September, 2023
DNR Capital Australian Equities High Conviction Fund decreased -3.28% (net of fees) in September, underperforming the S&P/ASX 200 Total Return Index by -0.44%. Over the last 12 months, the Fund increased by 13.15%, underperforming the Index by -0.31% (net of fees). Over the last 3 years, the Fund increased by 16.00% p.a., outperforming the Index by 5.00% p.a. (net of fees).
Contributors
• QBE Insurance Group (QBE): outperformed as rising bond yields supported expectations for return on shareholder funds, and broader insurance industry dynamics.
• Computershare (CPU): outperformed as rising bond yields supported margin income expectations on the group’s rate sensitive cash balances.
• National Australia Bank (NAB): outperformed along with global banking exposures as steeping yield curves supported the outlook for financial stocks.
Detractors
• James Hardie Industries (JHX): underperformed as investors grow increasingly concerned regarding the impact of lower housing starts and increasing construction costs. Additionally, mortgage rates have increased to multi-decade highs, weighing on sector sentiment.
• Scentre (SCG): underperformed during the period, following a strong move higher in bond rates. As a result of REITs' high correlation with bonds due to their duration and pricing, the entire sector finished lower.
• CSL (CSL): underperformed during the month as the market continued to digest weaker than expected earnings guidance for growth in FY24. The stock has also been softer following the release of trial results for a competitor’s treatment of Chronic Inflammatory Demyelinating Polyneuropathy (CDIP) which could impact demand for CSL’s immunoglobulin (IG) portfolio.
File: https://commentary.quantreports.net/wp-content/uploads/2020/10/DNR_High_Conviction_Fund_Monthly_Report-31.pdfAugust, 2023
DNR Capital Australian Equities High Conviction Fund decreased -0.34% (net of fees) in August, outperforming the S&P/ASX 200 Total Return Index by 0.39%. Over the last 12 months, the Fund increased by 9.49%, underperforming the Index by -0.07% (net of fees).
Contributors
• Carsales.com (CAR): delivered a solid FY23 result and FY24 guidance update. The Australian business delivered against expectations, whilst the Trader Interactive business in the US beat expectations, demonstrating both solid execution and confirmation of potential upside risks (including new customers, new products, pricing power and margin expansion).
• Domino’s Pizza Enterprises (DMP): outperformed following its FY23 result which missed expectations but provided trading updates with positive momentum in key Australian, NZ and European markets. Asian markets remain challengeing but group restructuring, and declining cost of goods sold (COGS) headwinds provides a more constructive outlook.
• James Hardie Industries (JHX): outperformed following 1Q24 earnings, with sales, margins and guidance all beating expectations, driven by stronger volumes and lower freight costs.
Detractors
• IRESS (IRE): underperformed following FY23 results that saw large downgrades to forward earnings expectations. As the group continues to reset the business and sell off non-core assets, we observe years of underinvestment and poor capital allocation needing to be resolved.
• Ramsay Health Care (RHC): was softer after highlighting the impact of higher interest costs flowing into FY24 which saw material downgrades to previous expectations.
• Wesfarmers (WES, underweight): outperformed with the group’s FY23 earnings exceeding expectations and showing resilient earnings in a tougher retail background with Bunnings and Kmart continuing to drive consumers into store through value and range.
File: https://commentary.quantreports.net/wp-content/uploads/2020/10/DNR_High_Conviction_Fund_Monthly_Report-30.pdfJuly, 2023
DNR Capital Australian Equities High Conviction Fund increased 3.73% (net of fees) in July, outperforming the S&P/ASX 200 Total Return Index by 0.85%. Over the last 12 months, the Fund increased by 11.06%, underperforming the Index by -0.61% (net of fees).
Contributors
• SEEK (SEK): with softer-than-expected inflation prints in the USA and Australia, investors are more hopeful of a soft landing and this supported the outperformance of cyclicals.
• Woodside Energy Group (WDS): outperformed during the period as global energy prices rose and the company reported a strong quarter of production, beating estimates. Energy prices have recovered from recent lows as recent OPEC+ cuts begin to bite and Russian over-production slows from historic levels.
• Lendlease (LLC): outperformed on no stock specific news. Management continues to make incremental progress towards its stated 2024 return targets with a sharpened focus on executing the existing development backlog of over $100bn.
Detractors
• Commonwealth Bank of Australia (CBA, no holding): banks bounced in July as the outlook for bad debts improved and some signs of easing competition.
• CSL (CSL): underperformed during the month as the market continued to digest weaker than expected earnings guidance for growth in FY24. The stock was also softer following the release of trial results for a competitor’s treatment of Chronic Inflammatory Demyelinating Polyneuropathy (CDIP) which could impact demand for CSL’s immunoglobulin (IG) portfolio.
• ANZ Group Holdings (ANZ, no holding): banks bounced in July as the outlook for bad debts improved and some signs of easing competition.
File: https://commentary.quantreports.net/wp-content/uploads/2020/10/DNR_High_Conviction_Fund_Monthly_Report-29.pdfJune, 2023
DNR Capital Australian Equities High Conviction Fund increased 0.69% (net of fees) in June, underperforming the S&P/ ASX 200 Total Return Index by -1.07%. Over the last 12 months, the Fund increased by 10.32%, underperforming the Index by -4.46% (net of fees).
Contributors
• QBE Insurance Group (QBE): outperformed this month as general insurance margin outlooks should benefit from higher investment yields.
