with a positive return. 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 could have a negative impact on the stock market development this year, which underlines the importance of creating a robust and resilient portfolio.
Harris Technologies' highest performing company of the month was up 11.85 percent. Although the company does not report until February, the stock market trend of the month is an acknowledgment of investor confidence in the company's positioning. The company works actively in communications, electronics, space technology and aviation electronics, and is particularly active in the fight against electronic warfare. The company benefits from the trend we see where states in their procurement increasingly focus on an open architecture strategy. This allows 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 F-35 fighter aircraft and reported significantly better sales than expected in its quarterly report, an increase of more than 10.4 percent compared to Q4 2019. Revenues were above market expectations and the company's forecast was scaled up for coming year. Northrop Grumman also performed strongly during the month, up 8.8 percent.
The security company Booz Allen sees stronger growth for the year ahead and increased by 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 closely following the company's development. For the first time since 1997, the company reported an annual loss and has increased its total cost of the 737Max crisis to USD18.5bn. Despite this, the company was only down 2.3 percent in January. Viasat landed a defense contract for new tactical radios worth $ 90 million, but the company was still severely penalized by the market and backed by 13 percent. We await with excitement 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 future, have proven to have good conditions to perform well .
