July was a very strong month too Global Defense & Security Fund with a return of 4.3 percent in line with the fund's benchmark index which returned 4.4 percent, but significantly stronger than OMX TR which was down 1.4 percent. Over 3 months, the fund has beaten both the benchmark index and the defense sector by almost 3 percentage points and OMX by almost 10 percentage points. In comparison with other globally diversifying funds, the GDS Fund is at the top, confirming our argument that the defense and security industry is behaving differently towards other sectors.
It was the security and IT sectors that performed best in July. Measured in Swedish kronor, Dell, Carbon Black and Palo Alto Networks were the best performing shares in the portfolio up 17.81%, 15.45% and 15.33%, respectively. It was not entirely unexpected that Dell recovered after the month of June. We believe that Dell is a well-run company, but our assessment is that the company is greatly affected by the ongoing US-China trade war. Dell is actively working to reduce that risk. Our assessment of Carbon Black has so far performed better than expected and the company is up over 40 percent since our investment in April. There is an extremely large upside in security companies that succeed, but we are aware of the higher risk in these individual, usually smaller companies, which also explains our current allocation to the company. Fireeye, another cyber security company owned by the fund, performed less well and rose 5.43 percent. The company has had headwinds with higher costs than expected for cloud migration, which caused the company to fall over 6 percent in the last days of July.
The defense sector again performed very well with L3 Harris Technologies, Mantech, Northrop Grumman, CACI and Raytheon in the top of the defense companies. United Technologies also performed strongly, a trend that may continue in view of the upcoming merger with Raytheon. A number of good reports were also released during the month which included Raytheon, Northrop Grumman and Lockheed Martin. Northrop Grumman is usually conservative in its assessments, but we note that the company has beaten market expectations every quarter over the past year.
The five worst performing companies in July were Kongsberg Gruppen, Flir, Thales, Textron and Boeing. Boeing reported its largest quarterly loss of all time - a total of $ 2.9 billion. Since the start, the fund has had a very small allocation to Boeing because we believe that there are still risks to the company. In the long term, however, we consider Boeing as an interesting company, and we are following the trend closely to possibly buy more shares if the price continues to fall.
See the monthly report for the GDS Fund below:
