Kim Bolton, president and portfolio manager, Black Swan Dexteritas

FOCUS: Technology stocks 

MARKET OUTLOOK:

With a nearly fully invested stock portfolio and a vigilant hedging strategy, our fund minimized drawdowns, lessened the portfolio’s volatility and impressively outperformed the broad market indices. Your Black Swan Dexteritas (BSD) team believes this active management process is the best course of action as we enter 2024. While the market searches for the next fundamental catalyst, technical signal or mechanical positioning and flows, 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 growth stocks that 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 “dialled down” in bullish markets.

If market participants are looking for a sure investable technology in 2024, your BSD team believes the market’s focus will be on the evolution of generative artificial intelligence through the medium of natural language processing (NLP) and large language models (LLMs). NLP is a field of computer science focused on making computers understand, interpret and generate human language. LLMs, on the other hand, are a specific type of model within the realm of NPL. LLMs leverage deep learning techniques, particularly transformer architectures, to process and generate human-like text. The primary publicly traded players in the NPL and LLMs arena are OpenAI, Meta, Alphabet, Oracle and Salesforce. Scale your entry and exit price targets carefully.

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TOP PICKS:

Synopsys (SNPS NASD)
 

Synopsys, Inc. provides electronic design automation software products used to design and test integrated circuits. The company offers Fusion Design Platform that provides digital design implementation solutions; Verification Continuum Platform that provides virtual prototyping, static and formal verification, simulation, emulation, field programmable gate array (FPGA)-based prototyping, and debug solutions; and FPGA design products that are programmed to perform specific functions.
It also provides intellectual property (IP) solutions for USB, PCI Express, DDR, Ethernet, SATA, MIPI, HDMI, and Bluetooth low energy applications; analog IP, including data converters and audio codecs; and system-on-chip (SoC) infrastructure IP, datapath and building block IP, and verification IP products.

Synopsys is the leader in semiconductor electronic design automation (EDA) and pioneered Synopsys.ai, the industry's first AI-driven EDA suite. Azure OpenAI Service gives customers access to OpenAI's large language models (LLMs) with the enterprise-ready capabilities of Microsoft Azure. Together, the companies collaborated to support Synopsys' development of Synopsys.ai Copilot, bringing together Azure OpenAI Service generative AI capabilities with Synopsys' industry-leading chip design tools and IP to help engineering teams accelerate time to market and address systemic complexity through the power of conversational intelligence.

Amazon.com (AMZN NASD)

Amazon’s retail business is primed for continued growth. The company is the lead market participant and dominator of the e-commerce market. Physical store and omnichannel expansion will bolster long-term commerce growth. AWS provides compute, storage, database, analytics, machine learning, and other services. It remains the backbone of the internet; it totals almost 70 per cent of the company’s EBIT today, and in conjunction with Microsoft, will own the cloud business for years to come.

As growth begins to decelerate longer term, management should become increasingly focused on expanding e-commerce margins. Margin expansion will boost profitability and free cash flow longer term. In general, Amazon is a force to be reckoned with. As optimistic as this may sound, Amazon has nearly unlimited TAM potential. The company continues to aggressively disrupt other industries. This aggressive management style is a key reason why AMZN is in the top 5 position.

AWS has announced the establishment of the Generative AI Innovation Center, a program that aims to accelerate enterprise innovation and success in generative AI. With a $100 million investment, the center will connect AWS machine learning and AI experts with customers and partners worldwide to build customized solutions using generative AI. Industries such as healthcare, manufacturing, and financial services can leverage this program to enhance drug research, industrial design, personalized customer information, and more, while receiving guidance, training, and best practices from AWS and its partners.

Salesforce (CRM NYSE)

Salesforce's service offerings include sales to store data, monitor leads and progress, forecast opportunities, gain insights through analytics and relationship intelligence, and deliver quotes, contracts, and invoices. Its service offerings also comprise a flexible platform that enables companies of various sizes, locations, and industries to build business apps to bring them closer to their customers with drag-and-drop tools; online learning platform that allows anyone to learn in-demand Salesforce skills; and Slack, a system of engagement. In September 2023 Salesforce unveiled the next generation of its AI technology, called Einstein.   

PAST PICKS: January 17, 2023

BYD Company (BYDDY OTC)

• Then: US$56.80
• Now: US$53.30
• Return: -6%
• Total Return: -6%

Alibaba Group Holding (BABA NYSE)

• Then: US$115.19
• Now: US$76.16
• Return: -34%
• Total Return: -33%

Taiwan Semiconductor (TSM NYSE)

• Then: US$88.99
• Now: US$104.92
• Return: 18%
• Total Return: 20%

Total Return Average: -6%