September, 2023
The DNR Capital Australian Equities Income Portfolio outperformed the S&P/ASX 200 Industrials Total Return Index by 0.79% in September. The Portfolio’s dividend yield expectation for 2023 is currently 5.10% (6.60% grossed up for franking credits).
Contributors
• QBE Insurance Group (QBE): outperformed as rising bond yields supported expectations for return on shareholder funds, and broader insurance industry dynamics.
• Beach Energy (BPT): outperformed during the period, with oil and gas prices rallying on tight markets. OPEC+ continue their restricted output settings through voluntary quota cuts, and Russian supply appear to be tapering off, at a time when Chinese demand proving stronger than feared.
• Computershare (CPU): outperformed as rising bond yields supported margin income expectations on the group’s rate sensitive cash balances.
Detractors
• Tabcorp Holdings (TAH): underperformed over the month despite delivering continued progress post demerger. Competitors’ trading results did highlight moderation in wagering demand.
• 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.
• Commonwealth Bank of Australia (CBA, no holding): outperformed in line with global banking exposures as steeping yield curves supported the outlook for financial stocks.
The S&P/ASX 200 Total Industrial Return Index was down 3.63% during the period. Financials (-1.7%) was the best performing sector, as a shifting outlook towards higher rates could see benefits to margins in the near term (ANZ Group Holdings (ANZ +1.3%), QBE Insurance Group (QBE +4.9%). Consumer Staples (-2.2%) also outperformed, as investors sought safety in defensive earnings streams (Woolworths Group (WOW -2.1%), Coles Group (COL -2.5%)). A-REIT’s (-8.7%) were the worst performing sector, with a strong move higher in bond yields leading to a broad-based sell off in duration assets (Goodman (GMG -8.2%), Scentre (SCG -10.6%)). Information Technology (-8.0%) also underperformed, similarly impacted by the moves in the bond market which impacts the present value of their growing, future cash flows (Wisetech Global (WTC -6.3%), Xero (XRO -10.1%)).
The DNR Capital Australian Equities Income Portfolio outperformed its benchmark for the period. Key stock contributors were QBE, Beach Energy (BPT) and Computershare (CPU). Key stock detractors were Tabcorp Holdings (TAH), Scentre (SCG) and Commonwealth Bank of Australia (CBA, no holding). The Portfolio’s dividend yield expectation for CY2023 is currently 5.10% (6.60% grossed up for franking credits)
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/DNR_Income_Monthly_Performance_Report_R-18.pdfAugust, 2023
The DNR Capital Australian Equities Income Portfolio outperformed the S&P/ASX 200 Industrials Total Return Index by 0.24% in August. The Portfolio’s dividend yield expectation for 2023 is currently 4.99% (6.60% grossed up for franking credits).
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/DNR_Income_Monthly_Performance_Report_R-17.pdfJuly, 2023
The DNR Capital Australian Equities Income Portfolio underperformed the S&P/ASX 200 Industrials Total Return Index by 0.12% in July. The Portfolio’s dividend yield expectation for 2023 is currently 4.98% (6.60% grossed up for franking credits).
Contributors
• Beach Energy (BPT): outperformed during the period as global energy prices rose and the company reported a strong quarter of price realisation, beating estimates. Energy prices have recovered from recent lows as recent OPEC+ cuts begin to bite and Russian over-production slows from historic levels.
• 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.
• 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.
• Aurizon Holdings (AZJ): released a new strategy of pursuing a land-bridge operation at Darwin Port to capture a portion of the container freight market (currently primarily delivered to the east coast ports), which will result in upfront capex, however with limited visibility on earnings profile.
• Tabcorp Holdings (TAH): underperformed over the month despite delivering continued progress post The Lottery Corporation demerger. Competitors’ trading results did highlight a normalisation in digital wagering turnover post the easing of lock downs.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/DNR_Income_Monthly_Performance_Report_R-16.pdfJune, 2023
The DNR Capital Australian Equities Income Portfolio underperformed the S&P/ASX 200 Industrials Total Return Index by -1.60% in June. The Portfolio’s dividend yield expectation for 2023 is currently 0.06% (0.00% grossed up for franking credits).
