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How active management delivered for one manager in 2020


Leading Australian equities fund manager, DNR Capital, has once again outperformed its benchmark for the month of December and finished the year on a high taking advantage of the pandemic and run up in the iron ore price.

Whilst the ASX 200 Index was up 1.21% the DNR Capital High Conviction strategy managed to return investors 1.34% beating the index by 0.13%. On the quarter and six-monthly performances the fund was also able to beat the index by 3.45% and 3.25% respectively.

Following strong leads from the US tech sector, local tech heavies enjoyed a bumper ride driving the sector up by +9.4%. Stocks such as Afterpay (ASX:APT) and Xero (ASX: XRO) were primary beneficiaries, helping drive portfolio outperformance. At the same time, the local materials sector, primarily iron ore, received an extra kicker after the iron ore price rose to US$160 per tonne by the middle of December. Unprecedented demand from China stemming from trade disputes between the authorities in China and Australia helped drive the price. Enjoying the price rise were local miners BHP (+11.5 per cent) and Fortescue Metals (ASX: FMG +28.5 per cent).

  • On the flip side, “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.”

    DNR Capital says “Domino’s Pizza Enterprises (ASX: DMP) outperformed following an encouraging investor day outlining growth opportunities in Japan and Europe. We expect FY21 to deliver strong earnings growth as it leverages an expanded customer base and ongoing network expansion in Japan and Europe.

    All in all DNR Capital believes three key themes will drive 2021, all inextricably linked:

    1. The rollout, uptake and efficacy of COVID-19 vaccines

    2. The quantum and pace of global fiscal stimulus

    3. Global inflation and central bank appetite for asset purchases, influencing the outlook for interest rates.

    “As key inputs to an ongoing and overarching debate around growth versus value, these will frame how best to position portfolios for a year (hopefully) defined by the recovery and reopening of the global economy. Focus is currently on the US, and to a lesser extent the UK and Eurozone, representing the key regions where unchecked infections could derail or delay a global recovery.”

    In light of the positive outlook, the fund recently announced to investors they were adding QBE Insurance (ASX: QBE) and Transurban Group (ASX: TCL) to their portfolio both on a valuation basis.

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