“Zenith’s strong conviction in the Portfolio  is underpinned by DNR Capital’s robust investment process and high calibre investment team. Zenith believes the Portfolio- represents one of our premier investment options within the Australian shares asset class,” Zenith said in its report.

“We are delighted to receive this upgrade and recognition that our high conviction approach to investing provides strong results for investors,” DNR Capital’s Chief Investment Officer, Jamie Nicol, said.

“We are also pleased that Zenith have commended our collegiate investment process, which is conducted by myself and Scott Bender,” he added.  “We have both been at DNR Capital for more than two decades and I believe this experience and stability makes a difference to our investors.”

Offering investors a concentrated portfolio of its highest conviction stocks, the DNR Capital Australian Equities High Conviction Portfolio has posted an annualised return of 12.16% since its inception in October 2002, outperforming the S&P/ASX Total Return Index by 3.13%^[2] per annum.

“Zenith believes that DNR Capital’s portfolio construction process ensures that the Fund has a bias towards high-quality companies,” Zenith said.

“Zenith draws a high degree of confidence in DNR’s investment process, which has been consistently applied over the long term, producing impressive investment outcomes. “

The DNR Capital Australian Equities Socially Responsible Portfolio and the DNR Capital Australian Equities Income Portfolio and Fund^[3] retain their Recommended rating from Zenith.

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Notes:
[1] DNR Capital Australian Equities High Conviction Fund, ARSN 604 465 849, APIR PIM0028AU.
[2] Performance for the DNR Capital Australian Equities High Conviction Portfolio and is gross of fees as of 31 May 2024. Past performance is not indicative of future performance.
[3] DNR Capital Australian Equities Income Fund, ARSN 639 285 902, APIR PIM8302AU.

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Jamie Nicol

As inflation starts to ease there are two disruptive themes emerging in the current environment, says DNR Capital, a leading Australian equities investment manager.

Jamie Nicol, chief investment officer at DNR Capital says: “The first is looking at productivity benefits from AI and technology and an aging population, versus the ongoing spend that’s needed to transition to a zero carbon future. The market is trying to figure out this balance and decide on a clear direction on this issue.

“The other debate is around hard landing versus soft landing. Clearly interest rates are on the way up and ordinarily we would expect the economy to slow in response to that. We have seen some evidence of slowing but the economy has been resilient to date. And that remains a key area of debate.

“What this means from a market and opportunities perspective is that after a very long period of uncertainty the outcome of these debates is not clear.

“What we are seeing in terms of opportunities is that uncertainty is driving some good quality companies to trade at discounts.

“This environment has provided a rare opportunity to invest in good quality businesses that perhaps are getting disrupted through hiccup in earnings, change in CEO, or a range of events which are causing some of these better quality companies to trade at discounts,” says Nicol.

Nicol cites SEEK and CSL as examples.

He says “SEEK is a great business and market leader across Australia, with its earnings tied to the economy due to job numbers. This uncertainty means investors are gravitating away from this company. This creates an opportunity for us as its stock price has become reasonable.

“We believe SEEK has a long-term opportunity to continue to lift prices and continue to expand into new markets. We think that will drive very good EPS growth on a through-the-cycle view.

“Another example of a more defensive but also disruptive stock is CSL. Obviously CSL is a market leader but it is trading at a reasonably weak level. They’ve had a change of the CEO. They did have a downgrade to near term earnings which was all about the recovery and earnings post-COVID, and perhaps the recovery is taking a little bit longer than what they initially expected. But the longer term trajectory still looks very good.

“We always like to buy in periods of uncertainty, particularly when we are unclear on what the macro framework looks like. We look for quality characteristics, good management, good businesses, good industry structure, competitive advantages, good ability to earn strong margins over the longer term because the market tends to gravitate back to those companies over time.

“And right now, investors can pick up some of those businesses at really good discounts,” notes Nicol.

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The Fund was recognised by Lonsec for the seasoned portfolio management team, its experienced and strongly aligned investment team and clearly articulated and robust investment approach which has been consistently applied by the team to produce strong performance outcomes for investors across a market cycle

DNR Capital’s Chief Executive Officer, Robert White says: “We are proud and honoured to be recognised by Lonsec for our flagship Fund which boasts a long track record of delivering outperformance^[2] through multiple market cycles.

“We are also pleased to announce that all DNR Capital Australian equity large cap strategies and funds are ‘Highly Recommended’ by Lonsec.”

The DNR Capital Australian Equities High Conviction Fund offers investors exposure to a medium-to-long-term, concentrated portfolio of high conviction, high quality stocks that offer attractive valuation.

