Full episode: Market Call for Wednesday, June 12, 2019
Kim Bolton, president and portfolio manager of Black Swan Dexteritas
Focus: Technology stocks
Your Black Swan Dexteritas team expected 2019 to be as volatile as 2018. Remember that 2018 saw six corrections of less than 10 per cent and two corrections over that percentage. The challenge is to expeditiously recognize the change in market sentiment because corrections are fast and furious. The month of May is a perfect example of a Black Swan event. So much happened that no one expected to happen:
U.S.-China trade talks broke down. Almost everyone expected that a trade deal would be reached between both countries in May, or that’s certainly what the rhetoric from both sides suggested. Then came the surprising news and relations between the two countries further soured over the course of the month. It seems that the U.S. may have pushed China too far. It’s unclear whether China will even return to the bargaining table given current circumstances.
U.K. Prime Minister Theresa May resigned. This opens up a Pandora’s box of uncertainty surrounding what will happen in Britain between now and the Oct. 31 Brexit deadline.
North Korea fired short-range missiles. For the first time since late 2017, North Korean tested its missiles. This happened just before Trump’s visit to Japan.
Trump vowed to impose a tariff on goods imported from Mexico. Trump decided not to enact them, but the recurring use of trade threats as a negotiating ploy will be enormously damaging to investor and corporate confidence.
Investors cannot possibly know when a Black Swan event will occur, but your BSD team can prepare for it when fundamental, technical and capital flow indicators are flashing warning signs. We took profit on a number of holdings as 12-month single stock price targets were achieved for many of our holdings in March and April. Later in April, we started hedging our remaining long stock portfolio. In May, global stock market indexes slumped about seven per cent in May, but the BSD Global Tech Hedge Fund registered a small gain that monthas a result of our proactive actions. Coincidentally during the May correction, a number of single stocks (Xilinx, Ericsson, and Universal Display) plus a few ETFs (SOXX, HACK, IGV and FDN) triggered our buy signals, at which time we put our elevated cash position to work. U.S. stock indexes have snapped back based on speculation that the Fed will ride to the rescue with up to three rate cuts later this year. Our investment strategy and tactics are geared to perform with whatever the market delivers.
APTIV PLC (APTV.N)
PAST PICKS: JUNE 1, 2018
DASSAULT SYSTEMES (DSY EPA)
- Then: $121.20
- Now: $134.55
- Return: 11%
- Total return: 12%
INFINEON TECHNOLOGIES (IFX ETR)
- Then: $23.61
- Now: $15.32
- Return: -35
- Total return: -34%
TENCENT HOLDINGS (700 HKG)
Tencent Music & Entertainment spun off on Dec. 28, 2018.
- Then: $404.00
- Dec. 28, 2018: $310.00
- Return: -23%
- Total return: -23%
Total return average: -15%
BSD Global Tech Fund
Performance as of: May 31, 2019
- 1 month: 0.44% fund, -2.77% index
- 1 year: 1.38% fund, 0.24% index
- 3 years: 30.08% fund, 14.02% index
INDEX: S&P/TSX Composite.
TOP HOLDINGS AND WEIGHTINGS
- Visa: 5.32%
- Cisco Systems: 4.94%
- Amazon: 4.03%
- Microsoft: 3.98%
- Equinix Inc: 3.66%