• Xero (XRO): outperformed in June following its strong full year results reported in the previous month, with growing expectations for improved margins through prudent cost control and price increases.
• Rio Tinto (RIO): bounced over the month as spot iron ore prices held up in the face of soft Chinese economic data. Chinese policy makers continue to incrementally ease policy, which should support commodity demand.
Detractors
• CSL (CSL): provided first-time earnings guidance for growth in FY24, which was below expectations primarily driven by a lower margin expectation. The company reiterated that Behring margins are tracking positively and should return to pre-COVID19 levels in the “medium term”, while collection volumes continue to track well.
• SEEK (SEK): underperformed given the uncertainty over the near-term volume outlook following heightened economic risk and interest rate rises. However, recent prices in the high single digits give confidence that this will help offset the volume decline into FY24.
File: https://commentary.quantreports.net/wp-content/uploads/2020/10/DNR_High_Conviction_Fund_Monthly_Report-28.pdfMay, 2023
DNR Capital Australian Equities High Conviction Fund decreased 1.45% (net of fees) in May, outperforming the S&P/ ASX 200 Total Return Index by 1.08%. Over the last 12 months, the Fund increased by 4.27%, outperforming the Index by 1.37% (net of fees).
Contributors
• Xero (XRO): outperformed during the period following its annual earnings result, which highlighted a strong recovery in its UK operations, alongside continued progress with cost-out and restructuring, driving free cash flow growth.
• James Hardie Industries (JHX): reported a result which was better than feared and highlighted their ability to extract good margins in a difficult market.
Detractors
• Ramsay Health Care (RHC): underperformed during the month following a negative trading update for the March quarter. While volumes were strong, the business struggled with staffing, which dragged on margins.
• ALS (ALQ): reported a result which was better than expected but also highlighted some declines in sample volumes, and the stock sold off.
File: https://commentary.quantreports.net/wp-content/uploads/2020/10/DNR_High_Conviction_Fund_Monthly_Report-27.pdfApril, 2023
DNR Capital Australian Equities High Conviction Fund increased 1.80% (net of fees) in April, underperforming the S&P/ASX 200 Total Return Index by 0.05%. Over the last 12 months, the Fund increased by 3.57%, outperforming the Index by 0.74% (net of fees).
Contributors
• Carsales.com (CAR): growth stocks rallied during the month due to expectations of lower bond yields. The business continues to benefit from recent price rises and as inventory normalises from lower levels.
• Fortescue Metals Group (FMG, no holding): underperformed over the month as iron ore prices slipped on concerns that the China reopening was slower than previously expected.
• BHP Group (BHP, underweight): underperformed during the month as a slower than expected pickup in economic activity post reopening in China led to lower iron ore prices.
Detractors
• Rio Tinto (RIO): underperformed during the month as a slower than expected pickup in economic activity post reopening in China led to lower iron ore prices.
• Ramsay Health Care (RHC): underperformed during the month on concerns around continued cost pressures and the potential for higher funding costs going forward.
• ANZ Group Holdings (ANZ, no holding): bounced back following the sell down of banks in March.
File: https://commentary.quantreports.net/wp-content/uploads/2020/10/DNR_High_Conviction_Fund_Monthly_Report-26.pdfMarch, 2023
DNR Capital Australian Equities High Conviction Fund decreased 0.97% (net of fees) in March underperforming the S&P/ASX 200 Total Return Index by 0.81%. Over the last 12 months, the Fund increased by 0.74% outperforming the Index by 0.64% (net of fees).
Contributors
• Xero (XRO): outperformed during the month following a restructuring announcement from new CEO Sukhinder Singh Cassidy. Following a review of group operations, redundancies across the firm are being undertaken to improve operational efficiency and drive greater focus on profitability.
• ANZ Group Holdings (ANZ, no holding): banks sold off following the run on US banks and failure of Silicon Valley Bank.
• Commonwealth Bank of Australia (CBA, no holding): banks sold off following the run on US banks and failure of Silicon Valley Bank.
Detractors
• Computershare (CPU): following the failure of Silicon Valley Bank expectations around interest rates declined.
• Scentre (SCG): underperformed during the period due to concerns regarding broader commercial property funding. Following the regional banking stress observed in the United States, spreads on commercial debt have expanded and equities have responded by selling down the REITs, with an emphasis on those with leverage or upcoming liquidity events.
• National Australia Bank: banks sold off following the run on US banks and failure of Silicon Valley Bank.
File: https://commentary.quantreports.net/wp-content/uploads/2020/10/DNR_High_Conviction_Fund_Monthly_Report-25.pdfFebruary, 2023
DNR Capital Australian Equities High Conviction Fund decreased 1.64% (net of fees) in February, outperforming the S&P/ASX 200 Total Return Index by 0.81%. Over the last 12 months, the Fund increased by 8.92%, outperforming the Index by 1.76% (net of fees).
The S&P/ASX 200 Total Return Index was down 2.45% during the period. Utilities (+2.3%) was the best performing sector, following an improved takeover offer presented to Origin Energy (ORG +9.4%), allaying fears that the deal would fall through. Information Technology also outperformed (+2.2%), with key constituents Computershare (CPU +5.7%) and WiseTech Global (WTC +4.1%) benefitting from higher cash rates and reporting a key customer contract, respectively. Materials (-6.9%) was the worst performing sector, with the majors (BHP Group, BHP -8.5%, Fortescue Metals Group, FMG -0.4%, Rio Tinto, RIO -7.8%) reporting strong cost inflation and a muted demand impulse from a reopening China.
