Sondre Flateraaker @Flaten: "Market Recap – Friday, December..."

Switzerland

Market Recap – Friday, December 5th I want to start today by congratulating everyone who stayed disciplined through this period of volatility. These weeks are never easy, but moments like yesterday show exactly why we stay focused on the bigger picture. With the release of the Golden Dome details and renewed momentum across drones and defense, our portfolio was rewarded with a strong rebound of 2.3% in a single day, with individual names climbing as much as 16%. None of this happens by chance. It happens because the thesis was clear, the positioning was deliberate, and you held steady. This is why having a plan matters. If you buy a house with the intention of selling it 20 years from now, you don’t panic if the price dips 3% in the first year. The same mindset applies in the market. It swings. It always has. It always will. And it is never the first or the last time we go through volatility. But when you know what you own, why you own it, and where the world is heading, you stay invested. That is how wealth compounds. On the geopolitical front, the U.S. Treasury’s October outlays showed weapons spending rising 13.4% year over year despite the shutdown, with the Army up 46.5% and the Navy up 38.3%. Wolfe Research highlighted that President Trump’s closure of Venezuelan airspace signals a steady escalation. There is now a credible path toward direct military action in 2026. The U.S. continues to expand air and naval presence around Venezuela, military planners are openly discussing options, and back-channel attempts by Maduro to negotiate a transition government are being met with little receptivity. Nobody wants a Vietnam-style ground conflict nor do I, but if hostilities break out, the U.S. will rely heavily on air power, naval assets, and drones. That is exactly the part of the stack we own. $KTOS (Kratos Defense & Security Solutions Inc) would be central to drone deployment, $RTX (Raytheon-Technologies) and $LHX (L3Harris) would be key for Air Force and Navy mission profiles, and the remainder we capture through $ITA (iShares US Aerospace & Defense ETF) diversified exposure. This is precisely why we’ve built such a broad, resilient defense allocation: different conflicts activate different parts of the chain, and we aim to harvest across all scenarios. We also received a meaningful upgrade on $MP (MP Materials Corp.) from Morgan Stanley, who raised the stock to Overweight with a $71 price target. The analyst reiterated that MP is building the only fully domestic mine-to-magnet rare-earth supply chain in the United States, with commercial magnet production beginning next year. Rare-earth magnets are essential not only for EV motors and wind turbines but and this is crucial for the humanoid robotics market that is now moving into its exponential growth phase. Given geopolitical risk around China-controlled rare earths, MP’s strategic value continues rising. The asymmetric bull-bear skew remains highly attractive. On $PANW (Palo Alto Networks) , our entry at $183 now looks well-timed. The selloff came after the acquisition of Chronosphere, which expands Palo Alto’s TAM from $200B in 2025 to $300B by 2028, but also temporarily reduces near-term free-cash-flow yield from 38.5% to 37%+. Chronosphere adds $160M in ARR and was growing triple digits. Bank of America noted that Palo Alto traditionally a cybersecurity company is now aggressively entering observability, a space typically dominated by $DDOG (Datadog Inc) $DT (Dynatrace Inc) and Elastic. This is a clear signal that both observability and cybersecurity budgets are converging in an AI-driven future. The winners will be the vendors who innovate the fastest, and Palo Alto is positioning itself exactly for that. On options flow, premium positioning continues to lean heavily bearish at 82%, with 18% bullish. This tells me one thing: the market is still hedged and fearful. Ironically, that is usually when forward returns improve. While there are more individual bullish trades, the capital weighting shows that sentiment remains defensive. As always, stay focused, stay rational, and stay long-term. This is how we win. Thank you for now and see you when The Market Opens!