Kim Bolton, president and portfolio manager of Black Swan Dexteritas
FOCUS: Technology stocks
Top Picks: Arista Networks, Snowflake, Datadog
MARKET OUTLOOK:
Former U.S. President Donald Trump’s victory over Vice President Kamala Harris on Nov. 5 sparked a furious rally that had propelled the S&P 500 Index to its best week in over a year. But the focus quickly shifted back to economic data and the U.S. Federal Reserve.
Slightly hot consumer and producer inflation data, along with a comment from Fed Chair Jerome Powell that suggested the central bank would not be “in a hurry to lower rates” weighed on markets in the second trading week of November. In a week that is light on macroeconomic news, the Nvidia earnings report Wednesday will be the next major market catalyst this week.
Additionally, market participants also need to weigh the impact of the never-ending geopolitical risks coming out of the Middle East, the Far East, and Eastern Europe. Your BSD team fully expects this elevated market volatility to continue through the end of 2024. Year-to-date our BSD Global Tech Hedge Fund and Separately Managed Accounts have registered an unrealized gain in the high teens, which you can expect us to protect; it’s not the time to get greedy.
While the market searches for the next fundamental catalyst or technical signal, your BSD team 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:
Arista Networks (ANET NYSE)
Arista Networks, Inc. develops, markets, and sells cloud networking solutions that consist of extensible operating systems, a set of network applications, as well as gigabit ethernet switching and routing platforms. The company’s growth is being driven by the increasing adoption of cloud computing and data center virtualization. Arista Networks' products and services are well-suited for these environments, as they offer high performance, scalability, and reliability. Arista Networks is also benefiting from the increasing demand for security and analytics in networking environments.
Snowflake (SNOW NYSE)
Snowflake Inc., established in 2012, is a leading cloud-based data platform provider. The company offers a unified solution for data warehousing, data lakes, and data sharing, enabling organizations to consolidate and analyze data seamlessly across multiple cloud environments.
Snowflake’s core offering integrates data storage, processing, and analytics, allowing businesses to manage diverse data workloads efficiently. The platform supports operations across major cloud providers, including Amazon Web Services, Microsoft Azure, and Google Cloud Platform, facilitating flexibility and scalability for clients. Snowflake has expanded its capabilities to include AI and machine learning, enabling enterprises to develop and deploy AI-driven applications directly within the platform.
Datadog (DDOG NASD)
Datadog develops monitoring and analytical solutions for dev, ops and businesses. Through its SaaS platform, it allows for automated infrastructure monitoring across the entire technology spectrum. This allows for monitoring, fixing issues, automation, among others. Typically, this results in shorter time frames for trouble shooting items and improve time-to-market. With DDOG’s growth largely underpinned to the hyperscalers, particularly the mission critical IaaS/PaaS layers.
Gen-AI poses to be a strong tailwind for observability as the complexity of IT stacks evolve, compute infrastructure increases and the pace of application deployment speeds up. As a strategic infrastructure software provider with its end-to-end observability platform, it’s poised to benefit from IT departments shifting usage from multiple point solutions into an integrated suite. Datadog is well positioned to succeed outside of its core products, particularly in security, which can expand the company’s TAM by $20 billion longer-term and the company’s revenue consumption model has room to grow as DDOG accounts for around 10 per cent of its largest clients' cloud spend.
Datadog offers a robust platform specializing in monitoring and analytics for cloud-based workflows, which includes capabilities like real-time logs, performance metrics, and the automation of security monitoring. Its recently expanded product offerings to include Bits, an AI assistant designed to help engineers resolve application issues more efficiently.
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| ANET NYSE | Y | Y | Y |
| SNOW NYSE | Y | N | Y |
| DDOG NASD | Y | Y | Y |
PAST PICKS: NOVEMBER 29, 2023
Alteryx (AYX NYSE)
- Then: US$39.81
- Now: US$48.26
- Return: 21%
- Total Return: 21%
Accenture plc (ACN NYSE)
- Then: US$333.34
- Now: US$354.67
- Return: 6%
- Total Return: 8%
Samsung Electronics (SMSN LSE)
- Then: £1403.00
- Now: £969.00
- Return: -31%
- Total Return: -30%
Total Return Average: 0%
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| AYX NYSE | N | N | N |
| ACN NYSE | Y | Y | Y |
| SMSN LSE | N | N | N |