Financials (-3.8%) also underperformed, with the banks reporting a weaker outlook for loan growth as well as increasing signs of stress in their loan books. This month the market was weaker, following a strong bounce in January. Globally, the key issue for the market remains inflation and its impact on interest rates. Reporting season has concluded with mixed results which we will examine in more detail.
File: https://commentary.quantreports.net/wp-content/uploads/2020/10/DNR_High_Conviction_Fund_Monthly_Report-24.pdfJanuary, 2023
DNR Capital Australian Equities High Conviction Fund increased 5.48% (net of fees) in January, underperforming the S&P/ASX 200 Total Return Index by 0.75%. Over the last 12 months, the Fund increased by 14.39%, outperforming the Index by 2.18% (net of fees).
The S&P/ASX 200 Total Return Index was up 6.23% during the period. Consumer Discretionary (+9.8%) was the best performing sector, as strong consumer data and more dovish commentary out of the Federal Reserve encouraged a “soft landing” (WES +8.2%, ALL +11.3%). Materials (+8.8%) also outperformed, benefitting from a reopening China and speculation of increased metals demand (BHP +8.2%, RIO +8.8%). Utilities (-3.0%) and Energy (+1.3%) were the worst performing sectors, as declining gas and coal prices following a mild Northern Hemisphere winter saw producers under pressure (AGL -5.2%, WDS +2.3%).
File: https://commentary.quantreports.net/wp-content/uploads/2020/10/DNR_High_Conviction_Fund_Monthly_Report-23.pdfDecember, 2022
DNR Capital Australian Equities High Conviction Fund decreased 2.23% (net of fees) in December, outperforming the S&P/ASX 200 Total Return Index by 0.98%. Over the last 12 months, the Fund increased by 3.93%, outperforming the Index by 5.01% (net of fees).
The S&P/ASX 200 Total Return Index was down 3.21% during the period. Materials (-0.91%) was the best performing sector, with the majors (BHP +0.24%, FMG +5.83%, RIO +6.19%) continuing their run on the back of a higher iron ore price in anticipation of Chinese reopening. Consumer Staples (-1.87%) also outperformed with Coles Group (COL -1.36%) and Woolworths Group (WOW -2.64%) benefitting from resilient supermarket sales and normalising industry market shares. Consumer Discretionary (-7.04%) was the worst performing sector, with Aristocrat Leisure (ALL -12.87%) selling off following a strengthening AUD and regulatory concerns in Australia. A-REITS (-5.61%) also underperformed, with climbing bond rates over the month negatively affecting REIT valuations.
2022 was the year a decade long secular stagnation receded. Zero interest rate policies quickly unravelled as the inflation that had eluded central banks for so many years swamped unprepared policy makers. Coordinated global rate rises placed heavier discounts on earnings further in the future and punished undisciplined loss-making enterprises. Capital markets whipsawed from There Is No Alternative (TINA) to There Are Now Alternatives (TANA). As the cost of capital reasserted itself on asset prices, many darlings of the COVID-19 era met the brutal reality of normalising activity, liquidity and market demand for sustainable cashflows. In assessing the equities landscape for investment opportunities in 2023, we review recent economic data in the context of slowdown narratives and weigh earnings expectations baked into stocks. Impactful changes occurring in Japanese bond markets may set the scene for markets in 2023, which continues to digest the astonishing events of the past few years.
File: https://commentary.quantreports.net/wp-content/uploads/2020/10/DNR_High_Conviction_Fund_Monthly_Report-22.pdfNovember, 2022
DNR Capital Australian Equities High Conviction Fund increased 5.15% (net of fees) in November, underperforming the
S&P/ASX 200 Accumulation Index by 1.43%. Over the last 12 months, the Fund increased by 7.97%, outperforming the Index by 2.97% (net of fees).
The S&P/ASX 200 Accumulation Index was up 6.58% during the period. Utilities (+20.9%) was the best performing sector, following a private equity takeover bid for Origin Energy (ORG +41.1%), which also helped peer AGL Energy (AGL +16.9%). Materials (+16.2%) also outperformed, with the majors marching higher (BHP +21.8%, RIO +24.3%) on signs of a softer landing for the global economy. Financials (+1.1%) was the worst performing sector, with two of the four big banks weaker on a slowing housing market (CBA +3.0%, NAB -0.3%, WBC +1.2%, ANZ -0.3%). Communications (+2.1%) also underperformed, with defensive telcos Telstra
Corporation (TLS +1.5%) and TPG Telecom (TPG -0.2%) left behind in the risk-on rally.
Markets continue to be highly reactive to data as 2022 draws to a close. In assessing the sustainability of an early Santa Claus rally, we review the fluid state of China's zero-COVID policy and the mixed signals from the Federal Reserve (the Fed) that continue to feed volatility. In evaluating the consequences for an economy dealing with inflation whilst staring into a potential global recession, we continue to rebalance the portfolio, selectively adding to reasonably priced quality exposures while reducing active exposure to high beta and elevated earnings multiples.
File: https://commentary.quantreports.net/wp-content/uploads/2020/10/DNR_Income_Monthly_Performance_Report_R-8.pdfOctober, 2022
DNR Capital Australian Equities High Conviction Fund increased 6.04% (net of fees) in October, in line with the S&P/ ASX 200 Accumulation Index. Over the last 12 months, the Fund increased by 2.87%, outperforming the Index by 4.88% (net of fees).
