L1 Long Short Fund Ltd. · ASX:LSF
L1 Long Short Fund — Investor Presentation (July 2020)
35 slides from L1 Long Short Fund's investor presentation, Jul 27, 2020
Slide 1: L1 Long Short Fund Limited Investor Presentation
For personal use only L1 Long Short Fund Limited Investor Presentation 27 July 2020
Slide 2: Agenda
Agenda For personal use only Overview Portfolio Positioning Market Observations COVID-19 Portfolio Themes Key Positions Capital Management AFSL 314 302 L1 Long Short Fund Limited 2
Slide 3: Overview
Overview For personal use only The Fund has performed strongly since the market sell-off in March (returning +34% in the June quarter). While we expect market volatility to stay elevated in the near term, we believe there is significant upside across the portfolio over the next 1-2 years. Valu
Slide 4: Portfolio Positioning
For personal use only Portfolio Positioning
Slide 5: Portfolio positioning – January 2020
Portfolio positioning – January 2020 For personal use only At the start of 2020, the portfolio had a clear skew to cyclical stocks that would perform well assuming a stable or improving global growth backdrop. Both the trade war and Brexit had de-escalated, which resulted in business confidence
Slide 6: Portfolio re-positioning – March 2020
Portfolio re-positioning – March 2020 For personal use only We aggressively bought stocks in mid-March, increasing our net long to 100%. We believed the outlook for equities was very attractive: 1. Many share prices were the most attractive since the depths of the GFC. 2. Investor positioning wa
Slide 7: Decisive buying in March drove strong returns in June quarter
Decisive buying in March drove strong returns in June quarter For personal use only In our last presentation (24 March), we flagged eight stocks that we believed were oversold and we had been aggressively buying. Since that time, the average return has been +57% (over 4 months). We believe sim
Slide 8: Market Observations
For personal use only Market Observations
Slide 9: Global growth stock valuations look stretched
Global growth stock valuations look stretched For personal use only ‘Growth’ has massively outperformed ‘Value’ since the GFC The extent and duration of outperformance of growth stocks is much larger than any other time in history. COVID-19 has caused a further “melt-up” in growth stocks, which no
Slide 10: Australian growth stocks have detached from fundamentals
Australian growth stocks have detached from fundamentals For personal use only High P/E firms in Australia trade on 47x P/E, double the 20 year average Australian growth stocks have structurally re-rated, but valuations are now stretched. During COVID-19, investors have hidden in tech & healthca
Slide 11: Leading indicators suggest cyclicals will soon start to outperform
Leading indicators suggest cyclicals will soon start to outperform For personal use only Expectations for cyclicals are very low The impact of stimulus is coming Latest reading Earnings for cyclical stocks are ‘bombed out’, given the fall in GDP due to COVID-19 lockdowns. ISM New Orders & Money
Slide 12: Portfolio Positioning – Gross & Net Exposure by Geography
Portfolio Positioning – Gross & Net Exposure by Geography For personal use only Gross Long Gross Short Net Exposure Australia/New Zealand 120% 74% 46% North America 21% 13% 8% Europe 28% 0% 28% Asia 15% 0% 15% Total 185% 87% 98% Equities look extremely attractive versus other asset classes (especi
Slide 13: COVID-19
For personal use only COVID-19
Slide 14: Encouraging outlook for COVID-19 treatments and vaccines
Encouraging outlook for COVID-19 treatments and vaccines For personal use only Investor & consumer panic regarding COVID-19 should gradually reduce over the next year. (1) The timing & likelihood of a safe & effective vaccine is better than the consensus view. - We have conducted an extensive amount
Slide 15: Portfolio Themes
For personal use only Portfolio Themes
Slide 16: Long portfolio – Key Themes
Long portfolio – Key Themes The most attractive opportunities we see are: For personal use only 1. Monopoly real assets – Monopoly or privileged assets with normalised dividend (or FCF) yields of 6-7% p.a. and growing. – Further upside from buybacks/special dividends. – Compelling alternative for in
Slide 17: Numerous stocks have huge upside as COVID-19 resolves
Numerous stocks have huge upside as COVID-19 resolves For personal use only Many of our stocks are trading far below their pre-COVID-19 levels (January 2020), implying a large, permanent change to their earnings and cashflows. On average, the value of these companies would increase by 79% if they