The S&P/ASX 200 Industrials Total Return Index was up 0.73% during the period. Information Technology (+3.5%) was the best performing sector, following the lead of US peers who continued the AI-optimism-led run (Wisetech Global (WTC) +6.7%, Xero (XRO) +8.2%).
Financials (+3.1%) also outperformed, with insurers and market-beta exposed companies leading the sector (QBE Insurance (QBE) +7.2%, Macquarie Group (MQG) +4.0%). Health Care was the worst performing sector (-6.6%), primarily due to a slower-than-expected recovery in FY24 margins for sector heavyweight CSL -9.5%. A-REITs also underperformed (-1.6%), with their bond-proxy nature seeing them trade lower as a more hawkish US Federal Reserve (Fed) pushed rates higher (Scentre (SCG) -2.2%, Stockland (SGP) -2.0%).
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/DNR_Income_Monthly_Performance_Report_R-15.pdfMay, 2023
The DNR Capital Australian Equities Income Portfolio outperformed the S&P/ASX 200 Industrials Total Return Index by 0.77% in May. The Portfolio’s dividend yield expectation for 2023 is currently 4.9% (6.5% grossed up for franking credits).
The S&P/ASX 200 Industrials Total Return Index was down 2.01% during the period. Information Technology (+11.6%) was the best performing sector, following the lead of US peers who rallied significantly due to hype surrounding Artificial Intelligence (AI) advances (WiseTech Global (WTC) +9.2%, Xero (XRO) +17.8%).
Utilities (+1.1%) also outperformed, with AGL Energy (AGL) (+13.1%) benefitting from increasing electricity prices and implicit earnings upgrades. Consumer Discretionary (-6.2%) was the worst performing sector as cracks in spending finally started to appear following a tightening of financial conditions. Financials (-4.8%) also underperformed, with mounting economic pressures weighing on the banks (Commonwealth Bank of Australia (CBA) -2.6%, Westpac Banking Corporation (WBC) -4.9%), who are vulnerable to earnings shocks after operating with record-low bad debts.
Macro volatility and commentary continues to be a significant driver of equity markets as concerns lingered around US lawmaker’s intentions on the country's debt ceiling during May.
The hallmarks of equities in 2023, i.e., growth over value and concentration of mega-cap tech, were on show again with the NASDAQ up +5.8%, while the equalweighted S&P 500 fell -4.0%. The key driver is optimism about the earnings potential of Artificial Intelligence (AI).
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/DNR_Income_Monthly_Performance_Report_R-13.pdfApril, 2023
The DNR Capital Australian Equities Income Portfolio outperformed the S&P/ASX 200 Industrials Total Return Index by 0.29% in April. The Portfolio’s dividend yield expectation for 2023 is currently 4.2% (5.5% grossed up for franking credits).
Contributors
• Commonwealth Bank of Australia (CBA, no holding): has modestly underperformed on no news but following a period of outperformance.
• TPG Telecom (TPG): Telstra put through large price increases on its prepaid plans during the month, giving the market increased confidence that it will also raise prices on its post-paid plans in line with recent inflation, indicating the mobile industry remains rational and open to future price increases.
• IPH (IPH): the company updated the market about its recent cyber-breach, indicating minimal client impact and that no data from IPH’s document management system was compromised (where sensitive pre-filing patent information lies). Market sentiment lifted on the news of the minimal effects on client losses..
Detractors
• The Lottery Corporation (TLC): underperformed over the month following concerns around a lack of large jackpots resulting in lower revenue. Revenue will fluctuate with jackpot sequences however, underlying trends should support continued solid growth.
