Kim Bolton's Top Picks: December 29, 2021
BNN Bloomberg
Top Picks from Kim Bolton, president and portfolio manager of Black Swan Dexteritas
MARKET OUTLOOK
Overall, 2021 was a good year for investing. The broad market indexes performed well, with the S&P 500 up 26 per cent year to date. However, it was a difficult year for growth investing, with the informal growth index ARK Innovation down 22 per cent year to date. Under the portfolio management of Black Swan Dexteritas, the BSD Global Tech Hedge Fund looks to register a small single digit gain, while our Separately Managed Accounts [SMA], all performed with returns either side of 20 per cent.
It has been a volatile five weeks for the Nasdaq, since BSD’s late November, 2021 appearance on the Market Call show; with weekly moves of -3.5 per cent, -2.6 per cent, +3.6 per cent, -2.9 per cent, and +3.2 per cent. To put this recent volatility into perspective, the last time the Nasdaq experienced back to back to back to back weekly moves of 2.5 per cent or more was more than ten years ago in October 2011 and before that March 2009. While it has been a long time since the last five-week streak of 2.5 per cent+ moves, the current streak is nowhere near a record. Back during the Financial Crisis and then again two other times right around the dot-com peak, the Nasdaq experienced 2.5 per cent weekly moves for a record ten straight weeks!
In this environment, we have positioned the BSD Global Tech Hedge Fund with the expectation of more market volatility; the Fund is 91 per cent invested across a couple dozen tech vendors and tech end-users, with a 70 per cent short equity indices hedge on the invested stock portfolio, that will incrementally grow (with a ‘laddered’ Nasdaq put option position) if the market deteriorates.
Taking a longer-term view, growth dramatically outperformed in 2020 and will likely outperform again at some point in the future. Even so, many smaller to medium sized high growth companies’ valuations look stretched and earnings and revenue growth in 2022 will not be enough for most of these small to mid-cap companies to overcome the contracting valuations that traditionally come with rising interest rates. So for 2022, BSD is balancing larger high growth tech investments with the protection of a short equity indice overlay to protect against significant corrections.TOP PICKS
Unity Software (U:UN)
