L1 Long Short Fund Ltd. · ASX:LSF
L1 Long Short Fund — L1 Long Short Fund Webinar (May 2024)
30 slides from L1 Long Short Fund's conference presentation, May 30, 2024
Slide 1: L1 Capital Long Short Fund
L1 Capital Long Short Fund Rafi Lamm, Joint Managing Director & Co-CIO Amar Naik, Head of Research 30 May 2024
Slide 2: Performance summary
1 Performance summary
Slide 3: Performance summary
Performance summary Strong long-term performance LSF Pre-tax NTA Net Performance1 L1 Long Short Fund Limited S&P/ASX 200 Accum. Index to 30 Apr 2024 (%) portfolio (AUD) Outperformance 3 months 10.6 1.0 +9.6 1 year 13.6 9.1 +4.5 2 years p.a. 6.4 5.9 +0.5 3 years p.a. 14.2 7.3 +6.9 4 years p.a. 28.2 1
Slide 4: Market observations and LSF positioning
Market observations and LSF 2 positioning
Slide 5: Economic outlook
Economic outlook Economic growth forecasts have remained resilient over the past year 2024 Real GDP growth forecasts (%) 2.8% ▪ U.S. Real GDP growth forecasts have 2.4% U.S. been revised up ~100bps YTD 2.0% ▪ Australian GDP growth is below long- term trend, but is supported by a 1.6% resilient labou
Slide 6: Economic outlook
Economic outlook Inflation has remained more persistent than expectations but should trend lower over the coming months U.S. Core CPI (YoY % change) Owners’ equivalent rent (OER) vs. new rent inflation (YoY % change) 10% 12% 8% 6% 8% 4% 2% 4% 0% -2% -4% 0% Core CPI 3m change 6m change Owners equival
Slide 7: Economic outlook
Economic outlook Stronger economic growth coupled with persistent inflation has driven a sharp revision in interest rate expectations Market pricing for number of interest rate cuts in 2024 (No.) Timing of expected interest rate cuts in 2024 (No.) 7.0 Six 25bps cuts 3.0 6.0 2.5 5.0 2.0 4.0 3.0 1.5 2
Slide 8: Market outlook
Market outlook Markets have shrugged off inflation risks and the re-basing of interest rate expectations ASX200 1-year forward P/E ratio vs. history S&P500 1-year forward P/E ratio vs. history 24 24 20.8x 20 20 16.9x 16.5x 16 16 14.7x 12 12 8 8 ASX 200 P/E ASX 200 Average P/E S&P 500 P/E S&P 500 Ave
Slide 9: Equities backdrop
Market outlook Equity markets look fully priced at current levels Equities backdrop Positive factors Negative factors ▪ Central Banks pivoting to an easing bias ▪ Inflation more persistent (albeit delayed vs. initial expectations) ▪ Valuations are full (most of ASX 20 and growth ▪ Surge in migration
Slide 10: LSF positioning
LSF positioning The portfolio is skewed to lower P/E stocks that have strong earnings growth and robust cashflow generation Portfolio positioning ▪ Median long: ~11x P/E, 14.5% EPS growth, 6.5% FCF yield Low P/E firms trade at a 53% discount to the market (6% below the 20-year average) -30 ▪ Median
Slide 11: We see two key areas of downside risk in the market
We see two key areas of downside risk in the market Consumer discretionary spending is weakening with stocks not fully pricing in the slowdown U.S. consumer discretionary stock performance (Nov 23 – May 24)1 U.S. cumulative excess household savings (% disposable income) +30.8% +31.0% 15% 12% 9% 6% 3
Slide 12: We see two key areas of downside risk in the market
We see two key areas of downside risk in the market Domestic bank valuations look very stretched versus history CBA forward P/E and EPS revisions Banks contribution to ASX200 Returns (%) 22x $8.00 6% 21.4x 20x $7.00 4% +4.6% 18x $6.00 2% +2.8% 17.1x 16x $5.00 0% 14x $4.00 -2% 12x $3.00 -4% CBA P/E (
Slide 13: Portfolio performance and key themes
Portfolio performance and 3 key themes
Slide 14: Stock contributors and detractors
Stock contributors and detractors 2024 calendar year-to-date Company name Company news Downer ✓ Increased cost out program by $75m p.a. to a total of $175m p.a. to be achieved by FY25 Qantas ✓ Changes to Loyalty Offer had a smaller earnings impact than market expectations Flutter ✓ Continued momentu
Slide 15: Portfolio themes: Summary
Portfolio themes: Summary We are invested in five key themes that we believe offer compelling, asymmetric risk-reward Infrastructure Global leaders Cash machines Copper & Gold Uranium ▪ Regulated assets with ▪ Number 1 players in ▪ Low P/E stocks, with ▪ Constrained supply for ▪ Demand resurgence si
Slide 16: Theme: Infrastructure