• Amcor PLC (AMC): destocking trends and demand deterioration continue to be flagged by management, customers and competitors leading, to concerns about volume weakness.
• Endeavor Group (EDV): underperformed as regulatory uncertainty lingers, and Star Casino’s Gold Coast operations highlighted slowing gaming earnings in Southeast Queensland. Subsequent quarterly releases highlighted normalising gaming revenue and a return to positive retail liquor comparable sales growth.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/DNR_Income_Monthly_Performance_Report_R-12.pdfMarch, 2023
The DNR Capital Australian Equities Income Portfolio underperformed the S&P/ASX 200 Industrials Total Return Index by 0.86% in March. The Portfolio’s dividend yield expectation for 2023 is currently 4.2% (5.5% grossed up for franking credits).
The S&P/ASX 200 Industrials Total Return Index was down 2.13% during the period. Communication Services (+1.6%) was the best performing sector. A flight to defensives saw Telstra Group (TLS +3.5%) trade higher, while REA Group (REA +13.0%) saw some support as domestic house pricing appeared to stabilise. Utilities also outperformed, with the gentailers seen as a defensive option that can grow earnings in a higher wholesale electricity price environment (AGL Energy, AGL +16.7%, Origin Energy, ORG +3.5%). A-REIT’s (-6.9%) were the worst performers as commercial real estate funding concerns surfaced following regional bank stress in the US (Goodman, GMG -5.4%, Dexus, DXS -10.9%). Financials (-5.1%) also underperformed, with banks sold off globally. Increasing bad debts, falling asset prices and a more expensive, less sticky deposit base paint a poor outlook for the sector (Commonwealth Bank of Australia, CBA -2.4%, National Australia Bank, NAB -7.6%).
Despite moderating inflation, strengthening the case for a pause in interest rate hikes, Australian equities lagged global peers. US equities were up 3.6% despite the failure of multiple US banks and concerns this could lead to weaker credit growth and bring forward the timing of a possible US recession. Offsetting these concerns was an expansion of the Federal Reserve (Fed) balance sheet as it provided liquidity support for banks. The DNR Capital Australian Equities Income strategy underperformed its benchmark over the month.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/DNR_Income_Monthly_Performance_Report_R-14.pdfFebruary, 2023
The DNR Capital Australian Equities Income Portfolio outperformed the S&P/ASX 200 Industrials Total Return Index by 0.44% in February. The Portfolio’s dividend yield expectation for 2023 is currently 3.5% (4.5% grossed up for franking credits).
The S&P/ASX 200 Industrials Total Return Index was down 0.97% during the period. As central banks continue their attempt to curb inflation, stronger than expected economic data led to expectations of higher interest rates. This led to an increase in real bond yields, which in turn, led to a decline in valuations.
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. Financials (-3.8%) was the worst performing sector, with the banks reporting a weaker outlook for loan growth as well as increasing signs of stress in their loan books. Consumer Discretionary also underperformed, following some disappointing results from retailers (Harvey Norman Holdings, HVN -13.9% and JB Hi-Fi, JBH -9.5%) which highlighted a faltering consumer in housing-related categories.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/DNR_Income_Monthly_Performance_Report_R-11.pdfJanuary, 2023
The DNR Capital Australian Equities Income Portfolio underperformed the S&P/ASX 200 Industrials Total Return Index by 1.23% in January. The Portfolio’s dividend yield expectation for 2023 is currently 3.90% (5.00% grossed up for franking credits).
The S&P/ASX 200 Industrials Total Return Index was up 5.64% 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 (the Fed) encouraged a “soft landing” (WES +8.2%, ALL +11.3%). AREITs (+8.1%) also outperformed, as bond rates declined sharply in expectation of fewer necessary rate rises from the RBA (GMG +15.0%, SCG +5.9%). Utilities (-3.0%) was the worst performing sector, as declining gas and coal prices following a mild Northern Hemisphere winter saw producers under pressure (AGL -5.2%, ORG -3.2%). Health Care (+3.9%) also underperformed, with its defensive nature overlooked in the cyclically-driven, risk-on rally (CSL +3.6%, RHC +3.0%).