Contributors
Domino's Pizza Enterprises (DMP): outperformed during the month, bouncing off its previous month lows on no stock specific news. Subsequent AGM trading updates highlighted ongoing pressures in Europe which the group continues to manage in the face of steep inflation.
Detractors
Commonwealth Bank of Australia (CBA, no holding): banks bounced due to higher interest rates feeding through to better margins in the short term. In the longer term we remain concerned regarding the impact of higher rates on bad debts, higher costs and competition eating away improved margins.
September, 2022
DNR Capital Australian Equities High Conviction Fund decreased 6.41% (net of fees) in September, underperforming the S&P/ASX 200 Accumulation Index by 0.24%. Over the last 12 months, the Fund decreased by 2.95%, outperforming the Index by 4.74% (net of fees).
The S&P/ASX 200 Accumulation Index was down 6.17% during the period. Healthcare (-5.1%) was the best performing sector, with the defensive nature of key companies such as CSL (CSL -2.9%) attracting investors in the face of recession fears. Consumer staples (-5.8%) also outperformed, similarly benefitting from its relatively defensive earnings characteristics, with grocers Woolworths Group (WOW -5.9%) and Coles Group (COL -6.4%) the largest constituents. Utilities (-14.9%) was the worst performing sector, as bond rates moved higher and Origin Energy (ORG -18.1%) announced the early closure of the Eraring power plant. REITs (-13.8%) also underperformed, similarly impacted by surging bond rates which are direct comparators to REIT cap rates.
This month saw a sharp drop in equities with concerns regarding continued inflation and higher rates weighing on valuations, and large currency and bond market moves created uncertainty for markets. We consider a range of factors impacting markets at present.
File: https://commentary.quantreports.net/wp-content/uploads/2020/10/DNR_High_Conviction_Fund_Monthly_Report-20.pdfAugust, 2022
The S&P/ASX 200 Accumulation Index was up 1.18% during the period.
Energy (+7.4%) was the best performing sector, with majors Woodside Energy Group (WDS +7.1%) and Santos (STO +8.1%) benefitting from the continued surge in energy prices, resultant from a period of underinvestment in supply and Russian retaliation to Western sanctions. Materials (+3.9%) also outperformed, increasing despite the outlook for a weaker global economy, with strong results from BHP Group (BHP +5.0%) and South32 (S32 +8.9%). Property (AREITs) (-3.6%) was the worst performing sector, as bond rates moved higher and property values came under pressure. Consumer Staples (-2.7%) also underperformed, with defensive names trading at higher multiples failing to deliver convincing results (Woolworths Group (WOW) -3.8%), Coles Group (COL) -6.4%).
DNR Capital Australian Equities High Conviction Fund underperformed the Index for the month. Key stock contributors were Woodside Energy Group (WDS), Commonwealth Bank of Australia (CBA, no holding) and QBE Insurance Group (QBE). Key stock detractors were Domino’s Pizza Enterprises (DMP), SEEK (SEK) and TPG Telecom (TPG).
File: https://commentary.quantreports.net/wp-content/uploads/2020/10/DNR_High_Conviction_Fund_Monthly_Report-19.pdfJuly, 2022
The S&P/ASX 200 Accumulation Index was up 5.75% during the period.
Information Technology (+15.2%) was the best performing sector, with key constituents Xero (XRO +20.8%) and WiseTech Global (WTC +32.4%) benefitting from the impact of falling bond rates during the month. REITs (11.9%) also outperformed, similarly benefitting from falling bond rates and the positive implications for property valuations. Materials (-0.7%) was the worst performing sector, with a perceptibly weaker Chinese economy adding to concerns of a global recession (BHP Group (BHP) -6.2%, Rio Tinto (RIO) -4.7%). Energy (+2.1%) also underperformed, as oil prices retreated in the face of the same growth concerns, despite a historically tight physical market (Woodside Energy Group (WDS) +0.44%, Santos (STO) -1.6%).
DNR Capital Australian Equities High Conviction Fund underperformed the Index for the month. Key stock contributors were Lendlease (LLC), National Australia Bank (NAB) and Scentre (SCG). Key stock detractors were Commonwealth Bank of Australia (CBA, No Holding), QBE Insurance Group (QBE) and Woodside Energy Group (WDS).
File: https://commentary.quantreports.net/wp-content/uploads/2020/10/DNR_High_Conviction_Fund_Monthly_Report-18.pdfJune, 2022
The S&P/ASX 200 Accumulation Index was down 8.77% during the period. Consumer Staples (+0.2%) was the best performing sector, with retailers Woolworths Group (WOW +2.7%), Coles Group (COL +1.6%) and Endeavour Group (EDV +4.3%) favoured for defensive characteristics in a potential recessionary scenario. Energy (-0.3%) also outperformed, with the successful merger of Woodside Petroleum (WPL) and BHP Petroleum creating immediate value in the new Woodside Energy Group (WDS +7.0%). Materials (-12.4%) was the worst performing sector, with fears of a recession taking a toll on commodity names, including the big iron ore miners (BHP –7.5%, RIO –10.3%, FMG –12.8%). Financials (-11.9%) also underperformed, with sensitivity to lower economic growth causing stocks in the sector to trade down.
