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Market rotation favoured defensive companies and growth factors

Global equities as a whole had a positive month in July, but the outcomes on the world stock exchanges varied. The stock markets performed well in Europe and the USA, but in the Asian markets the monthly return was negative. An acceleration in the spread of the delta variant of Covid-19 in many parts of the world contributed to concerns and lower interest rates.

The best returning sectors in the portfolio were cyclical consumer goods and information technology. In cyclical consumer goods, earnings were driven by company-specific positive news from Sony and Garmin, and the average return of 5.3 percent was contrary to the sector index, which rose 0.3 percent during the month. Among our technology companies, the development was more in line with the market as a whole and was mainly driven by a general market rotation that favoured defensive companies and growth factors, although a number of portfolio companies also issued excellent reports.

The best returning companies in the portfolio were Novo Nordisk (+10.4%), Alphabet (+10.4%) and Pfizer (+10.3%). Novo Nordisk climbed steadily during the month on expectations of strong quarterly figures and an overall strong period for the pharmaceutical sector. Alphabet delivered another strong interim report that exceeded expectations for both sales and profits by a good margin. Strong growth was reported in several segments, and total advertising sales increased by 68 percent compared with the same period last year. In the cloud services business, Google Cloud, revenue increased by 54 percent while the margin improved. Pfizer also released a strong report, with figures for both revenue and profits that exceeded market estimates. The focus was on the company’s Covid-19 vaccine, and it announced doses sold for a total of USD 7.8 billion during the second quarter. At the same time, the forecast for the full year was raised to SEK 33 billion, from the previous SEK 26 billion. Several other business areas also showed good development. In oncology, sales grew by 19 percent compared with the same quarter last year, while in the area of treatments for cardiovascular disease growth was 5 percent.

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