Finserve Global Security Fund lost 3.0 % during November, mainly as a result of a weaker dollar, which lost about 4.5 percent against the Swedish krona during the period, as well as increased uncertainty regarding the rate of growth in cyber security. MSCI World and broad stock indexes were up between 5-7 % for the month. The fund's contribution from the defense sector was positive, while cyber security had a negative performance contribution.
We assess that the rise in global stock indices can be attributed to, among other things, falling long-term interest rates, positive economic statistics from the US, a continued strong US labor market and a dovish FED. Powell's speech on November 30 was interpreted dovishly and received positively by the market. The US economy is showing signs of resilience despite high interest rates and inflation. As a result, a milder downturn in the economy is priced in, which has been positive for the market. It can be emphasized that the US economy is not as sensitive to the outside world and spillover effects as other geographic markets, but is primarily governed by the domestic economy and its conditions. The fund's portfolio is mainly weighted towards the US and it is interesting to see if the US would fare better than, for example, European and Asian markets in the future. We see the US as continuing to be the driving force in the global economy, led by, among other things, the sectors the fund is exposed to.. It can be emphasized that the US economy is not as sensitive to the outside world and spillover effects as other geographic markets, but is primarily governed by the domestic economy and its conditions. The fund's portfolio is mainly weighted towards the US and it is interesting to see if the US would fare better than, for example, European and Asian markets in the future. We see the US as continuing to be the driving force in the global economy, led by, among other things, the sectors the fund is exposed to.
What mainly weighed on the month's return was the fund's exposure to the cyber security company Crowdstrike. The company reported quarterly on November 29 and the stock traded down sharply after what the market interpreted as the strong growth in the company and the sector showing signs of slowing down from high levels. Crowdstrike contributed -0.90 % and is now the weakest holding for the year in the portfolio. Crowdstrike also brought other cyber security companies into the case – a sector that has shown major fluctuations during the year.
The fund's development was also weighed down by some defense companies; L3 Harris, Northrop Grumman and Huntington Ingalls, all of which had to give back some of their strong annual returns. The negative development came after Bank of America downgraded many defense companies due to estimates that delayed supply chains and component shortages will have negative effects on the sector. We share the bank's view that this may cause increased costs and delays, but we do not believe that it will go against the long-term strong trend for the sector, which we believe has good conditions to show strong growth and profitability going forward.
Positive contributions in the portfolio during October were Boeing, Microsoft and the Norwegian defense company Kongsberggruppen. Boeing gave an improved forecast that had a large positive price impact early in the month and the company ended up 25.5 % during the period.
We note that the fund's companies continue to win large assignments and procurements. This applies to companies in defense as well as cyber and space. Our long-term positive view of the sector remains intact.
