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

MARKET OUTLOOK

Although there is still a lot of consternation regarding the U.S. White House transition, and the logistical deployment of the coronavirus vaccine, the month of November did relieve some of the market’s anxiety about the U.S. election, while the positive vaccine news offered a light at the end of the pandemic tunnel. Global equity markets registered strong rallies in the week following the U.S. election. The past couple of weeks saw global equity markets performing a balancing act between incoming positive vaccine news and ever-growing economic restrictions aimed at curbing the recent spike in virus cases and hospitalizations. The rotation out of technology vendors and into more cyclical stocks continues, as the vaccine developments have improved investor sentiment and confidence about next year’s outlook. Still, we are in the midst of global health crisis, and we have regional economies rolling over with a significantly overvalued equity market – a dangerous mix for financial markets.

We have positioned the BSD Global Tech Hedge Fund with the expectation of more market volatility; the fund is 88 per cent invested across a couple dozen tech vendors and tech end-users, with a 75 per cent short equity index hedge on the invested portfolio that will incrementally grow if the market deteriorates. We’re still up over 24 per cent year-to-date, versus 10 per cent gains for the S&P 500 and 19 per cent gains for the 50/50 Nasdaq/Russell benchmark, as of November 24th, 2020.

The bottom line is, our BSD Global Tech Hedge Fund will be protected from market drawdowns, but if the stock markets continue to defy the actual economy and climb higher, we will marginally participate in those gains. The BSD credo – Prosperously navigating unexpected events with great skill and agility – defines our ability to outperform in these uncertain markets.

UPDATES:

Taiwan Semiconductors (TSM:UN)
Buy price: US$57.08 on March 4, 2020
Sell/Reduce price: US$82.17 on August 5, 2020
Taiwan Semiconductor achieved our price target; we took profit on this 4.5 per cent position.

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