L1 Long Short Fund Ltd. · ASX:LSF
L1 Long Short Fund — Investor Presentation (November 2020)
34 slides from L1 Long Short Fund's investor presentation, Nov 9, 2020
Slide 1: Investor Presentation & Webinar Invitation
9 November 2020 For personal use only The Manager ASX Market Announcements Australia Securities Exchange Exchange Centre Level 6, 20 Bridge Street Sydney NSW 2000 Investor Presentation & Webinar Invitation The Investment Manager will host a webinar for all investors of L1 Long Short Fund Limited (AS
Slide 2: L1 Long Short Fund Limited Investor Presentation
For personal use only L1 Long Short Fund Limited Investor Presentation 9 November 2020
Slide 3: Agenda
Agenda For personal use only Overview and Performance Update Market Outlook Portfolio Themes & Key Positions Closing the Gap to NTA Appendices L1 Long Short Fund Limited 2
Slide 4: Overview and Performance Update
For personal use only Overview and Performance Update
Slide 5: Overview
Overview For personal use only The L1 Long Short Strategy has performed strongly since the market sell-off in March. The NTA has increased 70% from $1.08 (March 23) to $1.83 (November 4). We continue to be positioned for rising equity markets and a major rotation towards oversold value and cycli
Slide 6: Performance Summary
Performance Summary For personal use only The Fund has had pleasing performance in 2019 and 2020, driven by strong stock selection, despite enormous headwinds for ‘value investors’ like L1. Staying composed and investing rationally during the crisis has paid off, with strong returns over the las
Slide 7: Performance Drivers
Performance Drivers For personal use only Four factors have driven the strong performance since March 2020: (1) Buying (or adding to) numerous oversold stocks near the March lows: Large Caps: Transurban, Qantas, Tabcorp, Oil Search, Downer, Scentre, Star Entertainment. Small Caps: Lovisa, Webjet,
Slide 8: Performance Drivers – Key Contributors (July – Oct 30)
Performance Drivers – Key Contributors (July 1 – Oct 30) For personal use only Total Company Name Comment Return Major positive inflection point in operating trends, non-core asset sales and Bed Bath & Beyond* +122% large buyback program announced. Improved regulatory certainty and path to higher di
Slide 9: Performance Drivers – Key Detractors (July – Oct 30)
Performance Drivers – Key Detractors (July 1 – Oct 30) For personal use only Total Company Name Comment Return Unibail-Rodamco- €9b re-set plan was poorly timed and structured and included a -28% Westfield proposed €3.5b rights issue. Shares trading at 80% below NTA. Lower coal volumes & prices, Chi
Slide 10: Market Outlook
For personal use only Market Outlook
Slide 11: Market Outlook
Market Outlook For personal use only Equities look very attractive compared to other asset classes. Monetary and fiscal stimulus is extreme and likely to cause further asset inflation. Investor positioning remains cautious due to concerns over COVID-19. The outlook for COVID-19 is likely to
Slide 12: Growth v Value – year extreme
Growth v Value – 50 year extreme For personal use only Low bond yields, combined with COVID-19 have created a bubble in growth stocks The current period of underperformance 200 of value stocks is by far the largest and Growth Outperforming 180 longest in the last 50 years. World Value vs Growth 16
Slide 13: Extreme Stock Dispersion - Ideal backdrop for active management
Extreme Stock Dispersion - Ideal backdrop for active management For personal use only Valuation premium of sectors/factors relative to history (12 month forward PE vs 10-yr range) Expensive vs History (%-tile) Cheap vs History (%-tile) 100 93 87 78 67 66 64 57 32 14 9 4 3 0 0 High P/E (growth) sto
Slide 14: Numerous stocks have huge upside as COVID-19 resolves
Numerous stocks have huge upside as COVID-19 resolves For personal use only In our March presentation, we identified a number of stocks that we believed were very oversold and had considerable upside as the impact of COVID-19 moderated over time. All of these shares have rallied strongly since tha
Slide 15: Portfolio Themes & Key Positions
For personal use only Portfolio Themes & Key Positions
Slide 16: COVID-19 Vaccines, Treatments & Testing
COVID-19 Vaccines, Treatments & Testing For personal use only Vaccines: Interim data expected in Nov/Dec from Pfizer, Moderna and AstraZeneca. Nine companies are currently in Phase 3 trials (five from western world, three from China and one from Russia). We expect positive data from at least one
Slide 17: Portfolio Positioning
Portfolio Positioning For personal use only We see four main areas of compelling, asymmetric risk-reward opportunities at present. Monopoly or privileged assets with normalised dividend (or FCF) yields of 6-7% p.a. and growing. Monopoly Further upside from buybacks/special dividends. real assets
Slide 18: Theme 1: Monopoly Real Assets