Theme: Infrastructure ▪ Owns and operates Frankfurt Airport alongside a portfolio of ▪ Lowest cost baseload generator in key markets of VIC and NSW International airport stakes ▪ Electricity demand set to grow substantially medium term – data ▪ Frankfurt is one of the busiest airports in Europe (~60
Slide 17: Theme: Global Leaders
Theme: Global Leaders ▪ Largest building products company in North America (~US$55b ▪ #1 player in U.S. online sports betting/iGaming (53% sports market market cap) although not well known to U.S. investors share and 26% iGaming share) ▪ Primary listing moved from LSE to NYSE in Sept 2023 ▪ Industry
Slide 18: Theme: Cash machines
Theme: Cash machines ▪ #1 supermarket in the U.K. with ~27% share ▪ Steel producer operating in Asia Pacific and North America ▪ Improved market structure ▪ Resilient and diversified business, commoditised earnings streams ▪ Strong balance sheet, and valuation underpinned by £17b protected by downst
Slide 19: Theme: Copper
Theme: Copper We expect robust demand growth for the rest of this decade Copper demand: ▪ Driven by electrification tailwinds, incremental data centre and A.I. related demand, improving global manufacturing activity ▪ Single most critical metal required to execute on the energy transition, including
Slide 20: Theme: Gold
Theme: Gold ▪ Rally to date driven by an acceleration in Central Bank buying as well as Asian Retail investing ▪ U.S. fiscal sustainability remains a key concern (national debt rising by US$1 trillion every 100 days!) ▪ Potential macro tailwinds (lower interest rates, weaker USD) add support for pri
Slide 21: Theme: Copper and Gold
Theme: Copper and Gold ▪ Leading copper-zinc producer which is in the process of ▪ WA gold producer with four mines across three processing hubs completing the sale of its steelmaking coal business ▪ Significant earnings leverage from the rising A$ gold price and ▪ Strong pipeline of organic growth
Slide 22: Theme: Uranium
Theme: Uranium ▪ Commitment from large western nations to triple nuclear energy capacity by 2050, China expected to go even faster ▪ Uranium contracting activity by utilities has returned to decade highs in 2023, and continues to grow ▪ Significant new mine supply needed from the middle of decade to
Slide 23: Theme: Uranium
Theme: Uranium ▪ Largest uranium asset under development globally (Rook I) ▪ Differentiated project scale and quality ▪ In final stages of approvals and financing, expected to commence major works within next 6-12 months ▪ Over ~C$1b in cash and uranium assets on balance sheet ▪ At US$100/lb uranium
Slide 24: About L1 Capital
I About L1 Capital
Slide 25: L1 Capital
L1 Capital Business overview L1 Capital is a specialist investment manager founded in 2007 by Mark Landau and Rafi Lamm ▪ ‘L’ – Derived from the surnames of the founders (Lamm & Landau) ▪ ‘1’ – Genuine firm-wide aspiration to be the “best”, not just “good” ▪ Reputation for investment excellence and
Slide 26: Global Investment Manager
Global Investment Manager Well-resourced and experienced team across investments, operations, compliance and investor relations Business Overview London ▪ Founded in 2007 Since 2017 U.K. Residential Property ▪ Circa A$7.2b FUM ▪ Investment professionals in 5 locations globally New York & Miami Since
Slide 27: L1 Capital Funds
L1 Capital Funds Strong performance culture Long Short Catalyst International Equities net returns S.I. 20.0% p.a. net return S.I. (ASX200AI 7.6% p.a.)1 13.2% p.a. (ASX200AI 6.0% p.a.) 14.4% p.a. net return S.I. (MSCI World 12.9% p.a.) Best performing long short fund High conviction in Australia S.I
Slide 28: Important information
Important information L1 Capital Pty Ltd Information contained in this publication Equity Trustees Limited (“Equity Trustees”) (ABN 46 004 031 298), AFSL 240975, is the Responsible Entity for the L1 Capital Long Short Fund. Equity Trustees is a subsidiary of EQT Holdings Limited (ABN 22 607 797 615)
Slide 29: Contact Us
Contact Us Chris Aman Lisa Bryce Clayton Kashyap Salamon Leyden Head of Distribution Deputy Head of Distribution Investment Specialist Investment Specialist +61 (3) 9286 7021 +61 (0) 477 341 403 +61 (0) 406 585 322 +61 (0) 407 876 532 cclayton@L1.com.au akashyap@L1.com.au lsalamon@L1.com.au bleyden@
Slide 30: ABN 21 125 378 145 | AFSL 314 302
ABN 21 125 378 145 | AFSL 314 302 Level 45, 101 Collins Street Melbourne Victoria 3000 Australia Phone +61 3 9286 7000 Fax +61 3 9286 7099 Web L1LongShort.com.au
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