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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 | DS Capital noted that, during the quarter, they were focused on earnings results. Their view is that, although business conditions were reasonable, it remained challenging to find organic growth and outlook commentary was cautious. Positive contributors included NEXTDC, Baby Bunting and Seek. Detractors included Eclipx and Experience Co. DS Capital sold their holdings in Baby Bunting and Seek, however, they noted they continue to like Seek and will look to reinvest at an appropriate time. The Fund's cash level ranged between 20% - 25% over the quarter. DS Capital noted the risk of a trade war continues to influence investors and will take time to play out. Domestically, they are monitoring deterioration in business conditions after July's political turmoil and the decision by some major banks to lift mortgage rates. They are also watching for signs of accelerating inflation that, together with resulting higher interest rates, will have various implications for asset markets. They also believe the Australian dollar is likely to remain under pressure as further rate rises are expected in the US while Australian rates remain flat. |
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