Theme 1: Monopoly Real Assets For personal use only Atlas Arteria (ALX ASX) Chorus (CNU ASX) Main asset is a 31% stake in APRR, (best toll road Monopoly owner of New Zealand’s world class network in France) and 100% ownership of Dulles ultra-fast fibre broadband network (81%) and Monopoly Greenw
Slide 19: Theme 2: COVID-19 Hit Stocks
Theme 2: COVID-19 Hit Stocks For personal use only Star Entertainment (SGR ASX) Safran (SAF FR) Owner of monopoly casinos in Sydney1, World’s highest quality aerospace company. Brisbane, Gold Coast. Global leader in manufacturing and parts for Monopoly Market cap of A$3.3b hugely undervalues t
Slide 20: Theme 3: Depressed Commodities
Theme 3: Depressed Commodities For personal use only Teck Resources (TECK US) Worley (WOR ASX) Owner of some of the world’s best quality World’s leading engineering consulting firm copper, coking coal and zinc mines, including focused on the energy and chemicals sectors. Monopoly majority of QB2
Slide 21: Theme 4: Restructures & Demergers
Theme 4: Restructures & Demergers For personal use only CK Hutchison (1 HK) News Corp (NWS ASX) High quality infrastructure conglomerate with Extremely undervalued digital real-estate US$40b of U.S. power infrastructure, 50+ ports, portal, media & publishing conglomerate. Monopoly Watsons Pharma
Slide 22: Portfolio Positioning – Gross & Net Exposure by Geography
Portfolio Positioning – Gross & Net Exposure by Geography For personal use only As at 30 October 2020 Gross Long Gross Short Net Exposure Australia/New Zealand 133% -70% 62% North America 24% -14% 10% Europe 34% 0% 34% Asia 11% 0% 11% Total 202% -85% 117% Continuing to maintain a higher than usual
Slide 23: Closing the Gap to NTA
For personal use only Closing the Gap to NTA
Slide 24: What Are We Doing to Close the Discount?
What Are We Doing to Close the Discount? For personal use only On-market buyback of up to 10% of shares in LSF. As at 30 October, ~$51 million has been bought at an average price of $1.28 per share, representing 6% of capital. Buyback has been accretive to shareholders and has reduced the discount
Slide 25: Conclusion
Conclusion For personal use only The portfolio has performed very strongly since March. Our detailed, bottom-up investment process has identified numerous companies with specific catalysts that should drive portfolio performance. As the outlook for COVID-19 gradually improves, we expect to see
Slide 26: Appendices
For personal use only Appendices
Slide 27: Strong Long Term Performance Across All L1 Capital Funds
Strong Long Term Performance Across All L1 Capital Funds L1 Capital managed funds (Melbourne office) For personal use only ZENITH AWARD Long Short: Best ‘Australian Launched Long Short Fund (Strategy) Equities – Alternative Sep 2014 15.8% net return p.a. since inception (6 yrs) (ASX200AI 5.1% p.a.
Slide 28: Net Performance of the Long Short Strategy (since inception)
Net Performance of the Long Short Strategy (since inception) For personal use only Long Short Strategy Performance (Net %) Period Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Year 2014 - - - - - - - - (2.42) 3.03 2.85 1.61 5.17 2015 0.59 9.14 2.42 1.71 3.73 (0.86) 3.30 2.06 5.51 8.49 8.11 4.62 60
Slide 29: Significant Outperformance in Falling Markets
Significant Outperformance in Falling Markets (Since Inception of the Long Short Strategy) For personal use only Performance in “Down Market” Months Performance in “Up Market” Months (Average of 29 months) (Average of 45 months) 5.0% 3.0% 3.0% 2.3% 1.0% 0.0% -1.0% -3.0% -3.3% -5.0% L1 Long Short ASX
Slide 30: Downside Protection During Falling Markets
Downside Protection During Falling Markets (Since Inception of the Long Short Strategy) For personal use only During the 29 months that the market fell, the Fund was flat (0% vs ASX200AI -90%) Long Short Fund (%) S&P/ASX200 Accumulation Index (%) 10.0 5.8 5.5 4.2 3.9 6.0 3.4 2.8 2.6 2.5 2.4 2.2 2.1
Slide 31: Sector Contribution
Sector Contribution (Since Inception of the Long Short Strategy) For personal use only Positive returns across most sectors Materials 38.4% Communication Services 33.2% Industrials 24.9% Utilities 14.8% Financials 14.5% Consumer Staples 8.5% Real Estate 7.5% Consumer Discretionary 6.9% Energy 5.9% H
Slide 32: Contact
Contact For personal use only Investor Relations Chris Clayton (QLD & WA) Wayne Murray (VIC) Head of Distribution Investment Specialist Phone + 61 417 279 183 Phone + 61 424 300 003 Email cclayton@L1.com.au Email wmurray@L1.com.au Alexander Ordon (NSW & SA) Aman Kashyap (NSW & VIC) Investment Specia
Slide 33: Legal Disclaimer
Legal Disclaimer For personal use only Information contained in this presentation L1 Long Short Fund Limited has been established to invest in a portfolio of predominantly Australian and New Zealand securities, with up to 30% invested in global securities. The Company has the ability to both buy and
Slide 34: For personal use only
For personal use only ABN 21 125 378 145 | AFSL 314 302 Level 28, 101 Collins Street Melbourne Victoria 3000 Australia Phone +61 3 9286 7000 Fax +61 3 9286 7099 Web L1.com.au
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