A Message from Mike

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Markets, Defence and Tech: Where We See Opportunity

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The first full trading session since last weekend’s geopolitical developments has delivered a telling message: equity markets are digesting uncertainty with bouts of volatility, but they’re not panicking. Headlines may dominate the news cycle, but from a market perspective, what matters most is how investors are reacting. So far, the picture is largely one of resilience, particularly in sectors tied to future growth and security.

This serves as a useful moment for reflection on portfolio positioning, market psychology, and where opportunity may be emerging.

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Markets Today: Volatility with Opportunity

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Monday’s trading session was the first real test for markets in light of recent events. Rather than a wholesale sell-off, we’ve seen periods of strength intermixed with volatility. Risk assets such as broad tech and cyclical stocks initially wavered but showed pockets of life, while traditional defensive sectors held ground. This reinforces an important theme we’ve emphasised for some time:

Volatility isn’t inherently negative, if it creates dislocations in quality names, it presents buying opportunities.

Short-term swings are much more reflective of liquidity flows and trader positioning than fundamental shifts in the earnings outlook or long-term valuation frameworks. In many cases, selling activity does not signal structural deterioration; instead, it often highlights temporary repricing driven by emotion and headline risk.

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Defence Sector Response: Confirmation of Strategic Value

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As anticipated, defence companies have been buoyant in this environment. Within our portfolio:
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Names such as Lockheed Martin, RTX, and Northrop Grumman are currently showing gains on the order of ~5% or more in early trading.
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This reflects their perceived role as core strategic plays in a world where governments are prioritising security and long-range capability development.
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Investors are rightly recognising that these businesses benefit from long-duration contracts, government procurement cycles that extend beyond immediate volatility, and deep technological moats that insulate earnings streams from short-term sentiment swings.
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A key point here is that defence equities aren’t reacting purely to geopolitics, they’re reacting to structural demand signals that have been building for years. This includes ongoing upgrades to air, naval and space platforms, advanced missile systems, as well as investments in autonomy and next-gen sensor technologies.
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That said, even this sector is not immune to broader market flux. If defence stocks continue to rally substantially from here, we may consider trim opportunities to re-deploy capital back into tech and other high-growth sectors that have temporarily lagged.

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Tech Sector: A Look at Nvidia’s Continued Strength

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Despite the geopolitical backdrop, one of the more notable market stories of the month has been the latest earnings from the tech stand-out, Nvidia Corporation (NVDA). Its recent fiscal Q4 and full-year results were nothing short of remarkable, even if the stock reaction was more measured than the headline numbers might have suggested.

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Here are the key takeaways:
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• Record revenue: Nvidia reported about $68.1 billion in quarterly revenue, a substantial increase both sequentially and year-over-year.
• Massive AI data centre demand: The Data Center segment was the engine of this performance, driving the majority of top-line growth.
• Strong forward guidance: Nvidia guided to ~$78 billion in revenue for the next quarter, again comfortably above expectations and signalling continued momentum in AIrelated computing. MICHAEL SMITH Portfolio Manager & CEO
• Profitability metrics remain robust, with margins consistent even at this scale of enterprise.
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On the surface, these results reaffirm Nvidia’s central role in powering today’s AI build-out, as well as its strategic relevance to cloud providers, hyperscalers, and enterprise compute platforms.

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Yet, despite the strength of the earnings release, the stock has traded with caution in recent sessions. After the earnings print, shares experienced some downward pressure, suggesting that:

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1. Expectations were already high heading into the report, and

2. The market is taking profits or rotating into cyclicals and defensive sectors in light of broader macro uncertainty.

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From an investor’s lens, temporary weakness, even after strong fundamentals, is not a reason to be discouraged. Instead, it often represents a strategic entry point into high-growth secular trends that remain intact.

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Selling in Tech: Turning Weakness into Opportunity
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We have seen modest rotation out of tech in response to the short-term shock of news flow. But it’s important to remember:
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Selling in high-quality growth stocks like Nvidia doesn’t equate to a breakdown in the investment thesis; it often signals shortterm positioning shifts.
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Periods of rotation can create better entry points, particularly when the underlying growth story remains strong and earnings prospects are robust.
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If we continue to see rotation out of tech in the coming days or weeks, this would not alarm us, in fact, it would likely be a cue to consider rebalancing actions, such as:
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• Reducing some exposure in defence positions that have run ahead, and
• Reallocating capital to tech leaders that temporarily lag due to headline noise.

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This disciplined approach helps capture gains in areas of strength while redeploying into sectors poised for future growth.

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Looking Ahead: Strategy Amid Volatility
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We are navigating a market environment that blends geopolitical uncertainty with clear structural growth trends in technology and defence. This duality, short-term insecurity amid long-term opportunity, is exactly where disciplined portfolio management excels.

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Our core investment philosophy remains unchanged:

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Quality first: We hold companies with strong balance sheets, durable demand, and leadership positions in their respective spaces.

Opportunistic rebalancing: Volatility and selling in any sector (whether tech or otherwise) should be viewed through the lens of potential re-entry points, not feardriven exits.

Strategic flexibility: If one sector rerates aggressively, it makes sense to trim judiciously and reallocate where valuations become more attractive.

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In practice, this means:
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• Monitoring continued market action in tech, especially around names like Nvidia and other AI enablers.
• Evaluating whether defence stocks sustain their early gains, and identifying potential windows to realise profits.
• Keeping capital ready to act if weak hands are forced out of high-quality growth positions.

Today’s market is not about panic, it’s about perspective. Shortterm selling, particularly in tech, should be seen as a chance to strengthen long-term positions, not a reason to abandon them.

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Defence equities are up, that’s a testament to their strategic relevance. But strength in one sector and weakness in another is simply the market’s way of finding equilibrium.

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