Kim Bolton, president and portfolio manager of Black Swan Dexteritas

FOCUS: Technology stocks

MARKET OUTLOOK:

In the past nine months, the constant liquidity injections from central banks have led to a significant rebound in global equities. Market participants remain skeptical about the sustainability of the current momentum in markets and are confident that valuations are currently “stretched”, because traditional financial ratios such as forward P/E or price-to-sales have diverged sharply from their historical averages.

However, in 2021 another three trillion USD of liquidity is expected to reach markets, which will provide more ‘ammunition’ for the market’s bulls. This scenario creates a “buy the rumour, sell the news” environment, meaning when widespread vaccinations create herd immunity and global economies open up, liquidity injections from central banks will slow and market fundamentals and technicals should again become important. The forward-looking nature of the stock market, means ‘selling the news’ will happen well in advance of global economies opening up.

Going into 2021, we like large cap names like Ericsson, Microsoft, Nvidia and Alibaba. These four hardware and software firms are leaders in the accelerated move to the cloud. We also like semiconductors (for example Micron and Infineon Technologies) and e-commerce leaders (for example Shopify and PayPal). Lastly, we have selected a number leaders in half a dozen technology themes and trends – electrification, 5G deployment, digital twins, artificial intelligence, robotics and gaming - that have long and lucrative runways.

We have positioned the BSD Global Tech Hedge Fund with the expectation of more market volatility; the Fund is 94 per cent invested across a couple dozen tech vendors and tech end-users, with a 64 per cent short equity indices hedge on the invested portfolio that will incrementally grow if the market deteriorates.

The BSD credo – prosperously navigating unexpected events with great skill and agility – defines our ability to outperform in these uncertain markets.

UPDATES:

Sold top pick's within the first year of recommending it:

Stock: Taiwan Semiconductor [TSM]

Buy Price:  US$57.08    [March 4, 2020]

Sell/Reduce price:  US$82.17    [August 5, 2020]

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

Stock name:  Intel [INTC]

Buy Price: US$48.50    [August 18, 2020]

Sell/Reduce price:  US$52.20    [December 4, 2020]

Intel's investment thesis changed dramatically with the announcement of Apple designing/manufacturing their own iPhone chips; and, Microsoft is expected to announce Microsoft designing /manufacturing their own Surface chips.

TOP PICKS:

Accenture Plc (ACN NYSE)

Qualcomm, Inc. (QCOM NASD)

C3.ai, Inc. (AI NYSE)

PAST PICKS: December 6, 2019

Advanced Micro Devices (AMD NASD)

• Then: $39.63
• Now: $89.09
• Return: 125%
• Total Return: 125%

Digital Reality (DLR NYSE)

• Then: $118.37
• Now: $139.35
• Return: 17%
• Total Return: 22%

Yandex (YNDX NASD)

• Then: $40.46
• Now: $69.39
• Return: 72%
• Total Return: 72%

Total Return Average: 73%

Website: www.blackswandexteritas.com