At our Annual General Meeting in October, we addressed several important topics reflecting the current market environment and Djerriwarrh’s long-term strategy aimed at delivering an enhanced dividend yield and long-term value to shareholders. In this article, we highlight key discussions and shareholder questions raised at our 2024 AGM.
Discount to NTA and long-term valueDjerriwarrh’s share price continues to trade at a discount despite the strong performance of our underlying portfolio. This is reflective of broader market conditions, as many ASX-listed LICs are currently trading below their net tangible assets (NTA) per share during a period of persistent inflation, high interest rates, and investor uncertainty.
We’ve made strategic decisions to address this, including ongoing share buybacks, which has been a central part of our strategy to reduce the discount to NTA and we believe reflect the value of the company. Since implementing the share buybacks over the past 1.5 months, the discount has narrowed, moving from a double-digit to the current single-digit discount. We have also increased our marketing efforts through this period.
We continue to offer a dividend reinvestment plan (DRP), as feedback from our shareholders indicates this program provides consistency. The goal is to ensure that the mix between the DRP and share buybacks is balanced, contributing to better long-term value for all shareholders. For now, there are no plans for further capital raisings.
We acknowledge concerns about long-term performance, particularly the share price component of returns. Since our strategic reset a couple of years ago, we have seen improvements, with the share price recovering from previous lows. Total returns for Djerriwarrh remain focused on yield and the benefits of franking credits.
Djerriwarrh’s investment strategy continues to emphasise on total return, balancing income generation with capital growth.
Current market and our investment strategyThe concentration of the Australian sharemarket is always front of mind for us. So far, we’ve been able to identify good-quality investments that offer strong long-term potential to replace lower-conviction holdings.
While we have seen a number of takeovers in the market, such as the case with Sydney Airport, we remain committed to long-term investments and are cautious about the shrinking of the Australian share market. We believe maintaining a diversified portfolio allows us to manage this risk effectively.
Our approach to managing individual holdings includes evaluating the broader market conditions and making informed decisions about when to sell stocks. Recently, we’ve opted to sell shares in Commonwealth Bank of Australia (CBA) through option exercises. While CBA remains a high-quality company, we’ve found opportunities to replace it with stocks that offer higher yields without compromising on quality.
Geopolitical uncertainty and market resilienceGeopolitical events and macroeconomic factors are always considered in our investment process, but we take a bottom-up approach, focusing on finding and investing in high-quality companies. Over the long term, these types of external factors tend to have a shorter-term impact. Our investment horizon is 10, 20, or even 30 years, and we believe that trying to predict short-term geopolitical movements is often futile.
That said, geopolitical disruptions can sometimes present opportunities. When market sentiment shifts or overreactions lead to significant mispricing, we may use these moments to increase holdings in quality companies that are temporarily undervalued but we believe will deliver strong long-term results for our shareholders.
ESG considerations ESG considerations are embedded in our investment process, though we do not market ourselves as an ESG-focused fund. We believe that social responsibility, good governance, and environmental sustainability are integral to the long-term success of any business. For example, we avoid investing in pure-play gambling stocks and actively assess the governance and social license of the companies we invest in.
We engage regularly with company boards and directors to ensure that these factors are properly addressed. If a company fails to meet acceptable standards, we consider this in our decision-making, as it often impacts the long-term prospects of the business.
We expect the companies we invest in to adhere to all regulatory and social obligations, which contributes to stronger, more sustainable returns for our shareholders.