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/DNR_Income_Monthly_Performance_Report_R-10.pdfDecember, 2022
The DNR Capital Australian Equities Income Portfolio outperformed the S&P/ASX 200 Industrials Accumulation Index by 1.69% in December. The Portfolio’s dividend yield expectation for 2023 is currently 3.9% (5.1% grossed up for franking credits).
The S&P/ASX 200 Industrials Accumulation Index was down 3.93% during the period. Consumer Staples (-1.87%) outperformed with Coles Group (COL -1.36%) and Woolworths Group (WOW -2.64%) benefitting from resilient supermarket sales and normalising industry market shares. Utilities (-2.17%) also outperformed during the month, with Origin Energy (ORG -1.78%) still running on positive news regarding the private equity takeover process. 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.
The DNR Capital Australian Equities Income Portfolio outperformed its benchmark for the period, with the portfolio’s defensive positioning acting as a counterbalance to the fall in markets. Key stock contributors were QBE Insurance Group (QBE), Domino’s Pizza Enterprises (DMP) and Suncorp Group (SUN). Key stock detractors were Skycity Entertainment Group (SKC), Computershare (CPU) and A2 Milk Company (A2M, no holding).
Equities and bonds were both troubled by renewed fears about central bank tightening, for example, the European Central Bank’s (ECB’s) quantitative tightening (QT) plans, and the Bank of Japan’s (BoJ’s) move to lift the cap on Japanese government bond (JGB) yields by 50bps. In addition, investors became concerned about complications from inflation from a re-opening of the Chinese economy. These factors dominated despite evidence of slowing US growth and core inflation and more dovish pricing of the trajectory for the Federal Reserve (Fed) funds rate as a result.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/DNR_Income_Monthly_Performance_Report_R-9.pdfNovember, 2022
The DNR Capital Australian Equities Income Portfolio underperformed the S&P/ASX 200 Industrials Accumulation
Index by 0.51% in November. The Portfolio’s dividend yield expectation for 2022 is currently 4.46% (6.03% grossed up for franking credits)
The S&P/ASX 200 Industrials Accumulation Index was up 3.76% 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%). Health
Care (+6.0%) also outperformed, with sector giant
CSL (+7.0%) benefitting from the improved outlook for lower terminal bond rates. 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.
Equities had a strong month in November, as the market pondered that the Federal Reserve (the Fed) may begin slowing rate hikes as soon as December.
The S&P/ASX 200 Industrials Accumulation Index (the strategy’s benchmark) was up 3.76% over the month, as investors responded to a dovish RBA. The S&P/ASX 200 Industrials Accumulation Index is now up 8.16% since the October low and down 3.68% year to date.
This performance is quite remarkable and despite war, inflation, recession risk, China’s zero-COVID policy and volatility in markets.
October, 2022
The DNR Capital Australian Equities Income Portfolio underperformed the S&P/ASX 200 Industrials Accumulation Index by -0.91% in October. The Portfolio’s dividend yield expectation for 2022 is currently 5.25% (6.01% grossed up for franking credits).
The S&P/ASX 200 Industrials Accumulation Index was up 7.76% during the period. Financials (+12.2%) was the best performing sector, with the big banks benefitting from increasing net interest margins while maintaining record low bad debts. A-REITs (+9.9%) also outperformed, with bond rates retreating from their highs, feeding directly into lower expectations for property capitalisation rates. Consumer Staples (-0.2%) was the worst performing sector, with a poor quarterly report from Coles Group (COL -0.6%) highlighting a moderation of operating conditions from COVID-19 highs. Health Care also underperformed; with sector heavyweight CSL (CSL -1.6%) giving back some recent outperformance
Equities had a strong month in October, mostly reversing September's drawdown. Speculation that central banks are nearing the peak of policy tightening broadly lifted sentiment. Investors responded to a more dovish than expected RBA 25bps hike to 2.60% which was reflected in Australian bond markets, as the Australian 10-year yield moved down by 13bps to 3.76%. Meanwhile US yields continued their upward trend, rising 28bps to 4.07%, however the potential for a pivot in the Fed's policy path supported risk sentiment.