The DNR Capital Australian Equities High Conviction Fund outperformed the Index for the month. Key stock contributors were Woodside Energy Group (WDS), Computershare (CPU) and Commonwealth Bank of Australia (CBA, No Holding). Key stock detractors were South32 (S32), Lendlease (LLC) and Woolworths Group (WOW, No Holding)
File: https://commentary.quantreports.net/wp-content/uploads/2020/10/DNR_High_Conviction_Fund_Monthly_Report-17.pdfMarch, 2022
The S&P/ASX 200 Accumulation Index was down 0.85% during the period. Utilities (+9.3%) was the best performing sector, with key constituents APA (APA +7.7%), Origin Energy (ORG +9.8%) and AGL (AGL +12.4%) all stronger on the back of stronger energy markets and ongoing private equity interest. Industrials (+3.4%) also outperformed with reopening plays such as Transurban (TCL +5.8%) and Qantas (QAN +7.5%) benefitting from increased normalisation of travel. Information Technology (-10.4%) was the worst performing sector, with increasing bond yields and inflation prompting a large sell off in expensive technology names in the US. Consumer Discretionary (-3.2%) also underperformed, with an emphasis of selling in higher growth companies and those who have benefitted throughout the COVID-19 period, where revenues may have been pulled forward.
File: https://commentary.quantreports.net/wp-content/uploads/2020/10/DNR_High_Conviction_Fund_Monthly_Report-15.pdfMarch, 2022
The S&P/ASX 200 Accumulation Index was up 6.89% during the period.
Information Technology (+13.2%) was the best performing sector, with key constituents Wisetech (WTC +17.2%), Computershare (CPU +14.0%) and Xero (XRO +9.6%) all stronger. Energy (+9.6%) also outperformed as global energy shortages remain, exacerbated by the war in Ukraine and its ramifications for Russian oil and gas exports. A-REITs (+1.2%) was the worst-performing sector, as bonds sold off sharply during the month, increasing funding costs and discount rates. Health Care (+1.9%) also underperformed, with COVID-19 beneficiaries Fisher & Paykel Healthcare (FPH -12.5%) and Resmed (RMD -2.9%) pulling the sector down. DNR Capital Australian Equities High Conviction Fund outperformed the Index for the month.
Key stock contributors were Woodside Petroleum (WPL), National Australia Bank (NAB) and Computershare (CPU). Key stock detractors were Commonwealth Bank of Australia (CBA, No Holding), Aristocrat Leisure (ALL), and Scentre (SCG)
File: https://commentary.quantreports.net/wp-content/uploads/2020/10/DNR_High_Conviction_Fund_Monthly_Report-14.pdfFebruary, 2022
The S&P/ASX 200 Accumulation Index was up 2.14% during the period.
Energy (+5.8%) was the best performing sector, as an already tight oil and gas market was rocked by the Russian invasion of Ukraine and the subsequent sanctions on Russia. Consumer Staples (+5.6%) also outperformed as a flight to safety and strong half-year reports from companies such as Endeavour Group (EDV +14.0%) propelled the sector higher. Information Technology (-6.9%) was the worst-performing sector, with the rotation from growth to value continuing and a newfound focus on profitability in reporting season. Consumer Discretionary (-5.8%) also underperformed, with key constituents Wesfarmers (WES -8.6%), Aristocrat Leisure (ALL -7.6%), and Domino’s Pizza Enterprises (DMP -23.7%) all reporting against strong comparative periods.
DNR Capital Australian Equities High Conviction Fund outperformed the Index for the month. Key stock contributors were Woodside Petroleum (WPL), South32 (S32) and Computershare (CPU). Key stock detractors were Westpac Banking Corporation (WBC, No Holding), Aristocrat Leisure (ALL), and SEEK (SEK).
File: https://commentary.quantreports.net/wp-content/uploads/2020/10/DNR_High_Conviction_Fund_Monthly_Report-13.pdfJanuary, 2022
The S&P/ASX 200 Accumulation Index was down 6.35% during the period. Energy (+7.9%) was the best performing sector, as oil and gas prices continued to climb and quarterly production reports from Woodside Petroleum (WPL +14.3%) and Santos (STO +13.1%) beat expectations. Utilities (+2.6%) also outperformed as Origin Energy (ORG +7.2%) similarly benefitted from record gas prices. Information Technology (-18.4%) was the worst performing sector, continuing the bond-yield-induced rout of high valuation names across global markets. Healthcare (-12.1%) also underperformed, with the more speculative healthcare stocks facing the worst of the sell off.
DNR Capital Australian Equities High Conviction Fund outperformed the Index for the month. Key stock contributors were Woodside Petroleum (WPL), BHP Group (BHP) and Virgin Money UK (VUK). Key stock detractors were James Hardie Industries (JHX), Santos (STO, No Holding), and Macquarie Group (MQG)
File: https://commentary.quantreports.net/wp-content/uploads/2020/10/DNR_High_Conviction_Fund_Monthly_Report-12.pdfDecember, 2021
The S&P/ASX 200 Accumulation Index was up 2.75% during the period. Utilities (+6.9%) was the best performing sector, as higher energy prices and the persistence of investor interest in utility and infrastructure assets saw the sector well supported. Materials (+6.4%) also outperformed as iron ore prices continue to recover in the face of increasing Chinese monetary stimulus. Information Technology (-5.4%) was the worst performing sector, largely on the back of poor returns from Afterpay (APT -23.7%) which reacted to a major sell down of potential parent company Block (NYSE:SQ). Consumer Staples (-2.4%) also underperformed with sector heavyweight Woolworths Group (WOW -6.9%) disappointing investors at its first half trading update
File: https://commentary.quantreports.net/wp-content/uploads/2020/10/DNR_High_Conviction_Fund_Monthly_Report-11.pdfNovember, 2021
The S&P/ASX 200 Accumulation Index was down 0.54% during the period.
