Kim Bolton, president and portfolio manager of Black Swan Dexteritas

FOCUS: Technology stocks 

MARKET OUTLOOK:

Stock markets fell almost five per cent from an early April peak as questions were raised about the proximity of the start of the easing cycle, particularly in the U.S. as geopolitical risk continued to accelerate. However, this dip was short-lived and the broad market indices have now fully recovered from April's slump, with market participants now expecting interest rate reductions this fall.

The generative AI revolution rolls on with this Wednesday's Nvidia earnings report followed by a summer of second-guessing the world's central bank policy decisions. The AI ecosystem's focus is clearly on the implementation players and the infrastructure participants. The latter comprises stocks whose products are in a sense the backbone of the rollout of AI. That includes stocks like chipmakers, various software companies, and of course, data centre equipment makers and data centre owners/operators. That group has pulled back from its highs in early March. In the meantime, utilities have been surging with the widely-cited reason being expectations of stronger energy demand thanks to AI. The moral of this is, the AI revolution is both broadening and deepening.

Your BSD Team’s active management practice has proven to be the right recipe for these volatile markets. We will continue to trim those securities that are achieving their respective intrinsic values and buy those growth stocks that exhibit longer, more lucrative investment runways. The hedging overlay will also 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:

Cisco Systems (CSCO  NASD)
Cisco provides infrastructure platforms, including networking technologies of switching, routing, wireless, and data center products that are designed to work together to deliver networking capabilities and transport and/or store data. Cisco has the widest offering of networking solutions among any of its key competitors, cementing its role as a trusted networking solutions provider, as well as a key procurement partner for its suppliers.

Western Digital (WDC NASD)

Western Digital is a leading global data storage company, offering a comprehensive portfolio of HDDs, SSDs, and NAND flash memory solutions. Its established brand and market position provide a competitive edge in the data storage industry. Its products are essential for industries such as technology, telecommunications, automotive, healthcare, and media and entertainment. The company serves a broad range of markets, including consumer electronics, enterprise storage, cloud data centers, and automotive. This diversification helps mitigate risks associated with reliance on a single market segment.

Digital Realty Trust (DLR NYSE)

DLR is a REIT that invests in carrier-neutral data centers and provides colocation and peering services. We consider the business combination with InterXion Holdings, a Netherlands-based information technology services company will be highly complementary. DLR has a 2.84 per cent dividend yield and a 11 per cent per cent CAGR. 

PAST PICKS: JULY 11, 2023

Marvell Technology (MRVL NASD)

• Then: US$62.15
• Now: US$73.43
• Return: 18%
• Total Return: 18%

Microsoft (MSFT NASD)

• Then: US$332.47
• Now: US$431.57
• Return: 30%
• Total Return: 31%

Meta Platforms (META NASD)

• Then: US$298.29
• Now: US$470.75
• Return: 58%
• Total Return: 58%

Total Return Average: 36%