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)
Defence Minister David McGuinty says the federal government is giving a big boost to the munitions industry to build up the domestic supply of heavy artillery shells.
The Bank of Canada today held its target for the overnight rate at 2.25 per cent, with the Bank Rate at 2.5 per cent and the deposit rate at 2.20 per cent.
Saskatchewan’s government is planning to table a deficit budget today in a move that Premier Scott Moe says protects public services.
Culture Minister Marc Miller says the government must have a serious conversation about AI systems’ use of news.
Delta Air said on Tuesday it expects first-quarter profit within its initial forecast range but raised its revenue expectations on strong demand, amid high jet fuel prices due to the conflict in the Middle East.
The United Arab Emirates briefly closed and then reopened its airspace Tuesday, temporarily halting flights in a crucial travel hub, as the country’s military said it was facing incoming attacks from Iran.
Prime Minister Mark Carney met with British Prime Minister Keir Starmer on Monday, and while both remarked the world has become a more challenging place since their first meeting a year ago, neither named a specific issue in their public remarks.
Japan plans to start releasing oil from its stockpiles on Monday to soften the shock from the U.S.-Israeli war on Iran, a stark reminder of the oil crisis half a century ago that prompted Tokyo to create reserves.
Warner Bros emerged as the biggest winner at the Academy Awards on Sunday, though the mood was clouded by its pending US$110 billion sale to Paramount Skydance, a deal reshaping Hollywood’s studio landscape.
Every day more than $4 billion worth of goods cross the United States’ borders with Canada and Mexico – U.S. auto parts headed for car factories in northern Mexico, cartons of Mexican avocados bound for California supermarkets, Canadian aluminum destined to become cans of Campbell Soup.
Prime Minister Mark Carney met Monday with Prime Minister Keir Starmer in London, and while both remarked the world has become a more challenging place since their first meeting a year ago, neither named a specific issue.
Conservative Leader Pierre Poilievre has unveiled a new auto plan that aims to secure tariff-free access to the U.S. market.
Prime Minister Mark Carney says that countries like Canada do not need to have oil reserves as a net exporter, after the energy minister announced Canada will contribute 23.6 million barrels to help stabilize international energy markets.