The S&P/ASX 200 Industrials Index 12-month forward PE remains slightly above the long-term average at ~17x, albeit the risk of EPS downgrades remains.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/DNR_Income_Monthly_Performance_Report_R-4-1.pdfSeptember, 2022
The DNR Capital Australian Equities Income Portfolio outperformed the S&P/ASX 200 Industrials Accumulation Index by 1.40% in September. The Portfolio’s dividend yield expectation for 2022 is currently 4.40% (5.68% grossed up for franking credits).
The S&P/ASX 200 Industrials Accumulation Index was down 7.59% 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.
Global equities fell (MSCI World Index -9.30%) in September as global recession fears intensified with the Federal Reserve (Fed) maintaining its aggressive attitude towards fighting inflation. Large currency and bond market moves created further uncertainty for markets. Bond markets now reflect a hawkish outlook, with the Australian 10-year yield increasing to 3.89% and US yields increasing to 3.80%. Higher yields act as a headwind for valuations, which have had a disproportionate negative impact on industrial stocks relative to resource stocks. The S&P/ASX 200 Industrials Accumulation Index (the strategy’s benchmark) outperformed global markets but still fell (-7.29%) during September.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/DNR_Income_Monthly_Performance_Report_R-2-2.pdfAugust, 2022
The S&P/ASX 200 Industrials Accumulation Index was down -0.42% during the period.
Communications (+1.2%) was the best performing sector, with key constituents Telstra Corporation (TLS +2.1%) and REA Group (REA +2.0%) beating expectations of a weaker outlook. Industrials (+1.0%) also outperformed, with economic activity holding up better than feared. A strong recovery from Qantas Airways (QAN +16.7%) also helped the sector higher. 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%).
The DNR Capital Australian Equities Income Portfolio outperformed the Index for the month. Key stock contributors were IPH (IPH), Woodside Energy Group (WDS), BHP Group (BHP). Key stock detractors were TPG Telecom (TPG), SEEK (SEK) and Wesfarmers (WES, no holding). The Portfolio’s dividend yield expectation for 2022 is currently 4.1% (5.5% grossed up for franking credits).
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/DNR_Income_Monthly_Performance_Report_R-5.pdfJuly, 2022
The S&P/ASX 200 Industrials Accumulation Index was up 8.16% 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. Utilities (+3.1%) was the worst performing sector in a strong market, posting respectable gains. Key constituents APA (APA +3.4%) and Origin Energy (ORG +3.7%) were impacted by a falling oil price during the period. Industrials (+3.5%) also underperformed, with a “risk-on” move seeing defensive companies such as Transurban Group (TCL +0.9%) lagging.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/DNR_Income_Monthly_Performance_Report_R-2-1.pdfJune, 2022
The S&P/ASX 200 Industrials Accumulation Index was down 8.05% 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 their defensive characteristics in a potential recessionary scenario. Healthcare (-3.1%) also outperformed, with their defensive nature weathering the worst of the sell-off CSL (CSL –1.0%). Financials (-11.9%) was the worst performing sector, with their sensitivity to lower economic growth causing them to trade down. Information Technology also underperformed, with the more cyclical and expensive names Wisetech Global (WTC –10.1%), Xero (XRO –13.8%), Block Inc. (SQ2 –28.2%) leading the sector down.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/DNR_Income_Monthly_Performance_Report_R-1-2.pdfMay, 2022
The S&P/ASX 200 Industrials Accumulation Index was down 3.74% during the period.
