Kim Bolton's Top Picks: September 20, 2023

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Kim Bolton’s Top Picks

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Kim Bolton, president and portfolio manager, Black Swan Dexteritas

FOCUS: Technology stocks

MARKET OUTLOOK:

We’re into the “dreaded” September and now that the market has consolidated the big rally from late spring through early summer. It has formed sideways patterns on several major indices and investors are trying to weigh the pros of stronger economic data against lofty valuations and the nagging inversion of the yield curve. However, when it comes to valuations the market isn’t necessarily as expensive as it may seem, but when it comes to the yield curve, there isn’t much positive to say. Historically, inverted yield curves and deeply inverted yield curves haven’t been particularly positive for equity prices (or ultimately the economy), so it’s hard to dismiss or play down its importance.

COVID-19 has caused a rewrite of all the playbooks, and maybe it will end up rewriting the yield curve script too, but it shouldn’t be dismissed. Even though there has been a lot of volatility in the markets over the past month, growth and tech stocks are still largely up for the year, partially offsetting very weak performance in 2022. Going forward, investors need to be very vigilant with their portfolio positions because the current incredibly high interest rate environment can upend the rallies of all stocks but the highest-quality names.

The U.S. The Federal Open Market Committee meeting on Wednesday is the main event this month. A pause is almost guaranteed, as is a hawkish stance given this past week's strong inflation and retail sales data. There could be a nod to further hikes in November or December but the U.S. Federal Reserve won't want to make the same mistake as the European Central Bank did this week when it signalled it was likely finished hiking. In the bigger picture, the S&P 500 is working off monthly upside exhaustion. There is still a bias for eventual new highs but the general expectation is for range trading and any moves outside 4,325-4,607 are likely to be un-sustained.

While the market searches for the next fundamental catalyst or technical signal, your BSD portfolio management team will continue to trim those securities that are achieving their respective intrinsic values and buy those stocks that exhibit longer, more lucrative investment runways. The hedging overlay will always be an important tool to protect your capital in bearish markets, and also an important tool to be dialled down in bullish markets.

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TOP PICKS:

Kim Bolton’s Top Picks

Kim Bolton, president and portfolio manager at Black Swan Dexteritas, discusses his top picks: Intel, Visa, and Applied Materials.

Intel (INTC NASD)

The company operates through Client Computing Group, Data Center and AI, Network and Edge, Mobileye, Accelerated Computing Systems and Graphics, Intel Foundry Services, and Other segments.
It offers platform products, such as central processing units and chipsets, system-on-chip and multichip packages; and non-platform or adjacent products, including accelerators, boards and systems, connectivity products, graphics, and memory and storage products.

Intel has announced a strategic collaboration agreement with Ericsson to utilize Intel's advanced 18A manufacturing technology for Ericsson's next-generation 5G infrastructure. This partnership involves Intel manufacturing custom 5G SoCs for Ericsson to develop cutting-edge 5G infrastructure products. This collaboration aims to position Intel as a process leader by 2025, benefiting their customers' future offerings. Intel is gearing up to compete more aggressively in the AI hardware market.

The strategy involves several things. Firstly by merging products to reduce confusion through integrating the capabilities of its discrete Gaudi AI chips with the Falcon Shores GPU. This move could help clients make more straightforward purchasing decisions, given they wouldn't have to choose between two flagship AI-oriented products.

Secondly, targeting Nvidia's dominance by supporting general computing along with specialized low-precision compute functions (critical for many AI tasks), Intel seems to be looking to cover the broad spectrum of AI computational needs. While merging products can reduce confusion, the ultimate determinant of success in this market will be performance. Intel's integrated product will need to be competitive with, or outperform, Nvidia's offerings in both general-purpose computing and AI-specific tasks. Intel is focusing almost exclusively on AI at its Intel Innovation conference, which is being held in San Jose.

Visa (V NYSE)

The company operates VisaNet, a transaction processing network that enables authorization, clearing, and settlement of payment transactions. It also offers credit, debit, and prepaid card products.

The company provides Cybersource, a payment management platform; and risk and identity solutions, such as Visa Advanced Authorization, Visa Secure, Visa Advanced Identity Score, and Visa Consumer Authentication Service; and Visa Consulting and Analytics, a payments consulting advisory services.

Visa and Conferma Pay are extending a strategic partnership to further enhance Visa Commercial Pay, a suite of business-to-business payment solutions aimed at improving cash flow for businesses and streamlining manual processes. Visa Commercial Pay includes virtual commercial cards and offers three business-to-business payment options for financial institutions and its corporate customers. Since its launch in 2020, it has helped companies transition from traditional payment methods to automated processes. The service has been adopted by select clients like Commerce Bank, OCBC, and Umpqua Bank, allowing financial institutions to support its corporate customers' virtual payment strategies and enhance cash flow while reducing manual work.

Paysend and Visa are partnering to enable Paysend's global customers to send money in real-time to eligible Visa cards in 170 countries and territories. This five-year collaboration expands on its initial partnership announced in February 2022, aiming to revolutionize international money transfers using Visa Direct. Paysend leverages Visa's infrastructure to offer cost-effective and faster services, especially benefiting regions with limited banking infrastructure.

Applied Materials (AMAT NASD)

AMAT is an American corporation that supplies equipment, services and software for the manufacture of semiconductor chips for electronics, flat panel displays for computers, smartphones and televisions, and solar products. The company operates in the U.S., China, Korea, Taiwan, Japan, Southeast Asia, and Europe.

AMAT plans to launch a multibillion-dollar research and development platform in Silicon Valley to drive semiconductor innovation. The facility, known as the Equipment and Process Innovation and Commercialization (EPIC) Centre. It aims to accelerate the development and commercialization of semiconductor technologies through collaborative innovation with chipmakers, universities, and ecosystem partners, reducing time to market and increasing the success rate of innovations in the industry.

Applied Materials has introduced the Vistara wafer manufacturing platform, a significant advancement in chipmaking technology.