The Fund adopts DNR Capital’s investment philosophy, of owning concentrated portfolios of quality companies.

Jamie Nicol, Chief Investment Officer, DNR Capital adds: ”We define quality companies as those with earnings strength, superior industry position, sound balance sheet, strong management and low ESG risk. Our assessment of a company’s quality is overlaid with a detailed valuation assessment where we are seeking to exploit mispriced, market inefficiencies.”

The Fund has produced a return of 8.89%2 per annum since its inception in 2015. It is long-only, “style neutral” and invests over a period of three-to-five years.

DNR Capital is also the recent the winner of Australian Equities IMAP Managed Account Award 2022.

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[1] DNR Capital Australian Equities High Conviction Fund, APIR code: PIM0028AU
[2] Performance as at 30 September 2022. Past performance is not an indication of future performance. Total return shown for the DNR Capital Australian Equities High Conviction Fund has been calculated using exit prices after taking into account all of the product’s ongoing fees and assuming reinvestment of distributions. No allowance has been made for entry/exit fees or taxation.

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Brad Partridge

One of Australia’s leading equities fund managers DNR Capital is pleased to announce the appointment of Brad Partridge to lead the development of a dedicated global equity capability.

Partridge has extensive investment management experience, having previously spent more than 20 years at Macquarie Group, most recently as Portfolio Manager for Macquarie Asset Management.

“We are looking to complement and build on the successful investment philosophy and process of the DNR Capital Australian equities strategies,” said DNR Capital’s Chief Investment Officer, Jamie Nicol.

“The addition of Brad to the investment team provides a dedicated Portfolio Manager to focus solely on the new global offering, which will allow our dedicated Australian equites team to continue providing our clients with quality investment solutions in the Australian equities space”, added Nicol.

“Brad has a unique ability to add value for investors through multiple cycles, and we look forward to seeing him build on this success at DNR Capital,” said DNR Capital’s Chief Executive Officer, Robert White.

“This is an extremely exciting opportunity for me and I am thrilled to join the DNR Capital team and be part of this new and exciting expansion into global equities,” said Partridge.

Once settled in, Partridge will work on resourcing the global equities investment team with additional recruitment planned in the short term.

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With more than 19 years of investment experience, Natasha joins DNR Capital from Maple-Brown Abbott and JPMorgan where she held senior positions including ESG analysis, equity strategy, portfolio management and M&A (mergers & acquisitions).

Natasha will be the dedicated ESG Investment Analyst across all of the DNR Capital Australian equity investment strategies, working directly with portfolio managers and analysts throughout the investment process.

DNR Capital Chief Investment Officer, Jamie Nicol said: “the appointment of Natasha further enhances our ESG capabilities. Having launched a dedicated socially responsible investment strategy in 2006, DNR Capital has maintained a clear commitment to ESG research and a strong appreciation for the value of an integrated approach.”

McKean has a Bachelor of Mining Engineering (Honours) and Bachelor of Commerce from the University of Queensland and is a CFA Charterholder.

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Jamie Nicol

Leading Australian equities investment manager, DNR Capital, has launched a new fund providing income seeking investors with a growing dollar income profile, to offset the current low interest rate environment – the DNR Capital Australian Equities Income Fund.

The Fund is managed and led by Chief Investment Officer, Jamie Nicol and Portfolio Manager Scott Kelly, under the same investment guidelines as the underlying strategy, the Australian Equities Income Portfolio .

“We are excited to offer another quality product to Australian investors. It’s a natural progression for this income generating investment strategy which has delivered sustainable returns for investors since inception in 2007.

“The Fund targets quality companies at attractive prices that provide sustainable and growing dividends over time. Its investment philosophy centres on six ‘quality’ factors which we believe contribute to medium-to-long-term outperformance: superior industry position, a sound balance sheet, strong company management, earnings strength, income sustainability and growth, and low ESG risk,” Nicol says.

“In the current low interest rate environment, meeting retiree and income seeking investor needs has become more challenging. Alternatives like cash, bonds and fixed interest are increasingly unattractive in our view,” notes Portfolio Manager, Scott Kelly.

“The Fund’s dual performance objective of capital and income should appeal to investors seeking a portfolio of quality companies which aims to grow the dollar value of income received by investors year on year. This same dual objective has helped the strategy deliver an annual gross yield of 6.6%^[1] for investors since inception,” says Kelly.

“Now more than ever, income seeking investors should consider a higher allocation to Australian equities with a focus on tax-advantaged, reliable and growing income generation. Investors looking for income are generally seeking exposure to a diversified portfolio of quality companies at reasonable prices, with good visibility on long-term dividend sustainability and after-tax benefits.