Utilities (-0.2%) was the best performing sector, with AGL (AGL +0.9%) bowing to activist shareholder pressure to ditch its demerger plans. Industrials (-0.5%) also outperformed, with defensive infrastructure names such as Transurban (TCL +0.2%), Brambles (BXB +3.1%) and Atlas Arteria (ALX +3.3%) supporting the sector. REITs (-8.7%) was the worst performing sector, with increasing bond yields putting pressure on valuations, given the direct comparison to property cap rates. Information Technology (-8.7%) also underperformed, with their sensitivity to higher bond rates and lower growth evident again.
The DNR Capital Australian Equities Income Portfolio outperformed the Index for the month. Key stock contributors were BHP Group (BHP), IPH (IPH) and Goodman (GMG, No Holding). Key stock detractors were Commonwealth Bank of Australia (CBA, No Holding), Lendlease (LLC) and Westpac Banking Corporation (WBC, Underweight).
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/DNR_Income_Monthly_Performance_Report_R-2.pdfApril, 2022
The S&P/ASX 200 Industrials Accumulation Index was up 0.37% 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.
The DNR Capital Australian Equities Income Portfolio outperformed the Index for the month. Key stock contributors were Lendlease (LLC), Block Inc (SQ2, No Holding) and Commonwealth Bank of Australia (CBA, No Holding). Key stock detractors were BHP Group (BHP), Qube Holdings (QUB) and IPH (IPH).
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/DNR_Income_Monthly_Performance_Report_R-4.pdfMarch, 2022
The S&P/ASX 200 Industrials Accumulation Index was up 5.82% 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. Financials (+8.3%) also outperformed with the banks benefitting from a higher rates outlook and stubbornly low bad debts. A-REITs (+1.2%) were 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.
The DNR Capital Australian Equities Income Portfolio underperformed the Index for the month. Key stock contributors were Woodside Petroleum (WPL), National Australia Bank (NAB) and James Hardie Industries (JHX, No Holding). Key stock detractors were Commonwealth Bank of Australia (CBA, No Holding), IPH (IPH) and SKYCITY Entertainment Group (SKC)
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/DNR_Income_Monthly_Performance_Report_R-3.pdfFebruary, 2022
The S&P/ASX 200 Industrials Accumulation Index was up 0.71% during the period. Consumer Staples (+5.6%) was the best performing sector as a flight to safety drove the sector higher. Utilities (+3.0%) also outperformed, following a bid for AGL (AGL +5.9%) from a Brookfield consortium. Information Technology (-6.9%) was the worst performing sector, with the rotation from growth to value continuing and a new-found 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.
The DNR Capital Australian Equities Income Portfolio outperformed the benchmark for the month. Key stock contributors were Woodside Petroleum (WPL), Lendlease (LLC) and Scentre (SCG). Key stock detractors were Westpac Banking Corporation (WBC, No Holding), SEEK (SEK) and TPG Telecom (TPG).The Portfolio’s dividend yield expectation for 2022 is currently 4.8% (grossed up for franking credits).
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/DNR_Income_Monthly_Performance_Report_R-1-1.pdfJanuary, 2022
The S&P/ASX 200 Industrials Accumulation Index was down 8.59% during the period. Utilities (+2.6%) was the best performing sector again, as Origin Energy (ORG +7.2%) benefitted from record gas prices in the quarter. Financials (-6.5%) also outperformed with the major banks partially sheltered from the market sell off due to their positive exposure to rising interest rates. 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. The DNR Capital Australian Equities Income Portfolio 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 Westpac Banking Corporation (WBC, No Holding), Commonwealth Bank of Australia (CBA, No Holding) and Sydney Airport Holdings (SYD, No Holding).
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/DNR_Income_Monthly_Performance_Report_R-1.pdfDecember, 2021
The S&P/ASX 200 Industrials Accumulation Index was up 1.84% 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. Financials (+4.3%) also outperformed with the major banks trading higher in a broad-based value rally. 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.
