Quality companies
Five factor quality web assessment
Attractive valuations
Exploit mispriced market opportunities
Concentrated
portfolios
High conviction holdings
Early participant in
Australian ESG
ESG is one of 5 factors used to assess quality companies
Style neutral
Quality bias
DNR Capital was born from our fundamental belief in investing in quality companies. Quality companies are well placed to deliver investment returns through economic cycles. Concentrated portfolios of quality companies maximise the opportunity for outperformance.
DNR Capital believes that quality companies outperform for these reasons:
- Quality companies successfully reinvest capital to drive sustainable returns over time.
- Companies in structurally attractive industries have pricing power to grow above inflation.
- Higher quality balance sheets help to ride out cycles.
- The ability to value quality companies is enhanced by the sustainability of earnings.
We have a disciplined approach to identifying quality companies at attractive valuations. DNR Capital has developed a proprietary “quality web”, where we define quality companies considering the following:
- earnings strength (particularly improving return)
- superior industry structure
- balance sheet strength
- strong management
- environmental, social and governance (ESG) risk assessment.
Quality Web
Industry structure
- Porter analysis
- Nature of industry
- Competitive positioning and pricing power
Balance sheet strength
- Net Debt /(Net Debt + Equity)
- Net Debt / (Net Debt + Mcap)
- Net Debt to EBITDA
- Interest cover
Earnings strength
- Average EBITDA margin
- EBITDA margin trend
- Average ROE
- ROE trend
- Average cash flow conversion
- EBITDA FY3 coefficient of variation
ESG risk assessment
- Governance focus
- Financial impact of environmental and social issues
- For the DNR Capital Australian Equities Socially Responsible strategy, an ESG score which is greater than the benchmark index average as determined by DNR Capital applying our own ESG ratings assessment.
Strong management
- Consistent, logical strategy
- Prudent capital allocation
Our assessment of a company’s quality is overlain with a detailed valuation assessment. Through this analysis we are seeking to capitalise on the following market inefficiencies:
- investment opportunities where improving quality might not be recognised by the market
- investment opportunities where the market has unduly de-rated quality
- investment opportunities where the market has underestimated the sustainability of earnings.
To maximise the potential for outperformance, DNR Capital constructs long-term, high conviction, concentrated investment portfolios. There are a number of factors considered in the portfolio construction process, including a top-down economic appraisal and portfolio risk characteristics, such as security and sector correlations. We are long term investors, investing over a period of three-to-five-years.
DNR Capital has a team of highly qualified, experienced investment professionals who conduct in-house investment analysis.
DNR Capital’s investment philosophy of a disciplined focus on quality companies has delivered strong investment returns through multiple market cycles.
Our investment strategies
Australian Equities High Conviction Strategy
Australian Equities Socially Responsible Strategy
Australian Equities Income Strategy
Australian Emerging Companies Strategy
*Past performance is not an indicator of future performance. No allowance has been made for taxation and fees are not taken into account.