Materials (+6.2%) was the best performing sector, as tight Chinese economic policy appeared to ease slightly, boosting the outlook for iron ore exports. Communications (+5.2%) also outperformed as companies with defensive earnings were favoured, with Telstra Corporation (TLS +6.5%) in particular, benefitting. Energy (-8.4%) was the worst performing sector, as COVID-19 resurgences dampened the outlook for global growth and politicians called for action to lower cost of oil. Financials (-8.0%) also underperformed with bond rates reversing some of their previous gains and the cyclical outlook turning incrementally less positive.
File: https://commentary.quantreports.net/wp-content/uploads/2020/10/DNR_High_Conviction_Fund_Monthly_Report-10.pdfOctober, 2021
The S&P/ASX 200 Accumulation Index was down 0.10% during the period. Information Technology (+2.1%) was the best performing sector, following global peers higher after underperforming last month. Health Care (1.0%) also outperformed with companies exhibiting pricing power outperforming in an inflationary environment. Industrials (-3.3%) was the worst performing sector, as infrastructure-style assets were sold down with higher interest rates. Consumer Staples (-2.3%) also underperformed with sector heavyweight Woolworths Group (WOW -3.2%) disappointing shareholders at its quarterly update.
The DNR Capital Australian Equities High Conviction Fund outperformed the Index for the month. Key stock contributors were Macquarie Group (MQG), SEEK (SEK) and National Australia Bank (NAB). Key stock detractors were Domino’s Pizza Enterprises (
File: https://commentary.quantreports.net/wp-content/uploads/2020/10/DNR_High_Conviction_Fund_Monthly_Report-1-3.pdfSeptember, 2021
The S&P/ASX 200 Accumulation Index was down 1.85% during the period.
Energy (+16.4%) was the best performing sector, following a surge in oil and gas prices due to recovering demand and limited supply. Utilities (+2.1%) also outperformed as a bidding war between APA (APA) and a private equity consortium erupted over Ausnet Services (AST +30.2%). Materials (‑12.1%) was the worst performing sector, as commodities came under pressure again from slowing growth, particularly in China. Health Care (‑5.5%) also underperformed as the sector leader CSL (CSL ‑5.9%), experienced continued issues in sourcing plasma
File: https://commentary.quantreports.net/wp-content/uploads/2020/10/DNR_High_Conviction_Fund_Monthly_Report-1-2.pdfAugust, 2021
The S&P/ASX 200 Accumulation Index was up 2.50% over the month.
Information Technology (+16.8%) was the best performing sector, following Afterpay’s (APT +39.2%) takeover offer from Square and Wisetech’s (WTC +57.0%) strong profit result. Health Care (+6.8%) also outperformed as the majority of the sector met expectations during reporting season. Materials (-7.9%) was the worst-performing sector, as fears of an economic slowdown stemming from the COVID-19 Delta variant affected commodity prices, with iron ore, in particular, impacting the majors. Energy (-5.1%) also underperformed as oil prices fell, similarly affected by economic sentiment.
File: https://commentary.quantreports.net/wp-content/uploads/2020/10/DNR_High_Conviction_Fund_Monthly_Report-9.pdfJuly, 2021
The S&P/ASX 200 Accumulation Index was up 1.10% during the period.
Materials (+7.1%) was the best performing sector. In a reversal from last month, sentiment swayed back towards the inflationary argument, with commodities prices continuing their ascent. Industrials (+4.3%) also outperformed in the pro-cyclical rally, however it was largely due to the takeover offer for Sydney Airport Holdings (SYD, +34.9%). Information Technology (-6.9%) was the worst performing sector following its rally last month. Energy (-2.5%) also underperformed, despite a higher oil price and a weaker Australian Dollar as company specific issues drag on the domestic names versus overseas peers
File: https://commentary.quantreports.net/wp-content/uploads/2020/10/DNR_High_Conviction_Fund_Monthly_Report-8.pdfJune, 2021
The S&P/ASX 200 Accumulation Index was up 2.26% during the period.
Information Technology (+13.4%) was the best performing sector. The observed market rotation away from value in part reflects a flattening of the yield curve, pointing to transitory inflation and a slowing in recently strong economic growth. Implied lower-for-longer interest rates benefit longer duration and growth stocks. Communication Services (+5.6%) also outperformed, with the telcos lifting the sector on favourable industry dynamics. Financials (-0.2%) was the worst performing sector, in a direct reversal of the procyclical trade last month. Materials (+0.3%) similarly suffered from the shift towards lower inflation, lower growth sentiment.
DNR Capital Australian Equities High Conviction Fund performed largely in-line with its benchmark for the period. Key stock contributors were Iress (IRE), Westpac Banking Corporation (WBC, no holding) and CSL (CSL, underweight). Key stock detractors were Lendlease (LLC), Afterpay (APT, no holding) and National Australia Bank (NAB).
File: https://commentary.quantreports.net/wp-content/uploads/2020/10/DNR_High_Conviction_Fund_Monthly_Report-7.pdfMay, 2021
The S&P/ASX 200 Accumulation Index was up 2.34% during the period.