The DNR Capital Australian Equities Income Portfolio underperformed the Index for the month. Key stock contributors were Afterpay (APT, No Holding), Woolworths Group (WOW, No Holding) and CSL (CSL, Underweight). Key stock detractors Commonwealth Bank of Australia (CBA, No Holding), Goodman (GMG, No Holding) and IPH (IPH). The Portfolio’s dividend yield expectation for 2022 is currently 4.0% (5.1% grossed up for franking credits)
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/DNR_Income_Monthly_Performance_Report_R.pdfOctober, 2021
The S&P/ASX 200 Industrials Accumulation Index was up 0.14% 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 their quarterly update.
The DNR Capital Australian Equities Income Fund underperformed the Index for the month. Key stock contributors were Macquarie Group (MQG), National Australia Bank (NAB) and Transurban Group (TCL, No Holding). Key stock detractors were Aurizon Holdings (AZJ), IPH (IPH) and Suncorp Group (SUN).
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/DNR_Income_Fund_Monthly_Report-1-2.pdfSeptember, 2021
The S&P/ASX 200 Industrials Accumulation Index was down 0.76% during the period.
Utilities (+2.1%) was the best performing sector, as a bidding war between APA (APA) and a private equity consortium erupted over Ausnet Services (AST +30.2%). Financials (+1.5%) also outperformed as bond yields spiked higher and the market rotated towards value names and higher interest rate beneficiaries. Health Care (-5.5%) was the worst performing sector, as the sector leader CSL (CSL -5.9%), experienced continued issues in sourcing plasma. Consumer Staples (-4.4%) also underperformed, following a selloff in the more expensive defensive exposures such as Woolworths Group (WOW -5.8%) and Coles Group (COL -6.0%).
The DNR Capital Australian Equities Income Fund outperformed the Index for the month. Key stock contributors were Woodside Petroleum (WPL), Macquarie Group (MQG) and Qube Holdings (QUB). Key stock detractors were Commonwealth Bank of Australia (CBA, No Holding), Lendlease (LLC) and BHP Group (BHP).
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/DNR_Income_Fund_Monthly_Report-1-1.pdfAugust, 2021
The S&P/ASX 200 Industrials Accumulation Index was up 5.58% 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. Utilities (+0.3%) was the worst performing sector, following poor performance in energy markets, evidenced by results released during the recent reporting period. Industrials (+2.5%) also underperformed, as materials and energy-linked industrials in particular underperformed alongside faltering commodity prices.
The DNR Capital Australian Equities Income Fund underperformed the Index for the month. Key stock contributors were IPH (IPH), Commonwealth Bank of Australia (CBA, no holding) and Suncorp Group (SUN). Key stock detractors were BHP Group (BHP), Afterpay (APT, no holding) and Woodside Petroleum (WPL).
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/DNR_Income_Fund_Monthly_Report-5.pdfJuly, 2021
The S&P/ASX 200 Industrials Accumulation Index was down 0.29% during the period.
In a reversal from last month, sentiment swayed back towards the inflationary argument. The top performing sector in this environment was Industrials (+4.3%), however it was largely due to the takeover offer for Sydney Airport Holdings (SYD, +34.9%). Consumer Staples (+1.4%) also outperformed with supermarkets (WOW, +1.7%, COL, 2.3%) performing well. Information Technology (‑6.9%) was the worst performing sector following its rally last month. Financials (‑1.4%) also underperformed, despite the pro‑cyclical mantra of the markets due to the risk of increased bad debts for the banks resulting from further lockdowns in Australian capital cities
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/DNR_Income_Fund_Monthly_Report-4.pdfJune, 2021
The S&P/ASX 200 Industrials Accumulation Index was up 2.74% 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. Health Care (+2.1%) would have benefited from the macro view if not for stock-specific factors, with CSL (CSL -1.7%) facing plasma collection concerns.
