Kim Bolton's Top Picks
Kim Bolton, president and portfolio manager of Black Swan Dexteritas
Focus: Technology stocks
Following two very bullish months, global stock markets moved rather sideways in March. However, the uptrend since the December lows is still intact. Since then, the major U.S. indexes have rallied about 20 per cent.
Readers are probably familiar with our rather cautious opinion at the moment and also during the last couple of months. Without denying that there might be short-term opportunities (and also some long-term picks), we still don’t think this is the time to invest in the stock market in a major way, but rather it’s time to rely on Black Swan Dexteritas as the adept manager to guide your investments.
With the labor market sending rather bullish signals, the bond market sending rather bearish signals and the housing market and consumer sentiment being somewhere in between, we have to describe the fundamental numbers as mixed. It seems possible that the bull market might go on a little longer, but even if we should see another bullish wave, we’re still convinced we’re close to the top, especially because of the signals the bond market is sending. We’ve taken profit on half of our equity portfolio and the remaining long-biased stock portfolio is hedged 50 per cent. If the market’s fundamental, technical and capital flow foundations suffer a material change, we will adjust our underweight stock portfolio and our short derivatives hedge.
The bottom line is that while the upcoming earnings season is likely to be quite brutal, the underlying U.S. and global economy are set to recover in the second quarter. The high operational gearing of the technology sector at a time of weaker orders and a decidedly cooler outlook on spending warrants some caution. The price/earnings-to-growth ratio and free cash flow yields of the tech sector have almost returned to last year's highs and lows at a time when our S&P 500 target has been touched (2,900). While the 10-year bond yield is subdued, the multiple move will rely on margins not contracting any further. Perhaps that will be the decisive voting machine for the upcoming quarterly results. The qualitative guidance is likely to suggest improvement for the next few quarters, but the best that can be hoped for exiting the first quarter reporting period is a cessation in the estimate reduction process.
PAST PICKS: DEC. 14, 2018
- Then: 106.03
- Now: 121.77
- Return: 15%
- Total return: 15%
- Then: $88.82
- Now: $135.82
- Return: 53%
- Total return: 53%
YASKAWA ELECTRIC (YASKY.PK)
- Then: $52.21
- Now: $75.04
- Return: 44%
- Total return: 44%
Total return: 37%
BSD Global Tech Hedge Fund L.P.
Performance as of: March 31, 2019
- 1 month: -0.91% fund, 0.64% index
- 3 months: 7.82% fund, 11.61% index
- 3 years: 23.47% fund, 19.32% index
INDEX: S&P/TSX Composite.
Fund’s returns are based on reinvested dividends. Returns are net of fees.