Kim Bolton, president and portfolio manager of Black Swan Dexteritas

FOCUS: Technology stocks 


After ending 2023 on a very strong note, global equities continue to rally into the new year, with the MSCI ACWI Index hitting a new record high on Feb. 9. However, the 2024 surge is not widespread. While Japan and the U.S. continue to drive the MSCI ACWI to new highs, Europe and Canada show very little growth, and emerging markets show a negative return. The outperformance of the U.S. benchmark versus its global peers is driven by optimism in the markets that the U.S. Federal Reserve is on track to achieve its inflation target without causing undue damage to the economy.

According to the consensus forecast based on company guidance, the worst of the earnings decline is already behind us. We continue to think that this view is aggressive, as non-U.S. gross domestic product (GDP) growth expectations for 2024 continue to be revised lower, which can't be good news for the U.S. multinationals that make up the S&P 500 Index. On the domestic front too, there are reasons to be skeptical about the 2024 earnings outlook. Indeed, concerns about the falling value of commercial real estate have resurfaced after a U.S. regional bank was recently forced to write down the value of certain assets.

All things considered, we continue to believe that the rally in global equities ignited last November on the hope of rate cuts in early 2024 is overdone. We still think that economic growth and corporate profitability will surprise on the downside in the coming months. Monetary policy transmission lags may be slightly longer than historical averages, but they have not disappeared.

The longer the Fed waits to cut rates, the more likely it is to trigger a deleveraging episode, which has characterized every business cycle since the 1960s, when monetary policy was brought to restrictive levels. We maintain our defensive asset allocation, with an overweight short equity indices hedge on the notional value of the stock portfolios. The recipe for success in 2024 will entail active management. We will continue to trim those securities that are achieving their respective intrinsic values and buy those growth stocks that exhibit longer, more lucrative investment runways. The hedging overlay will also be an important tool to protect your capital in bearish markets, and also an important tool to be “dialled down” in bullish markets.

  • Sign up for the Market Call Top Picks newsletter at
  • Listen to the Market Call podcast on iHeart, or wherever you get your podcasts



Kim Bolton’s Top Picks

Kim Bolton, president and portfolio manager at Black Swan Dexteritas, discusses his top picks: ASML Holding NV, Canon, and Tesla.

ASML Holding   [ASML  NASD]

ASML Holding develops and services advanced semiconductor equipment systems consisting of lithography, metrology and inspection-related systems for memory and logic chipmakers. The company provides extreme ultraviolet lithography systems; and deep ultraviolet lithography systems comprising immersion and dry lithography solutions to manufacture various range of semiconductor nodes and technologies. The company’s current extreme ultraviolet lithography (EUV) machine is used by TSMC, Samsung and Intel. It faces a robust demand backdrop driven by a broad array of applications that benefit the logic segment, for example, smartphones, high-performance computing (HPC), 5G, AI, virtual/augmented reality and autonomous driving. ASML is working through the supply chain challenges related to chip shortages, materials and components.

The semiconductor industry continues to work through the bottom of the cycle. Although our customers are still not certain about the shape of the semiconductor market recovery this year, there are some positive signs. Industry end-market inventory levels continue to improve and litho tool utilization levels are beginning to show improvement. Our strong order intake in the fourth quarter clearly supports future demand.

Canon [CAJPY  ADR]

Canon has reported that the early interest in its new lithography chip-making machines is surpassing expectations. This marks a significant effort by the company to close the gap with ASML, the Dutch leader in the field. The company's new technology, nanoimprint lithography, involves stamping chip designs directly onto silicon wafers. This method is highlighted for its low cost and reduced power consumption compared to traditional techniques.

Canon's new chipmaking equipment is priced significantly lower than ASML's top lithography machines, aiming to offer more affordable alternatives in the cutting-edge equipment sector. While Canon's new tools have garnered attention, there may be limitations on shipping these machines to China due to export curbs on advanced technology beyond 14-nanometer technology.

Canon has been collaborating with companies like Dai Nippon Printing Co. and Kioxia Holdings Corp. for nearly a decade to refine its nanoimprint processes. This technology allows for the creation of advanced chip geometries but at a slower pace compared to EUV lithography. Despite the slower rate of chip production with nanoimprint lithography, Canon is optimistic about the new opportunities and demand this technology will bring, especially in reducing reliance on foundries for chipmakers.

Tesla [TSLA  NASD]

Tesla is reportedly nearing completion of an innovation that would enable the die-casting of nearly the entire complex underbody of an electric vehicle (EV) as a single piece, as opposed to approximately 400 parts in a conventional car. Tesla's focus is on expanding manufacturing capacity, including for new vehicle models like the Cybertruck and next-generation platforms. The company aims to increase production rates and efficiency at its existing factories while depending on the ramp-up at Gigafactory Berlin-Brandenburg and Gigafactory Texas. Tesla is also working on developing its own high-volume battery cells to lower costs and increase range.

The company has been generating positive cash flow from operations, and improved working capital management has contributed to this. Tesla plans to use these cash flows for vertical integration, expanding its product roadmap, and offering financing options to customers. However, it anticipates varying levels of capital expenditures based on project pace and external factors like material prices and supply chain and labour costs. Despite this, Tesla expects to remain self-funding as long as macroeconomic conditions support current sales trends.




Kim Bolton’s Past Picks

Kim Bolton, president and portfolio manager at Black Swan Dexteritas, discusses his past picks: Equinix, Cisco Systems, and Check Point Software.

Equinix (EQIX NASD)

  • Then: US$694.51
  • Now: US$850.00
  • Return: 22%
  • Total Return: 24%

Cisco Systems (CSCO NASD)

  • Then: US$51.17
  • Now: US$48.09
  • Return: -6%
  • Total Return: -3%

Check Point Software (CHKP NASD)  

  • Then: US$127.68
  • Now: US$151.88
  • Return: 19%
  • Total Return: 19%

Total Return Average: 13%