The DNR Capital Australian Equities Income Fund underperformed its benchmark for the period. Key stock contributors were IPH (IPH), Commonwealth Bank of Australia (CBA, no holding) and CSL (CSL, underweight). Key stock detractors were Lendlease (LLC), Afterpay (APT, no holding) and SKYCITY Entertainment Group (SKC).
The Fund’s dividend yield expectation for 2021 is currently 4.83% (6.39% grossed up for franking credits).
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/DNR_Income_Fund_Monthly_Report-3.pdfMay, 2021
The S&P/ASX 200 Industrials Accumulation Index was up 2.62% during the period.
Financials (+4.4%) were 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%) are also exposed to higher rates through their non‑cyclical earnings profile, resulting in underperformance during the period.
The DNR Capital Australian Equities Income Fund underperformed its benchmark for the period. Key stock contributors were Afterpay (APT, no holding), QBE Insurance Group (QBE) and Super Retail Group (SUL). Key stock detractors were Commonwealth Bank of Australia (CBA, no holding), CSL (CSL, underweight) and Lendlease (LLC).
The Portfolio’s dividend yield expectation for 2021 is currently 4.87% (6.45% grossed up for franking credits).
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/DNR_Income_Fund_Monthly_Report-2.pdfApril, 2021
Australian stocks lagged the US market during the month of April. The S&P/ASX 200 Industrials Accumulation Index was up 2.98% during the period, compared to the S&P 500, which was up +5.3%.
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. Industrials (+4.3%) also outperformed. Stronger economic growth and activity has begun feeding through to the industrials’ businesses with a number of quarterly updates surprising to the upside. Consumer Staples (-2.6%) was the worst performing sector. The quarterly updates from many retailers disappointed investors, as they cycle earnings from the COVID-19 lockdown activity surge. Utilities (-1.2%) also underperformed led by AGL Energy (AGL -7.5%) who announced a demerger, followed by a surprise resignation of its CEO
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/DNR_Income_Fund_Monthly_Report-1.pdfDecember, 2020
The DNR Capital Australian Equities Income Fund underperformed its benchmark for the month. Key stock contributors were CSL (CSL, no holding), BHP Group (BHP) and Super Retail Group (SUL). Key stock detractors were Commonwealth Bank of Australia (CBA, no holding), Afterpay (APT, no holding) and Lendlease (LLC). The S&P/ASX 200 Industrials Accumulation Index was down 0.56% 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 U.S technology peers.
Consumer Staples also outperformed as the grocery names led the sector higher. Both Woolworths (WOW, +6.3%) and Coles (COL, +1.6%) contributed, with the smaller Metcash (MTS, +14.6%) also stronger. Utilities (-6.8%) was the worst performing sector, as defensive sectors continue to underperform in the re-opening trade. AGL Ltd (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. The portfolio’s dividend yield for Calendar year 2020 was 3.56% (4.67% grossed up for franking credits).
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/DNR_Income_Fund_Monthly_Report.pdfticker: PIM8302AU
release_schedule: Monthly
commentary_block: Array
factsheet_url:
https://dnrcapital.com.au/product/australian-equities-income-strategy/
!! Go to “Download Current Performance Report”
asset_class: Domestic Equity
asset_category: Australia Large Value
peer_benchmark: Domestic Equity - Large Value Index
broad_market_index: ASX Index 200 Index
structure: Managed Fund
manager_contact_details: Array
fund_features:
DNR Capital Australian Equities Income’s investment objective is to invest in a portfolio of Australian equities that aims to outperform the Benchmark (net of fees) and deliver higher levels of income relative to the Benchmark over a rolling three-year period. The investment objective is not a forecast of the Fund’s performance. The Fund seeks to identify quality medium to long-term investments delivering sustainable, growing income. The Fund seeks to invest in a selection of securities that have high and sustainable dividend capability, strong profit-to-cash conversion, and relatively assured earnings growth.