This fundie has beaten the ASX 200 every year for the past 2 decades. Here’s how

This ASX fundie has a pretty impressive market-beating track record. Here’s how his fund beats the market.

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Key points

  • Most ASX investors hope to beat the market, but few do
  • Yet this ASX fund manager has managed to beat the ASX 200 for 20 years
  • So let's look at how DNR Capital does it

The rise in the popularity of index exchange-traded funds (ETFs) on the ASX over the past decade or two has no doubt been supported by the idea of ‘if you can’t beat it, join it’. The ‘it’ in this case is the market. Specifically the S&P/ASX 200 Index (ASX: XJO).

‘Beating the market’ is the goal of every ASX investor. After all, if an investor can’t beat the market, then they are mathematically better off investing every cent they have in an index fund. So to hear one ASX fund manager has beaten the market every year for two decades is definitely worth a closer look.

As revealed in the Australian Financial Review (AFR), Jamie Nicol is co-founder of the Brisbane-based DNR Capital. This ASX fundie has managed to steer DNR Capital’s flagship High Conviction Australian Equities fund to an annual return of 12.9% per annum since its inception in 2002. That’s a market outperformance of an average 9.3% per annum that the fund’s ASX 200 Accumulation Index benchmark has achieved over the same period.

Meet ‘Mr 13%’ ASX fundie Jamie Nicol

This outperformance has held over many periods of market turmoil. These include the global financial crisis, the pandemic crash, and the gyrations we have seen over 2022 so far.

Nicol reckons this can be explained by “an eye for quality stocks, smart recruitment and decades of hard work”:

Remember, we started at the end of the dotcom crash, some people ended up with portfolios full of junk, it’s got similarities today… When we set up 20 years ago we were keen to go where ideas were, which would provide us with opportunities at different points in the cycle. Quality stocks at attractive prices is what we thought worked. Once this was defined, we then concentrated our portfolios in a limited number of high-quality businesses, but sought to buy them when there was a mispricing opportunity.

But Nichols also says that his firm still looks at finding value in companies that are suffering from “inefficiencies” in the market. These can be a mispricing of a growth opportunity. Or else buying a company that has been oversold over temporary concerns.

At the moment, DNR is “overweight in the mining sector”. But Nicol is also looking at Aristocrat Leisure Limited (ASX: ALL) and Domino’s Pizza Enterprises Ltd (ASX: DMP) as possible candidates for the ‘oversold’ label.

Nicol also cites patience as a necessary virtue for market outperformance. He says, “opportunities to be contrarian and buy out-of-favour businesses remain a fruitful exercise, you perhaps need more patience for the opportunities to be realised”.

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Dominos Pizza Enterprises Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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