Kim Bolton, president and portfolio manager of Black Swan Dexteritas

FOCUS: Technology stocks 

MARKET OUTLOOK:

Your Black Swan Dexteritas team believes the recipe for success in 2024 revolves around active management. 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.

Recently, fiscal stimulus has strongly reduced the potential for market volatility, offsetting monetary policy tightening. Also, the U.S. Federal Reserve’s positioning regarding rate cuts being around the corner has been a powerful driver of financial conditions and investor sentiment, strongly supporting asset prices and limiting downside moves. The duo actions of fiscal stimulus and dovish Fed talk are likely to continue for the rest of the year regardless of inflationary pressures, thus sustaining a lid on equity volatility and keeping market bears at bay. Bond vigilantes have driven the long-end higher while punishing risk premiums in protest of inflation in the past. The Fed is already talking about slowing down its quantitative tightening program while looking to modify rules that will allow banks and primary dealers to purchase an increasing share of Treasury securities relative to the capacity they have under the current risk and regulatory framework. Still, a slew of sunny months may lead investors to forget what a rain shower looks and feels like. That’s where the hedging overlay is such an important tool to protect your capital in bearish markets, and also an important tool to be “dialed down” in bullish markets.

A little trivia for you: One of the most fascinating stats about the stock market, at least over the last 30 years, is that nearly all of the market's price gains since SPY's inception in 1993 have come from after-hours moves. If you only owned SPY after hours since it began trading in the early 1990s, you'd hypothetically have a gain of 855 per cent. Of course, this is a hypothetical analysis because buying SPY at the close every day and selling at the open the next day would incur significant trading costs. Had you done the opposite and only owned SPY during regular trading hours over the same time frame, you'd only be up 18.3 per cent.

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TOP PICKS:

Intuit (INTU NASD)

TurboTax Live Full Service offering to launch on Nov. 30, unveiling new generative AI-powered innovations rolling out across TurboTax Online and TurboTax Live. TurboTax Live Full Service will match customers to a virtual tax expert or to a local Intuit TurboTax Verified Pro for virtual or in-person tax preparation. Intuit QuickBooks introduces integrated e-commerce management for product-based businesses using QuickBooks Online.

It announced the availability of several new and improved e-commerce innovations for QuickBooks Online that help small businesses effortlessly manage their inventory across sales channels from one, central platform.

Product-based businesses often track inventory using inefficient methods, including spreadsheets and pen and paper. QuickBooks’ new e-commerce capabilities are designed to help these businesses manage orders and inventory with more confidence and less work, which is critical, especially during the busy holiday season. In fact, customers report they plan to spend 35 per cent more than they did compared to last holiday season, with 50 per cent of this year’s holiday budget expected to be spent at small businesses. By automating inventory accounting processes and connecting sales channels, QuickBooks Online now provides a single source of truth for product, stock, and bookkeeping information. This gives business owners the visibility they need to make informed business decisions.

Workday (WDAY NASD)

The company offers a suite of financial management applications, which enable chief financial officers to maintain accounting information in the general ledger; manage financial processes and identify real-time financial, operational, and management insights. The applications also enhance financial consolidation; reduce time-to-close; promote internal control and auditability; and achieve consistency across finance operations.

Workday is a uniquely positioned software application company addressing massive cloud replacement cycles in a $105 billion-plus TAM spanning HCM, financials, analytics, planning, and procurement. The pandemic drove customers to accelerate their digital transformation efforts so that they can operate their businesses virtually in the cloud, where we believe Workday remains well positioned to capitalize on rising cloud adoption particularly within Financials.

Within Human Capital Management (HCM), the company is best in class with the ability to innovate and deliver new feature functionality in response to customer demand, like people analytics, people experience and the talent marketplace. Workday utilizes generative AI in various ways to enhance its suite of enterprise software solutions, particularly in areas like human resources and financial management.

Palo Alto Networks (PANW NASD)

The company offers firewall appliances and software; Panorama, a security management solution for the control of firewall appliances and software deployed on an end-customers network and instances in public or private cloud environments. It also provides subscription services covering the areas of threat prevention, malware and persistent threat, uniform resource locator filtering, laptop and mobile device protection and more.

In addition, the company offers cloud security, secure access, security analytics and automation, and threat intelligence and cyber security consulting. PANW is a leading network security provider whose legacy business continues to perform relatively well as the network security market changes. PANW is aggressively developing and acquiring next-gen security solutions and successfully introducing them to the market.

Valuation is modest given its market leadership position, especially compared to peers like Zscaler and Crowdstrike which offer similar services.
Palo Alto Networks has announced a new cloud infrastructure investment in Taiwan. This investment offers Taiwanese customers access to Palo Alto Networks' cybersecurity capabilities while allowing them to store their logs within Taiwan, meeting data location requirements. It's part of the company's commitment to providing comprehensive security services for local and regional customers, enabling them to balance data location needs with threat detection capabilities, all within Taiwan.