Financials (+4.4%) was the best performing sector. An increase in inflation expectations in the market saw pro‑cyclical sectors outperform, with Financials positively geared to a rising interest rate environment. Despite this, Health Care (+3.5%) also outperformed, with sector heavyweight CSL (CSL +7.0%) recovering from post‑COVID‑19 lows. Information Technology (‑9.9%) was the worst performing sector, with longer‑duration stocks expected to suffer in a higher interest rate environment. Utilities (‑7.0%) is also exposed to higher rates through its non‑cyclical earnings profile, resulting in underperformance during the period.
File: https://commentary.quantreports.net/wp-content/uploads/2020/10/DNR_High_Conviction_Fund_Monthly_Report-6.pdfApril, 2021
The S&P/ASX 200 Accumulation Index was up 3.47% during the period.
Information Technology (+9.6%) was the best performing sector. Growth stocks in general performed well with bond rates falling, forcing investors to consider a potential return to a duration-friendly, low-rate environment. Materials (+6.8%) also outperformed. Global commodities prices continued their recovery-led run, with iron ore prices reaching new highs. Energy (-4.9%) was the worst performing sector. Oil prices were lower during the month following an extended period of strength following the vaccine recovery trade. Consumer Staples (-2.6%) also underperformed. The quarterly updates from many retailers disappointed investors, as they cycle earnings from the COVID-19 lockdown activity surge.
File: https://commentary.quantreports.net/wp-content/uploads/2020/10/DNR_High_Conviction_Fund_Monthly_Report-5.pdfMarch, 2021
The S&P/ASX 200 Accumulation Index was up 2.44% during the period.
Consumer Discretionary (+6.9%) was the best performing sector. Improving consumer confidence, coupled with strong household savings and a surging housing market has encouraged the sector. Utilities (+6.8%) also outperformed, as the selloff in bonds moderated, allowing investors to revisit the outlook for bond proxies, including infrastructure and real estate. Materials (-5.0%) was the worst performing sector as iron ore prices slipped from their highs, prompting a selloff in the majors. Information Technology (-3.0%) also underperformed, with long-duration stocks continuing to be challenged by higher bond rates.
File: https://commentary.quantreports.net/wp-content/uploads/2020/10/DNR_High_Conviction_Fund_Monthly_Report-4.pdfFebruary, 2021
The S&P/ASX 200 Accumulation Index was up 1.45% during the period. Materials (+7.2%) was the best performing sector. The economic recovery, supported by large fiscal and monetary stimulus, has led to a much stronger outlook for inflation and bond yields, which is historically beneficial to this sector. Financials (+4.5%) similarly outperformed, as the rising yields gave further life to the value rotation that started last year. Information Technology (-9.1%) was the worst performer, as growth stocks were heavily impacted by a steepening in the yield curve. Utilities (-8.8%) also underperformed as the assets with fixed-interest-like qualities followed bonds lower.
DNR Capital Australian Equities High Conviction Fund outperformed its benchmark for the period. Key stock contributors were Virgin Money UK (VUK), Tabcorp Holdings (TAH) and Lendlease (LLC). Key stock detractors were Westpac Banking Corporation (WBC, no holding), Coles Group (COL) and Computershare (CPU).
File: https://commentary.quantreports.net/wp-content/uploads/2020/10/DNR_High_Conviction_Fund_Monthly_Report-3.pdfJanuary, 2021
The S&P/ASX 200 Accumulation Index was up 0.31% during January. Consumer Discretionary (+4.7%) was the best performing sector. Promising economic data regarding housing and consumer spending saw strong support for exposed retailers, including the Wesfarmers stable (WES, +8.4%), Harvey Norman Holdings (HVN, +13.9%) and Breville Group (BRG, +13.5%). Also outperforming was the Communications sector, similarly benefiting from the housing and consumer theme. Telstra Corporation (TLS, +4.7%) and TPG Telecom (TPG, +2.5%) finished higher, as did online property listings duopoly member Domain Holdings Australia (DHG, +11.1%). A-REITs (-4.1%) were the worst performers, as fears of rising bond yields saw the likes of Goodman (GMG, -6.5%) and Dexus Property (DXS, -4.2%) lower. Industrials also underperformed with travel-related Sydney Airport Holdings (SYD, -10.8%) and Qantas Airways (QAN, -7.2%) sold off as the timeline for international border reopenings was pushed out.
DNR Capital Australian Equities High Conviction Fund underperformed its benchmark for the period. Key stock contributors were CSL (CSL, no holding), Woodside Petroleum (WPL) and Fortescue Metals Group (FMG, no holding). Key stock detractors were Lendlease (LLC), Westpac Banking Corporation (WBC, no holding) and Macquarie Group (MQG).
File: https://commentary.quantreports.net/wp-content/uploads/2020/10/DNR_High_Conviction_Fund_Monthly_Report-2.pdfDecember, 2020
The DNR Capital Australian Equities High Conviction Fund outperformed its benchmark for the month. Key stock contributors were CSL (CSL, no holding), Domino’s Pizza Enterprises (DMP) and BHP Group (BHP). Key stock detractors were Fortescue Metals Group (FMG, no holding), Lendlease (LLC) and Afterpay (APT, no holding). The S&P/ASX 200 Accumulation Index was up 1.21% during the period. Information Technology (+9.4%) was the best performing sector during the period. Large-caps Afterpay (APT, +24.4%) and Xero (XRO, +13.8%) drove the gains, following a strong lead from US technology peers. Materials (+8.8%) continued their strong run as iron ore prices remain elevated.