“A high conviction and concentrated equities Fund, focused on sustainable and growing income generation, increases the compound total return over time and helps retirees achieve their income goals,” Kelly says.

He adds: “We categorise income-generating companies as:

Growers – high-conviction stocks that may be paying a below-market dividend yield, however we see a clear path towards delivering a sustainable and growing income profile in the medium term – REA Group (REA), SEEK (SEK).

Compounders – quality stocks operating within a robust industry structure that have a strong competitive position, underpinning attractive and sustainable income growth – Amcor (AMC), IPH (IPH).

Cows – stocks with a solid balance sheet and capital management potential that are being undervalued on traditional earnings-based metrics – Aurizon Holdings (AZJ), Wesfarmers (WES).

Yielders – quality companies at attractive valuations that are delivering sustainable and cash-backed dividends, however with little growth – Suncorp Group (SUN), BHP Group (BHP).”

The Fund has generated strong performance since its recent inception in March 2020 to 31 July 2020, having outperformed the S&P/ASX 200 Industrials Accumulation Index by 8.26%^[2] .

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[1] Gross yield as at 31 July 2020.
[2] Outperformance as at 31 July 2020 since inception of 11 March 2020.

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The DNR Capital Australian Equities High Conviction Portfolio (’the Model Portfolio’) is a concentrated, ‘long only’ Australian equities product.

Lonsec notes: “At different points, Lonsec has observed the strategy to exhibit both ‘growth’ and ‘value’ characteristics depending on the opportunity set and prevailing market conditions. The objective is to outperform the S&P/ASX 200 Accumulation Index (’the Benchmark’) by 4.0% p.a. (before fees) over rolling three-year periods.”“Lonsec has maintained the Model Portfolio’s ’Highly Recommended SMA’ rating. Lonsec considers CIO, Jamie Nicol to be an astute investor with a wealth of experience who is ably supported by Scott Bender. Furthermore, the strategy benefits from a clearly articulated and robust investment approach which has produced strong long-term outcomes. Lonsec also highlights the significant level of staff co-investment and equity ownership as further positives.”

Lonsec also notes: “the core team remains stable with Nicol and Bender holding one of the longest tenured partnerships in the sector.”

The DNR Capital Australian Equities Income Portfolio is also a ‘long only’ Australian equities product comprised of companies that provide a growing, sustainable dividend yield and growth potential.

The objective is to outperform the S&P/ASX 200 Industrials Index (’the Benchmark’) and deliver higher levels of income over a rolling three-year period after fees, irrespective of market direction.

The underlying investment philosophy centres on six ‘quality’ factors which the Manager believes contributes to medium-to-long term outperformance: earnings strength; superior industry position; a sound balance sheet; strong company management; income sustainability / growth; and low ESG risk.

Lonsec reports: “Lonsec has maintained the Model Portfolio’s ’Highly Recommended SMA’ rating. Lonsec considers CIO, Jamie Nicol to be an astute investor with a wealth of experience who is ably supported by Scott Kelly.”

Lonsec notes the products’ ‘high calibre portfolio managers’ who are strongly aligned to the performance of the Model Portfolio.

DNR is a long-established participant in the SMA market segment having offered individual and SMA solutions to Australian investors since 2001. Lonsec notes: “The Manager’s considerable experience in this space makes it a natural exponent of SMAs as a vehicle for delivering actively managed Australian equity exposure.”

These products are currently available on the following platforms: AMP Personalised Portfolio, CFS Wrap, BT Panorama, BT Direct, Hub24, Macquarie Wrap, Mason Stevens, Netwealth, OneVue, Powerwrap and Praemium.

DNR Capital was recently awarded the Money Management Australia Fund Manager Award for the best Australian Equities SMA 2020.

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Jamie Nicol

The market has reacted sharply over the past week as news of COVID-19 continues to dominate. The policy response has been to encourage social distancing to slow the pace of contagion.

However, this clearly has a very negative impact on a range of industries (tourism, restaurants etc.) especially small business and on the economy. Concerns centre on the ability of certain industries (especially small business) to survive the revenue fall likely in the next few months, notes Jamie Nicol, Chief Investment Officer at DNR Capital, a leading equities investment manager.

He notes: “ To offset this impact, Governments and Central Banks are undertaking coordinated policies.  These are a moveable feast at present. Governments appear prepared to do what it takes to support the economy through this period.

“The focus appears to be ensuring liquidity is available and we highlight the following policies:

1. Globally interest rates have been cut aggressively.
2. Support to ensure the cost of borrowing for banks remains low. This helps ensure they can provide financial support to their customers. We have spoken to the banks and note the ability to support customers via providing more credit, deferring interest costs or enabling repayment holidays.
3. The Federal Government is providing tax relief to small business and handouts to low income households which should be transferred via spending to small businesses.
4. Fiscal stimulus programs globally continue to evolve and we understand a large program in China is expected.

