Gold’s surge and market whiplash favour the patient

If August reminded investors of anything, it's that markets can shift from fear to euphoria faster than a gold chart in a geopolitical storm, and Emanuel Datt has been quietly seizing these moments. 

As Principal of Datt Capital, a boutique Melbourne based manager known for sniffing out high-growth and special situations, Datt has built a reputation for buying quality names when sentiment is at its weakest - then waiting patiently for the market to catch up. 

In this week's Q&A, Datt reveals the trades and themes driving his portfolio. From taking advantage of negative headlines to build positions in quality businesses, trimming exposure where turnarounds still carry risk, and watching for undervalued opportunities that may only need the right catalyst. 

What’s your most recent investment and why?

We were attentive enough to buy a load of NRW (ASX: NWH) at sub-$3 prices over time. 

We believe the company is well run and was able to benefit from the negative media sentiment with respect to the company’s exposure to the Whyalla Steelworks. 

A few short months later, the company is pushing all-time highs as the market has finally understood the company’s limited economic exposure to a nationally important project.

Which investment did you add to your watchlist this week?

Perpetual (ASX: PPT) looks like an interesting play here, given the substantial discount to previous M&A bids. We believe there is significant latent value that is trapped within the company; however, there is still no clear internal catalyst for change outside of another M&A bid from an external party.

What is the most recent investment you have trimmed or sold, and what drove this decision?

We recently trimmed Iress (ASX: IRE), given the company still appears in turnaround mode. Whilst the recent appointment of a new, seasoned CEO was notable and positive, we understand that turnarounds do take time, effort and come with opportunity cost if you’re not disciplined about position sizing.

What’s your favourite chart or data point from this week?

My favourite chart of the week is the Gold prices in US Dollars. 

Gold has risen almost 10% over the past month, which has significant implications for unhedged, Australian gold producers. This also tells us that despite historically high prices, demand appears to be robust for the commodity, given the significant geopolitical uncertainty that still remains on the horizon. 

We continue to hold a portion of the portfolio in Australian gold producers and near-term developers.

What was your weekly high - a standout market moment or highlight?

Siteminder (ASX: SDR), which we purchased in April at significantly lower prices, continues to perform well, pushing towards all-time highs. 

The company holds a very strong market position and it has been pleasing to see the renewed focus on costs flowing through to the bottom line. We believe the company can increase the intensity of its monetisation efforts over time.

What was your weekly low – a market disappointment or challenge?

Bravura Solutions (ASX: BVS) softening post results into September has been quite disappointing. The company have made a tremendous turnaround over the past 24 months, has one of the world’s eminent enterprise software investors as the major shareholder and provides mission critical software. These factors make for a very compelling special situation.

What first drew you to markets or this sector?

I grew up in family businesses and intimately understood the cyclical nature of businesses and industries, along with the challenges of building a sustainable, profitable enterprise. 

Having to make decisions with imperfect information was an invaluable experience for investing in public markets.

I have always been very intellectually curious and a voracious reader. This combination of deep knowledge, cool temperament and disciplined decision making has worked extremely well in the volatility of public markets. Money is merely a by-product of these efforts.

What continues to motivate and inspire you as an investor?

I have an intensely competitive nature and the motivation to deliver our best relative to our peers is a huge inspiration.

Being of service to our investors is also a fundamental, important duty and we have managed to deliver exemplary performance. Maintaining this performance is always top of mind for me.

How do you unwind when you’re not thinking about the market?

I love to read about the world around us and set aside time each day to educate myself. History, culture and of course, financial markets tend to be my usual genres.

I love to spend time with my family, playing games and telling jokes. I like to think that there’s no better investment to make than spending quality time with your children, and I hope to instil in them the same sense of civic duty that I was raised with.

I like to keep physically active and enjoy learning new sporting skills - skiing is an activity I've picked up in recent years.