DNR Capital’s Chief Investment Officer, Jamie Nicol gives his wrap up of the recent reporting season and discusses a few stocks, where trusting in our proven investment process is more important than ever.


Yes, we’ve just finished reporting season and they delivered 26% earnings growth of a COVID-impacted year. So a very good year and one we weren’t expecting a year ago. It was much stronger than anticipated. A couple of key highlights was the dividend growth, resource companies benefiting from high iron ore prices, banks benefiting from very low bad debt charges lifted dividends which was a good boost for shareholders. I think the other key highlights was, it was interesting to see the market rotate from COVID winners to COVID losers, a lot COVID winners like Wesfarmers, Woolworths struggled to really kick on despite delivering good results in what was a good year for them.

And the market was prepared to go towards some of those stocks which had been impacted by COVID and still delivering pretty soft growth for 22. The markets prepared to look through that and start to price it off 23 and beyond. I think the other factor that we looked at was just some interesting stocks specific results. If you were a good growth stock delivering good outcomes then the market was prepared to reward that and we thought we’d talk about a couple as well.

I thought I’d contrast two stocks that delivered interesting results for us. The first one was Domino’s. Its been our biggest winner over the last couple of years and delivered very strong growth through the year. Clearly there’ve been beneficiaries from COVID, people have been staying at home eating pizzas, but the other thing that its done for them is introduce, they’ve been able to introduce themselves to customers in Japan, in Germany, in France, downloads of their apps was up substantially over the course of the year. That’s improved their profitability in those markets. They’re about to increase advertising, franchisees are making more money, they’re interested in putting more capital down to support further growth.

So you’re really looking at a company with very strong growth prospects in all of those markets and that gives you a long duration of growth long into the future. The stocks obviously had a good run and some of that future earnings growth and future share price growth has been pulled forward, but certainly delivered and I think when we look back sort of three years ago when we were buying it was in the midst of a franchisee inquiry. There was uncertainty about those offshore markets and so pricing at a deep discount. We always like to buy these quality companies when they’re trading at a discount and there’s a level of uncertainty. So we’ve done well out of that one and to contrast that stock that we’re looking at we’ve bought over the past years been computer share. And that’s a stock that has had of difficult few years. It has a lot of money that sits on cash on deposit, low interest rates hasn’t been very helpful for that. They’ve also got a mortgage business in the US which is a lower quality business.

It’s not the highest quality business in their portfolio, but it only represents about 10% of the overall value of computer share and I think it’s on a bit of a cyclical low. So as we look forward we think they’re higher quality parts of their business, the share registry business, the corporate trust business, they’ve got these businesses that produce very good cash flow, very good annuity streams and I think the market’s sort of underestimating that because its recent history’s been a little bit clouded. And as we look forward we think they can get very strong growth from just executing on their strategy and there’s an optional extra if interest rates happen to go up then that’s going to give you a very substantial boost to your profits as well.


This article has been prepared  and issued by DNR Capital Pty Ltd, AFS Representative – 294844 of DNR AFSL Pty Ltd ABN 39 118 946 400, AFSL 301658. Whilst DNR Capital has used its best endeavours to ensure the information within this document is accurate it cannot be relied upon in any way and you must make your own enquiries concerning the accuracy of the information within. The information in this document has been prepared for general purposes and does not take into account the investment objectives, financial situation or needs of any particular person nor does the information constitute investment advice. Before making any financial investment decisions you should obtain legal and taxation advice appropriate to your particular needs. Investment in DNR Capital Funds can only be made on completion of all the required documentation. The Trust Company (RE Services) Limited ABN 45 003 278 831 AFSL No 235150 (as part of the Perpetual Limited group of companies) is the issuer of the PDS for the Funds. An investor should obtain and read the PDS and target market determination and consider their circumstances before making any investment decision. The PDS and target market determination are available at the Fund website at www.dnrcapital.com.au/invest, or a paper copy can be obtained, free of charge, upon request by calling DNR Capital Pty Ltd (‘Manager’), the investment manager of the Fund on 07 3229 5531. Total returns shown for the Fund have been calculated using exit prices after taking into account all of Perpetual’s ongoing fees and assuming reinvestment of distributions. No allowance has been made for taxation. Past performance is not indicative of future performance. The Manager or The Trust Company (RE Services) Limited does not guarantee the repayment of capital from the Fund or the investment performance of the Fund. An investment in this Fund is subject to investment risk including loss of some or all of an investor’s principal investment and lower than expected returns.