Kim Bolton, president and portfolio manager of Black Swan Dexteritas

FOCUS: Technology stocks


Five months into 2022, market participants agree the world’s stock markets are in a bear market, with the broad market indices down either side of 20 per cent (i.e. the S&P 500 has fallen 15 per cent, while the Nasdaq 100 has slumped 25 per cent) and the index technical patterns illustrate lower highs and lower lows. Bear markets can have unexpected rallies, like the 16 per cent Nasdaq rally in the second half of March. From a portfolio management perspective, bear markets require vigilant active management to both defend a long stock portfolio and profit from the elevated market volatility.

Your Black Swan Dexteritas [BSD] portfolio management team has successfully defended both the BSD Global Tech Hedge Fund and our separately managed accounts by offsetting the long stock portfolios with our short equity indices positions (aka the ‘hedge’). The unrealized losses in the stock portfolios are offset by gains on the hedge, and when the stock markets enter oversold conditions, we lower the hedge and let the stock portfolio appreciate during the bear market rallies. As of mid-May, the BSD Hedge Fund is only down five per cent year-to-date and the separately managed accounts have single-digit gains year-to-date – our active management strategy and tactics are built for both bear markets with elevated volatility, and bull markets.

Looking ahead, your BSD portfolio management team is unsure whether the economy will enter a recession and a ‘secular bear’ market, or whether we are currently experiencing an unwind of the 2021 market froth and a continuation of the ‘secular bull’ market. However, we are confident our portfolio management tools can generate returns in excess of eight per cent for the BSD Fund, and achieve the performance expectations of our customized separately managed account clients.

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Kim Bolton's Top Picks

Kim Bolton, president and portfolio manager of Black Swan Dexteritas, discusses his top picks: Sony Group, ServiceNow, and Fortinet.

Sony Group (SONY NYSE)

  • Japanese conglomerate which operates in a variety of business units (electronics, semiconductors, music, film/tv etc.)
  • Sony is the global leader in the image sensor market with about 44 per cent market share. Their solutions are used in the camera modules for flagship mobile phones from manufacturers such as Samsung and Apple.
  • Sony is the market leader in the gaming consoles market with about a 64 per cent market share. To put this into perspective, since the launch of their new consoles in November 2020, Microsoft shipped about 2.8 million units compared to 4.2 million shipped by Sony.
  • Sony is expanding into the connected vehicles and smart mobility space, where they developed an innovative driver monitoring system. Their offering has 2 solutions: Car infotainment, a gesture recognition solution that is used to control the infotainment system. In-Cabin Monitoring monitors the vehicle’s occupancy, tracks the driver’s movements and body language and provides feedback. This has implications for autonomous vehicles (level three automation) to determine driver awareness and if/when the automated driving system should intervene.
  • Sony is purchasing Bungie, the U.S. video game developer behind the popular Destiny and Halo franchises, for $3.6 billion to bolster its stable of game-making studios.
  • Sony aims to sell roughly 18 million PlayStations units in the current fiscal year, behind the initial target of 22.6 million units.
  • The lower target for the current year stems from supply-chain complications because of the COVID-19 pandemic, including lockdowns in China, the city of Shanghai, a key center for tech production, has largely been under lockdown since the beginning of April. 

ServiceNow (NOW NYSE)

  •  Operates the Now platform for workflow automation, artificial intelligence, machine learning, performance analytics, electronic service catalogues and portals, configuration management systems, data benchmarking, encryption, and collaboration and development tools.
  • NOW was founded in 2003, and since its 2012 IPO the company has strategically acquired 16 companies to be the go-to company for “incident, problem, and change” IT operational events
  • Their product has a 99 per cent contract renewal rate.
  • They serve over 1,100 clients who spend $1 million and have grown their client base which spends more than $5 million by 40 per cent.
  • Their platform is being used to support the NHS in Scotland to administer vaccines to 5.5 million people.
  • They have a tremendous impact in the banking sector, with a major UK bank reporting a 70 per cent improvement in payment processing due to the platform.
  • ServiceNow’s Q122 results outperformed the high end of the company’s guidance range across all guided metrics in addition to beating consensus expectations on key top-line metrics, including subscription revenue. Subscription revenues of $1,631mn topped consensus’ $1,613mn by ~$18mn. The non-GAAP operating margin was largely consistent with consensus expectations at ~25.4 per cent, a 200 bps decline from Q121, indicative of fading COVID-related savings (resumption of in-person travel and in-person events) and continuation of an aggressive headcount ramp (+28 per cent y/y) in S&M and R&D to capitalize on large TAM opportunity and achieve revenue target $15bn+. 

Fortinet (FTNT NASD)

  • Fortinet provides broad, integrated, and automated cybersecurity solutions in the Americas, Europe, the Middle East, Africa, and the Asia Pacific.
  • It offers FortiGate hardware and software licenses that provide various security and networking functions, including firewall, intrusion prevention, anti-malware, virtual private network, application control, web filtering, anti-spam, and wide area network acceleration.
  • The company remains focused on addressing the convergence of networking and security, going to market with a platform approach, and differentiating with technological leadership. FTNT continues to take share in core platform markets and has grown to account for approximately 38 per cent of firewall shipment market share.
  • Fortinet is well-positioned to benefit from meaningful macro tailwinds, including the ongoing healthy demand for network security, a strong demand environment for security heightened by the current geopolitical landscape, and one of the best firewall spending cycles we've seen in years.
  • For Q122, total revenue growth of 34 per cent y/y was driven in part by product revenue growth of 54 per cent y/y, substantially over consensus estimate for product revenue growth of 21 per cent y/y.
  • After guiding to FY22 billings of over $5.5 billion during its most recent earnings call, management updated its mid-term model with a billings target of $10 billion in 2025. 





PAST PICKS: May 6, 2021

Kim Bolton's Past Picks

Kim Bolton, president and portfolio manager of Black Swan Dexteritas, discusses his past picks: Palo Alto Networks, VMWare, and Salesfoce.

Palo Alto Networks (PANW NASD)

  • Then: $337.44
  • Now: $474.31
  • Return: 41%
  • Total Return: 41%


  • Then: $162.33
  • Now: $99.99
  • Return: -38%
  • Total Return: -21%

Salesforce (CRM NYSE)

  • Then: $218.05
  • Now: $163.37
  • Return: -25%
  • Total Return: -25%

Total Return Average: -2%