How Datt Capital Is Positioning Its Portfolio Right Now

Emanuel Datt was recently featured on Livewire Markets to discuss Datt Capital's latest portfolio changes. Four moves in the portfolio this quarter say more about the fund's process than any single return figure will. Two additions, two reductions, and one significant underweight, each one argued on its own mechanism rather than a single market call.

Platform Migration Flows Are Still Underpriced

Datt Capital has built new positions in HUB24 and Netwealth, the two specialist platforms picking up the lion's share of adviser flows still migrating away from the big banks. It's a slow shift, and far from finished. Combined, the two still administer only a minority share of the Australian platform market, yet keep capturing most of the industry's net inflows. "Both businesses fit our template," Datt says: aligned management, capital-light economics, high incremental margins. Compulsory super does the rest, a tailwind that keeps compounding regardless of where the cycle sits.

Convenience Retail and Refining Face a Structural Squeeze

Datt trimmed Ampol and Viva Energy, Australia's two big refiners, on three fronts at once: softening Asian refining margins, China easing its export quotas straight into the benchmark both stocks are priced against, and a less obvious pressure, illicit tobacco now eating more than a third of the category that has quietly anchored convenience retail's foot traffic for years. "Both companies are quality franchises," he says, "but the earnings base is at risk outside of improved refining operations."

A Global Gas Dislocation Makes Thermal Coal the Structural Play

Coal is where the fund has gone the other way entirely. Qatar's force majeure on LNG cargoes since March has pulled roughly a fifth of global supply off the market, and Europe is heading into winter with storage at its lowest since 2021, bidding hard against Japanese, Korean and Chinese buyers for what's left. Thermal coal is the obvious substitute, and Asian utilities are already burning more of it, a shift already visible in thermal coal prices holding near 52-week highs through a seasonal demand trough. Whitehaven and New Hope sit right where that demand lands, selling Newcastle-benchmark coal into the Japan-Korea-Taiwan market while still returning cash to shareholders. It isn't the fund's first move into energy as a structural rather than cyclical position; a similar logic drove its earlier repositioning into ASX refiners and thermal coal when conventional safe havens stopped working.

"The market is still pricing terminal decline, whilst we think the cyclical setup could not be more favourable." Emanuel Datt.

Retail Caution Runs Deeper Than One Sector

The RBA has hiked three times this year, taking the cash rate to 4.35%, and Sydney and Melbourne dwelling values each fell around 3% in the June quarter, chipping away at the wealth effect that's propped up discretionary spending for years. Add the May Budget's negative gearing and CGT changes, which CBA estimates land like a 90 to 155 basis point rate hike for property investors, and a domestic market already being picked apart by Temu, Shein and Amazon. Datt Capital holds a significant underweight here.

The Fund Remains Cautious on AI Infrastructure

The same scrutiny gets applied to AI infrastructure, and Datt isn't convinced by the current wave of enthusiasm. Hyperscaler capex is tracking toward US$700 billion this year, roughly double last year's spend, and the bull case leans on that pace holding while end-user demand remains largely unproven. Nvidia's yearly architecture refresh also means each generation of installed silicon is half-obsolete within 18 to 24 months. It's a narrower caution than it might sound, though; reporting season commentary found real opportunity in technology businesses already benefiting from AI adoption at compressed valuations. Infrastructure spend is the part Datt won't underwrite.

"Investors are being asked to underwrite long-duration capital commitments against short-duration technology. We'd rather deploy capital into high-quality businesses whose competitive position doesn't depend on the next silicon cycle." Emanuel Datt.

Portfolio Relevance

Four decisions, one process running underneath all of them: find where a mechanism, not a narrative, is driving the mispricing, and size the position to match. It's the same research-led discipline behind the Datt Absolute Return Fund's approach to capital preservation, whichever way the cycle is turning.

To learn more about how Datt Capital's Absolute Return Fund is positioned this cycle, visit our fund page or contact our Distribution Manager, Daniel Liptak, at 0419 004 524 or by email at daniel@datt.com.au.