Slide 18: Key Positions
For personal use only Key Positions
Slide 19: Key long positions
Key long positions For personal use only Atlas Arteria (ALX ASX) Monopoly real assets Chorus (CNU ASX) Star Entertainment (SGR ASX) COVID-19 hit stocks Imdex (IMD ASX) Teck Resources (TECK US) High quality cyclicals Worley (WOR ASX) CK Hutchison (1 HK) Undervalued conglomerates News
Slide 20: Key long positions: Atlas Arteria, Chorus
Key long positions For personal use only Atlas Arteria (ALX ASX) – Main asset is a 31% stake in APRR, (best toll road network in France) & 100% ownership of Dulles Greenway (U.S). – Monopoly, long term concessions. 5.5% div yield (FY21), 7% div yield (FY23). – Rapid recovery in passenger traffic v
Slide 21: Key long positions: Star Entertainment, Imdex
Key long positions For personal use only Star Entertainment (SGR ASX) – Owner of the monopoly casinos in Sydney1, Brisbane and Gold Coast. – Market cap of A$2.6b hugely undervalues the asset base, licenses and likely cashflow generation. – Shares are trading 40% down from January levels due to COV
Slide 22: Key long positions: Teck Resources, Worley
Key long positions For personal use only Teck Resources (TECK US) – Owner of some of the world’s best quality copper, coking coal and zinc mines. – All major assets are in stable and attractive countries (Canada, U.S. and Chile). – Low cost producer with a large cost out program underway that will
Slide 23: Key long positions: News Corp, CK Hutchison
Key long positions For personal use only News Corp (NWS ASX) – Extremely undervalued digital real-estate portal, media & publishing conglomerate. – Main asset 61.6% stake in REA (A$8.6b) + A$2b net cash = A$10.6b (NWS market cap). – NWS also owns the WSJ, Dow Jones, Realtor.com, Harper Collins, Fo
Slide 24: Capital Management
For personal use only Capital Management
Slide 25: Capital Management
Capital Management For personal use only In March, the Board announced an on-market buyback for up to 10% of the issued capital of LSF. The buyback program commenced on 19 March and has bought back approximately 21.4m shares (~$25m). The buyback is now 32% complete and has helped to reduce the
Slide 26: Conclusion
Conclusion For personal use only The Fund has begun to recover strongly after the initial impact of COVID-19. The equity market is now offering exceptional opportunities not seen in many years. The investment team has a track record of outperforming strongly after macro shocks. The portfolio
Slide 27: Appendices
For personal use only Appendices
Slide 28: 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 15.7% net return p.a. since inception (5 years)1 Strategies’ 2017
Slide 29: Fund performance since inception
Fund performance since inception (Since Inception of Long Short Strategy) For personal use only In the table below, we show the full performance history (net of fees) of the L1 Long Short Strategy since inception on 1 September 2014. Long Short Strategy Performance (Net %) Period Jan Feb Mar Apr* Ma
Slide 30: Significant Outperformance in Falling Markets
Significant Outperformance in Falling Markets (Since Inception of Long Short Strategy) For personal use only Significant outperformance in falling markets Performance in “Down Market” Months Performance in “Up Market” Months (Average of 28 months) (Average of 42 months) 5.0% 3.0% 3.0% 2.3% 1.0% 0.0%
Slide 31: Downside Protection During Down Markets
Downside Protection During Down Markets (Since Inception of Long Short Strategy) For personal use only In the 28 months that the market fell, the Fund was flat (0% vs ASX200AI -90%) Long Short Fund (%) S&P/ASX200 Accumulation Index (%) 10.0 8.1 5.8 5.5 4.2 6.0 3.9 3.5 2.8 2.6 2.5 2.4 2.0 2.1 1.9 1.7
Slide 32: Sector Contribution
Sector Contribution (Since Inception of Long Short Strategy) For personal use only Positive returns across most sectors Materials 36.7% Communications 27.5% Industrials 25.0% Financials 13.6% Utilities 13.3% Consumer Staples 9.3% Real Estate 7.9% Energy 5.3% Health Care 3.2% Consumer Disc. 3.2% IT -
Slide 33: Contact
Contact For personal use only Investor Relations Wayne Murray Phone + 61 424 300 003 Email [email protected] Alexander Ordon Phone +61 413 615 224 Email [email protected] AFSL 314 302 L1 Long Short Fund Limited 33
Slide 34: 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 35: 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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