Monthly newsletter July 2020


There was a generally strong development in the stock market in July and once again it was the technology company that acted as the locomotive. The investment interest in the cyber security sector is clear and companies in the sector performed particularly strongly, which also had a positive effect on many of the fund's holdings. Crowdstrike was up 12.9 percent and up 127 percent during the year while NortonLifeLock, a company the fund increased its holding in in June, was up 8.2 percent and is up 47.2 percent in 2020. The dollar continues to act headwind and backed 5 .8 percent in July, which had a large effect on the fund's return, which ended down 3.4 percent.

It was an active month where more than half of the portfolio companies reported quarterly results. Saab reported stronger-than-expected sales of SEK 8.84bn with sales growth compared with 2019 corresponding to 4.6 percent and a significantly better result than expected. As a positive sign of Saab's future sales development, there were new orders of SEK 9.25bn during the second quarter and the company enters the third quarter with a strong order backlog, including large orders from the US Army and the expectation is that the company will be cash flow positive. . The company was up over 20.8 percent in July.

The Norwegian defense company Kongsberg Gruppen increased by 1.6 percent (SEK) in July after reporting a better-than-expected result, despite lower-than-expected sales.

While the dollar exchange rate dampened the return in SEK, the majority of holdings reported significantly better results than expected. Textron, a company with a significant exposure to the aviation industry, beat expectations with stronger sales and a stronger-than-expected result. A robust demand for the company's products in the defense industry will reduce the downside risk. Textron was up over 6 percent in USD. Other companies that performed well in July with stronger than expected results were Northrop Grumman which beat expectations for both sales and earnings and was up 5.7 percent (USD), Booz Allen reported slightly weaker sales than expected but stronger than expected results and was up 5.1 percent (USD) and Lockheed Martin reported stronger-than-expected sales and better-than-expected earnings, up 3.9 percent (USD).

The dollar has declined more than 16.5 percent since March and this has affected the fund negatively. Although it is a large price movement, it is not unusual from a historical perspective and it is our assessment that we will see a stronger dollar in the longer term, which will benefit the fund.

Boeing and Raytheon Technologies reported weaker-than-expected results and this is reflected in the month's price movements. Boeing was down 13.8 percent (USD) while Raytheon backed 8 percent (USD).

No major changes have been made to the fund during the month, only some minor tactical adjustments.

The quarterly reports released in July support the argument that the ongoing crisis has not had a major impact on the majority of the fund's holdings. Some of the holdings have a slightly greater exposure to the aviation industry and the real economy, but in general the portfolio is exposed to global security and we view the fund's ability to create good future returns positively.

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