BHP Group (BHP, +11.5%) and Fortescue Metals Group (FMG, +28.5%) remained the largest contributors to performance. Utilities (-6.8%) was the worst performing sector, as defensive sectors continue to underperform in the re-opening trade. AGL Energy (AGL, -11.5%) and APA Group (APA, -6.8%) led declines.
Health Care (-4.9%) also underperformed as their defensive nature counted against them in a month that largely rewarded cyclical names. CSL (CSL, -4.8%) was the largest contributor to the sector’s performance, however many of the large cap names were down strongly.
File: https://commentary.quantreports.net/wp-content/uploads/2020/10/DNR_High_Conviction_Fund_Monthly_Report-1-1.pdfNovember, 2020
The DNR Capital Australian Equities High Conviction Fund outperformed its benchmark for the month. Key stock contributors were CSL (CSL, no holding), National Australia Bank (NAB) and Scentre (SCG).
Key stock detractors were Domino’s Pizza Enterprises (DMP), ANZ Banking Group (ANZ, no holding) and Commonwealth Bank of Australia (CBA, no holding).
The S&P/ASX 200 Accumulation Index was up 10.21% during the period. Energy (+28.4%) was the best‑performing sector during the period, as vaccine news caused a market-wide rotation into value and procyclical names. Oil and gas majors Woodside Petroleum (WPL, +29.1%) and Santos (STO, +29.4%) led the sector higher as oil prices staged a strong rebound. Financials (+15.2%) also benefited from the value rotation as banks (NAB, +23.1%) and insurers (SUN, +22.5%) are expected to benefit from a stronger global growth outlook.
Consumer Staples (-0.7%) was the worst performer, with investors pulling out of the defensive, COVID-19 beneficiaries like Woolworths Group (WOW, -4.7%) and Coles Group (COL, -0.6%). Utilities (+1.2%) underperformed, with the defensive earnings of APA (APA, -1.4%) and Ausnet Services (AST, -7.3%) less favourable in a cyclical rotation.
File: https://commentary.quantreports.net/wp-content/uploads/2020/10/DNR_High_Conviction_Fund_Monthly_Report-1.pdfOctober, 2020
The DNR Capital Australian Equities High Conviction Fund underperfomed its benchmark by the month.
The S&P/ASX 200 Accumulation Index was up 1.93% during the period. Information Technology (+9.0%) was the best performing sector during the month as Link Administrative Holdings (LNK) +27.9% was the subject of a private equity bid and Afterpay (APT) +21.0% continued its strong run. Financials (6.3%) also outperformed the broader market, with banks and fund managers benefiting from a targeted value rally, typified by Virgin Money UK (VUK) +26.9% and Pendal Group (PDL) +18.5). Industrials (-3.9%) was the worst performing sector with major names like Aurizon Holdings (AZJ) -12.6% and Brambles (BXB) -8.8% struggling to attract investors ahead of key quarterly updates. Utilities (-1.5%) also performed poorly, with energy assets in particular suffering from the uncertainty surrounding the impact of a widespread renewables push. AGL Energy (AGL) -8.4% and Spark Infrastructure (SKI) -3.2% were the key detractors.
File: https://commentary.quantreports.net/wp-content/uploads/2020/10/DNR_High_Conviction_Fund_Monthly_Report.pdfSeptember, 2020
The DNR Capital Australian Equities High Conviction Fund outperformed its benchmark for the period. Key stock contributors were James Hardie Industries (JHX), Aristocrat Leisure (ALL) and ALS (ALQ). Key stock detractors were CSL (CSL, no holding), Virgin Money UK (VUK) and Cleanaway Waste Management (CWY). The S&P/ASX 200 Accumulation Index was down 3.66% during the period. Health Care (+0.4%) was the best performing sector during the month as both Sonic Healthcare (SHL) +3.7% and Cochlear (COH) +3.1% outperformed. Industrials (-0.7%) also fared better than the market, with Sydney Airport Holdings (SYD) +8.1% rallying ahead of peers. Energy (-11.6%) was the worst performing sector on the back of weaker oil prices, with all oil and gas majors heavily down. Consumer Staples (-8.2%) also performed poorly, with Woolworths Group (WOW) -8.6% and Coles Group (COL) -4.1% both struggling after outperforming during the COVID-19 lockdown period.
File: https://commentary.quantreports.net/wp-content/uploads/2020/10/DNR_High_Conviction_Fund_Monthly_Report.pdfticker: PIM0028AU
commentary_block: Array
factsheet_url:
release_schedule: Monthly
fund_features:
The Australian Equities High Conviction Portfolio is designed for investors with a long-term investment objective focused on achieving portfolio growth with less focus on generating excess income. Investors in this portfolio are prepared to accept higher volatility in return for higher growth.
- Style neutral with a quality focus
- Investment objective: To outperform the S&P/ASX 200 Accumulation Index by 4% p.a. over a rolling three-year period
- ASX listed securities with a focus on the S&P/ASX 200
- Number of stocks: 15–30
- Portfolio stock limit: 15% maximum weighting
manager_contact_details: Array
asset_class: Domestic Equity
asset_category: Australia Large Blend - Core / Style Neutral
peer_benchmark: Domestic Equity - Large Cap Neutral Index
broad_market_index: ASX Index 200 Index
structure: Managed Fund