Kim Bolton, president, and portfolio manager of Black Swan Dexteritas
FOCUS: Technology stocks
Top Picks: Amazon, Salesforce, ServiceNow
MARKET OUTLOOK:
Since U.S. President Donald Trump’s inauguration, market sentiment pivoted from buying on dips to selling on rallies; that’s a big change since the bull run for equities in 2023 and 2024. In February, we increased our short equity indices hedge to approximately 40 per cent of the notional value of our stock portfolios, and we have gradually built cash positions to approximately 17 per cent.
When market sentiment changes whereby market participants start buying on dips, we will deploy our cash and lower the hedge. The stock market has risen on five of the last seven recent trading days, but the S&P 500 Index is still down roughly six per cent from its 52-week high in mid February as of Tuesday morning.
While a decline of six per cent sounds relatively modest, individual stocks in the index, especially the ten largest, have seen much larger declines. Of the ten, nine have seen pullbacks of at least 10 per cent, and six of those have shed a fifth of their value. That’s a bear market! When stocks representing more than a third of the entire S&P 500 are down a median of more than 20 per cent from their respective 52-week highs, you can understand why some investors have been feeling more pain in their portfolios than the decline in the S&P 500 would suggest.
An important technical barometer of market sentiment is the S&P 500’s 200-day moving average which is currently 5,752. The S&P 500 is currently trading slightly above its 200-day moving average by a slim 0.5 per cent. Eventually market participants will go back to buying the stock market on dips, but we need more technical and fundamental confirmations before investors earn that courage. In the meantime, we will continue to trim those securities that are achieving their respective intrinsic values, and buy those technology growth stocks that exhibit longer, more lucrative investment runways.
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TOP PICKS:
Amazon (AMZN NASD)
Amazon operates as a diversified technology conglomerate with three core segments: North America, International, and Amazon Web Services (AWS). Its business model integrates e-commerce, cloud computing, advertising, and consumer technology, underpinned by a relentless focus on scale, automation, and customer obsession.
Salesforce (CRM NYSE)
Salesforce, Inc. (CRM) is the world’s leading provider of cloud-based customer relationship management (CRM) software, based in San Francisco. It delivers a comprehensive suite of tools to manage sales, customer service, marketing, and analytics, with a strategic shift toward artificial intelligence (AI) to drive future growth. Its subscription-based model accounts for around 90 per cent of revenue, ensuring high recurring cash flows.
ServiceNow (NOW NYSE)
ServiceNow, Inc. (NOW), headquartered in Santa Clara, California, is a premier provider of cloud-based workflow automation software, transforming enterprise operations in IT, HR, customer service, and beyond. Its Now Platform®, delivered via a subscription model (around 90 per cent of revenue), leverages AI and a single data architecture to streamline business processes globally.
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| AMZN NASD | Y | Y | Y |
| CRM NYSE | Y | Y | Y |
| NOW NYSE | Y | Y | Y |
PAST PICKS: March 20, 2024
Intuit (INTU NASD)
- Then: US$639.65
- Now: US$618.82
- Return: -3%
- Total Return: -3
Workday (WDAY NASD)
- Then: US$276.41
- Now: US$253.12
- Return: -8%
- Total Return: -8%
Palo Alto Networks (PANW NASD) - Stock Split Dec 16, 2024
- Then: US$282.05
- Now: US$189.68
- Return: 35%
- Total Return: 35%
Total Return Average: 8%
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| INTU NASD | Y | Y | Y |
| WDAY NASD | Y | N | Y |
| PANW NASD | Y | Y | Y |
