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

MARKET OUTLOOK

The global equity markets are once again in a confirmed uptrend, but the forecast is anything but clear. President Trump testing positive for the coronavirus may only be the first of multiple fourth quarter 2020 surprises for market participants. Investors riding the historic stock market rally from the coronavirus crash bottom on March 23 to record highs in September pushed a few concerns to the background. The unravelling U.S.-China trade détente, looming antitrust action against FANG stock stalwarts Alphabet and Facebook, a possible early winter global coronavirus wave, a lapse in fiscal stimulus, a potential Democratic sweep that promises big tax hikes for corporate profits and investment gains, a drawn-out vote-counting process that jolts stocks like the 2000 hanging-chad election: All these worries may come to the fore in the coming weeks. Expect more stock market turbulence.

We have positioned the BSD Global Tech Hedge Fund with the expectation of more market volatility; the fund is 80 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 6.6 per cent for the S&P 500 and 12.7 per cent for the 50/50 Nasdaq/Russell benchmark, as of Oct. 21.

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 Semiconductor

• Buy price: US$57.08 on March 4, 2020
• Sell/Reduce price: US$82.17 on Aug. 5, 2020

Taiwan Semiconductor achieved our price target; we took profit on this 4.5 per cent position.

TOP PICKS

MercadoLibre Inc (MELI NASD)

StoneCo Ltd (STNE NASD)

Bandwidth Inc (BAND NASD)

PAST PICKS: NOVEMBER 13, 2019

Cisco Systems (CSCO NASD)

• Then: $48.46
• Now: $38.70
• Return: -18%
• Total Return: -15%

Alphabet (GOOGL NASD)

• Then: $1,296.18
• Now: $1,591.42
• Return: 23%
• Total Return: 23%

PayPal (PYPL NASD)

• Then: $102.12
• Now: $207.75
• Return: 103%
• Total Return: 103%

Total Return Average: 37%