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| Fund Overview | The investment team looks for industrial businesses that are simple to understand; they generally avoid large caps, pure mining, biotech and start-ups. They also look for: - Access to management; - Businesses with a competitive edge; - Profitable companies with good margins, organic growth prospects, strong market position and a track record of healthy dividend growth; - Sectors with structural advantage and barriers to entry; - 15% p.a. pre-tax compound return on each holding; and - A history of stable and predictable cash flows that DS Capital can understand and value. |
| Manager Comments | The March quarter featured the February reporting season with most of DS Capital's businesses reporting results in line with their expectations. They noted that the underlying operations of almost all their businesses continued to perform well in an unusual environment. Top contributors included Resimac, Dusk and Kogan. DS Capital's view is that short to medium term economic conditions will largely remain dependent on the continuing impact of Covid-19. They also noted that their investment process has long been focused on identifying businesses offering earnings growth in a variety of environments over the long term. Should the expectation of rates rising sooner than previously expected materialise, then DS Capital believe it is likely that economic conditions are also improving and will be accompanied by stronger earnings growth. In this event, they expect that stronger earnings should provide some insulation against any impact that higher interest rates may have on derating earnings multiples. They continue to monitor inflation and interest rates for evidence of a more significant change. |
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