Kim Bolton, president and portfolio manager of Black Swan Dexteritas
FOCUS: Technology stocks
Top Picks: Teradyne, Dassault Systèmes, Hyundai Motor Company
MARKET OUTLOOK:
The Middle East is in the thick of war, this November’s U.S. presidential election is a coin flip based on the polls between two very different candidates, the Russia-Ukraine war shows no signs of stopping, China’s economy is extremely weak, and tensions with Taiwan have been escalating. It may not sound like a great recipe for risk assets, but the S&P 500 Index just wrapped up its sixth week in a row of gains to new all-time highs in the process. What’s not to like? Despite the broader macro concerns, equities have managed to rally as the U.S. economy has taken the global economy on its back and earnings season has gotten off to a strong start. Inflationary pressures, not just in Canada but around the world, continue to ease and commodity prices have been cooperating despite the geopolitical tensions.
With inflation behaved, central banks can maintain the global easing cycle. Market internals have also been strong. The S&P 500’s cumulative A/D line hit another record high last week, and there was an explosion in the percentage of stocks hitting new highs. Credit markets have also been very strong as both high yield and investment grade credit spreads are at multi-year lows. As if that wasn’t enough, the market is right in the thick of what has been its best one and three-month periods of the year with median returns in the ninety ninth percentile relative to all other periods. That’s all the good news. If there’s one piece of bad news, it’s the fact that we just mentioned all the good things!
On the one hand, while credit spreads are at multiyear lows, they can only go so low. Also, the bull market just turned two last week, and if you have any experience with kids, you know why they call it the terrible twos. Historically, bull markets that make it to a second year tend to last an average of five years but returns in the third year have been on the weak side. And we haven’t even mentioned valuations. That doesn’t mean that stocks will go down in the third year, but it’s not a guarantee they go up either. We’re the last ones who want to be party poopers, but as your parents may have advised when you went off to college, have fun, but take everything in moderation!
While the market searches for the next fundamental catalyst or technical signal, your BSD Global Tech Hedge Fund and Separately Managed Accounts will continue to trim those securities that are achieving their respective intrinsic values, and buy those technology 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 “dialed down” in bullish markets.
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TOP PICKS:
Teradyne (TER NASD)
Founded in 1960 and headquartered in North Reading, Massachusetts, Teradyne designs and manufactures test systems for semiconductors, wireless products, storage devices, and complex electronic systems. Its advanced testing solutions help ensure the quality and reliability of high-tech products.
Teradyne has expanded into industrial automation, offering robotics and automation solutions that improve manufacturing efficiency and flexibility. The company serves clients across diverse industries, including consumer electronics, automotive, industrial, and communications sectors.
Dassault Systèmes (DASTY ADR)
Dassault Systèmes SE is a global provider of software solutions and services, offering a range of products including SOLIDWORKS for design, CATIA for engineering, GEOVIA for natural resources and urban planning, and BIOVIA for chemicals and materials experiences. The company also provides simulation applications (SIMULIA), global industrial operations software (DELMIA), 3D space planning solutions (3DVIA), and product lifecycle management software (Centric PLM). Dassault Systèmes serves several industries including automotive, aerospace, consumer goods, industrial equipment, and healthcare.
Recently, Dassault Systèmes released SOLIDWORKS 2024, which includes new functionalities to streamline product development. It also announced CEO changes effective Jan. 1, 2024, with Pascal Daloz becoming the new CEO. Additionally, Dassault Systèmes reported a 12 per cent increase in quarterly earnings and continued growth in their software business.
Hyundai Motor Company (HYMTF ADR)
Hyundai Motor Company, founded in 1967 and headquartered in Seoul, South Korea, is one of the world’s largest automakers, operating in over 200 countries. The company produces a diverse range of vehicles, including sedans, SUVs, and electric vehicles under the Hyundai, Genesis, and IONIQ brands. Hyundai is also recognized for its strong focus on sustainable mobility, investing in electric and hydrogen fuel cell vehicles, autonomous driving technologies, and connected car solutions.
In addition to its automotive business, Hyundai has made significant investments in robotics, particularly with its acquisition of Boston Dynamics in 2020. The company is leveraging robotics for industrial automation and exploring new applications in mobility, healthcare, and smart cities, positioning itself as a leader in both future mobility and robotics innovation. Hyundai aims to sell one million EVs annually by 2030 and achieve eight to 10 per cent market share in the global EV market.
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| TER NASD | Y | Y | Y |
| DASTY ADR | Y | N | Y |
| HYMTF ADR | Y | Y | Y |
PAST PICKS: OCTOBER 25, 2023
Oracle (ORCL NYSE)
- Then: US$101.43
- Now: US$175.50
- Return: 73%
- Total Return: 75%
Lam Research (LRCX NASD) (10 for 1 stock split 10/3/2024)
- Then: US$58.33*
- Now: US$73.01
- Return: 25%
- Total Return: 26%
Atlassian (TEAM NASD)
- Then: US$178.59
- Now: US$190.46
- Return: 7%
- Total Return: 7%
Total Return Average: 36%
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| ORCL NYSE | Y | Y | Y |
| LRCX NASD | Y | Y | Y |
| TEAM NASD | Y | Y | Y |