Kim Bolton, president and portfolio manager of Black Swan Dexteritas
Focus: Technology stocks

MARKET OUTLOOK

The technology arena was the best performing sector in the S&P 500 once again this year (up 40 per cent year-to-date). We are concerned by the recent speculative frenzy sweeping global stock markets. This pushed us to raise our short equity index overlay, protecting the BSD Global Tech Hedge Fund from a potential stock market correction.

Here are the signs of market froth this year: nothing evokes a stock peak like an IPO/SPAC rush to the public markets; stock market valuations with the S&P 500 sales multiple are some 16 per cent above the 2000 peak; a call option frenzy; merger mania;  sinking yields; and finally, “digital tulips” like Bitcoin, the latest sign of irrational exuberance.

Going into 2021, we like investments back into more “GARPy” large cap names like Ericsson, Microsoft, Nvidia and Alibaba. These four firms are leaders in the accelerated move to the cloud. We also like semiconductors like Micron and Infineon Technologies and e-commerce leaders like Shopify and PayPal. Lastly, we have selected a number leaders in half a dozen technology themes and trends such as electrification, 5G deployment, digital twins, artificial intelligence, robotics and gaming, with long and lucrative runways.

We have positioned the fund with the expectation of more market volatility. It’s 93 per cent invested across a couple dozen tech vendors and tech end-users, with a 67 per cent short equity index hedge on the invested portfolio that will incrementally grow if the market deteriorates.

The BSD credo, to prosperously navigate unexpected events with great skill and agility, defines our ability to outperform in these uncertain markets.

UPDATE

Sold Taiwan Semiconductor (TSM NYSE) at $82.17 USD on Aug. 5, 2020. It achieved our price target; we took profit on this 4.5 per cent position.

Sold Intel (INTC NASD) at US$52.20 on Dec. 4, 2020. Intel's investment thesis changed dramatically with the announcement of Apple designing/manufacturing their own iPhone chips and Microsoft is expected to announce it will make their own Surface chips as well.

TOP PICKS

ERICSSON (ERIC NASD)

ALIBABA (BABA NYSE)

MICROSOFT (MSFT NASD)

 

DISCLOSURE PERSONAL FAMILY PORTFOLIO/FUND
ERIC Y Y Y
BABA Y Y Y
MSFT Y Y Y

 

PAST PICKS: DEC. 6, 2019

Advanced Micro Devices (AMD NASD)

  • Then: $39.63
  • Now: $92.43
  • Return: 133%
  • Total return: 133%

Digital Reality (DLR NASD)

  • Then: $118.37
  • Now: $138.63
  • Return: 17%
  • Total return: 22%

Yandex NV (YNDX NASD)

  • Then: $40.46
  • Now: $68.27
  • Return: 69%
  • Total return: 69%

Total return average: 75%

 

DISCLOSURE PERSONAL FAMILY PORTFOLIO/FUND
AMD Y Y Y
DLR Y Y Y
YNDX Y Y Y

 

WEBSITE: bsdmi.com