“While the impact on short-term company earnings has the potential to be material, the overall value of a company is not significantly impacted by the outlook for earnings over the next six months, but rather its future long-term earnings capacity. When the market is caught in the moment of uncertainty, the focus of market participants can shrink rapidly and we think it is a mistake to become too short-term in your thinking at this point.

“Old investor sayings of ‘buying when there is blood on the streets’ or ‘buying when others are fearful’ usually hold true.

• “While clearly, news regarding COVID-19 has the potential to drive uncertainty and volatility, we are focused on the following:
  Thinking through where there will be long-term changes to behaviour which might impact the value of a company e.g. Domino’s Pizza Enterprises (DMP) is benefiting from an increase in downloads of their apps in Europe and increased usage. Once the app is downloaded it can drive ongoing usage over time.
• Identify quality companies which have been sold off in the current environment yet the long-term health of the business looks strong e.g. Ramsay Health Care (RHC) owns a strong portfolio of hospitals and is down 30% from its highs. In the short-term there will be a decline in elective surgeries (partially offset by a pick-up in patients transferred from public hospitals) but in the long run little has changed—they own high performing hospitals which will benefit from an ageing population.
• Using the volatility to improve the quality characteristics of the portfolio—good companies are usually the first to be bought into a recovery.

“Looking forward, interest rates will be low. Globally, stimulus will be strong and the peak fears surrounding COVID-19 may well be behind us.

“Equity markets have survived world wars, terrorist attacks and a GFC – a global pandemic, while no doubt a serious issue, will also pass in time.

“The market sell-off has been very sharp and indiscriminate and we see this as providing a range of opportunities to buy good businesses at very attractive long term valuations,” says  Mr Nicol.

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Jamie Nicol

Leading Australian equity investment manager, DNR Capital, has factored in a possible reduction in credit growth in determining the current positioning of its Australian equity funds including being underweight bond proxies and higher price-earnings (PE) stocks.

DNR Capital Chief Investment Officer Jamie Nicol said: “There can be little doubt that we are looking at a period of reduction in credit growth and that this will have a headwind effect for consumers. It seems most likely that this will have some incremental flow-on effect on the housing sector and consumer behavior.

“The bigger risk would be if the reduction in credit availability snowballed into a fully blown credit crunch. Whilst we don’t believe it is the regulator’s intention to drive a material reduction in credit availability, macro prudential initiatives have already targeted investor and interest only loans.

“The banking and financial services Royal Commission has turned the spotlight on the banks’ responsible lending obligations.

“In this environment our suite of Australian equities portfolios – ‘High Conviction’, ‘Socially Responsible’ and ‘Income’ will be managed in accordance with a number of key considerations.

“Given the inflation outlook DNR Capital’s Australian funds are underweight bond proxies and we are reducing exposure to higher price-earnings (PE) ratio stocks. With regard to elevated household debt to GDP we are underweight consumer stocks and banks.

“We are maintaining exposure to companies invested in mining and infrastructure spending, noting corporate debt is low and capex is rising.

“With the resource cycle turning we are overweight major resource stocks and we are overweight offshore earners due to our belief the interest rate differential to the US suggests AUD weakness.

“In terms of specific stocks, we have been building positions in quality names like Woolworths Group (ASX: WOW), which offers good defensive characteristics and good growth, and have found opportunities in companies like CYBG (ASX: CYB) and companies whose balance sheets and outlooks have improved substantially, like Woodside Petroleum (ASX:WPL),” said Mr Nicol.

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He takes on the role of portfolio manager and will focus on the development of a new investment strategy and product in the emerging companies space.

“We are looking to complement and build on the successful investment philosophy of DNR Capital High Conviction and Income strategies”, noted DNR Capital CIO, Jamie Nicol.

“Sam brings a wealth of investment experience both domestically and overseas. This will help us to continue identifying quality domestic businesses with sustainable competitive advantages, especially those emerging local companies with the ability to grow into global franchises.”

“I am very excited at the opportunity to join a team of highly successful investors, with an excellent long-term performance track record in the Australian market. We see significant opportunities to add value in the smaller segment of the market, where we see a range of highly innovative and disruptive business models emerging in fast growing sectors such as technology, financials, consumer and healthcare”, added Sam Twidale, Portfolio Manager.

Robert White, DNR Capital CEO, said “the new emerging companies product is scheduled for launch later in 2018 and further details about the product will be made available at that time”.

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