By Mark Landau, Co-Founder and Co-Chief Investment Officer, L1 Capital
L1 Capital’s Mark Landau explains how a global investment universe and a flexible long short approach allow the fund to pursue opportunities across a broad range of companies, markets and sectors.
Global share market indices have been relatively stable in recent months, but beneath the surface, individual stocks have experienced significant price moves. We believe this dispersion is creating a particularly attractive set of investment opportunities for the L1 Global Long Short Fund (ASX: GLS).
More than half of Russell 3000 stocks have fallen by more than 20% since the start of June, despite the index appearing stable. In the US consumer discretionary sector, two-thirds of stocks are down more than 20%. The stability in headline indices belies the weakness across the broader market, with performance increasingly concentrated in the largest (top 10) companies.
Several factors are driving these moves. One of the biggest increases in bond yields on record has hit yield-sensitive sectors, including utilities, infrastructure and property. Brent Oil prices are up 70% this year and circa 15% in the past month. Meanwhile, artificial intelligence continues to influence market sentiment towards both companies perceived to be AI losers and those investing heavily in its development.
Note: all data points above current as at 15 October, 2026
A global opportunity set
At L1 Capital, we have been managing long short strategies since 2007. The L1 Global Long Short Fund applies the same investment team, philosophy and process as our L1 Capital Long Short Fund. Both strategies are jointly managed by myself and Co-Founder and Co-Chief Investment Officer Rafi Lamm, with the key difference being the geographic scope of their investment universes.
The Long Short Fund’s global exposure is capped at 30% of its portfolio, whereas the Global Long Short Fund can invest its entire portfolio globally. This allows us to bring more of our best international ideas into the portfolio.
The objective of the Strategy is to achieve strong, positive, risk-adjusted returns over the long term (in AUD terms), with a return objective of 10% p.a. net of fees and expenses over the long term. There is no guarantee that the objective will be achieved.
Finding value through bottom-up research
Recent volatility has created a much larger set of attractive investment opportunities than usual. We are finding numerous stocks that have fallen well below our view of fair value.
Our investment approach is contrarian and research driven. We focus on individual companies, assessing their earnings potential, valuations and cash generation rather than simply following market trends.
We look for situations where short-term headwinds or fears are being priced into a company’s valuation well into the future, even when we believe their medium-term impact on the business will be much less significant.
The portfolio is diversified across sectors and geographies, with both long and short positions. This means we can seek opportunities among companies we believe are undervalued, while also taking short positions (selling) where we believe the financial model or market expectations are too optimistic.
Examples from the portfolio
Alcoa (NYSE: AA), a global industrial leader in alumina refining, and aluminium manufacturing, is one example of where we believe the market has overreacted to near-term uncertainty. Its shares have almost halved since late May (as at September 30, 2026), reflecting weaker commodity prices and an acquisition that defers capital returns to shareholders.
The market appears to be placing too much weight on near-term uncertainty and too little on Alcoa’s medium-term earnings potential. Longer term, aluminium demand is expected to benefit from electrification and infrastructure spending, while improved operational execution and synergy delivery offer further potential earnings upside.
Fraport (ETR: FRA), which operates Frankfurt Airport and international airport concessions, is another example. Its shares fell 15% over the quarter (as at September 30, 2026) as higher jet fuel costs and disrupted flying activity weighed on near-term traffic. We believe these headwinds are mostly temporary. With major investment programs at Frankfurt, Lima and Antalya now complete, we see significant improvement in cash generation ahead.
On the short side, we believe the financial model of electric vehicle manufacturer Rivian (NASDAQ: RIVN) remains challenged. The business continues to post losses and burn cash, while its lower-priced R2 needs to deliver a major step-up in production and sales in a highly competitive market. We see elevated risks that operational challenges prolong losses and require further capital funding.
These examples illustrate how we assess each investment on its individual merits, with a focus on valuation and the medium-term outlook rather than short-term share price movements alone.
A diversified portfolio at attractive valuations
The portfolio is built from extensive bottom-up company research and looks very different from major market indices, which are heavily skewed towards US mega-cap technology stocks.
Across our long positions as at 30 September 2026, the median stock trades on around 11 times FY27 earnings, based on consensus forecasts, alongside expected median earnings growth of around 15% on the same basis and strong cash flow generation. These estimates are forward-looking and may not be realised.
Since the strategy commenced on 1 January 2025, it has returned 108.3% cumulatively after fees (equivalent to 52.2% p.a.) to 30 September 2026, compared with a cumulative return of 35.3% for the MSCI World Index (equivalent to 18.9% p.a.) over the same period. These figures relate to the strategy, not the L1 Global Long Short Fund (ASX: GLS).
The breadth of contributions has also been notable. Over the same period, 63 stocks had each contributed more than one percentage point to the strategy’s returns, across a diverse range of sectors and geographies.
Investments can go up and down. Past performance is not predictive of future returns. As GLS is listed on the ASX, its share price may trade at a discount or premium to its net tangible asset (NTA) value per share, so shareholder returns may differ from the performance of the underlying portfolio.
Aligning our interests with investors
A core value at L1 Capital is strong alignment of interests. Rafi and I have a large personal investment in the strategy, putting our capital alongside investors.
That philosophy extends across the broader investment team. We don’t allow investment staff to trade individual shares personally, meaning their best ideas are directed into client portfolios. A material part of team members’ bonuses is also invested in L1 Capital funds and escrowed for at least three years.
We believe the current dispersion in share prices is creating a compelling environment for long short investing. For investors, this reinforces the value of a strategy that can pursue mispriced companies across global markets, rather than relying solely on the direction of the broader market.
The L1 Global Long Short Fund combines this flexibility with an investment team and research process refined over nearly two decades of managing long short strategies.
Explore the L1 Global Long Short Fund (ASX: GLS).
DISCLAIMERS: This communication has been prepared for L1 Global Long Short Fund Limited (ACN 063 975 431) by its investment manager, L1 Capital Pty Ltd (ABN 21 125 378 145 and AFS Licence 314302). L1 Capital Pty Ltd has prepared this publication in good faith in relation to the facts known to it at the time of preparation. This publication contains general financial product advice only. In preparing this information, we did not consider the investment objectives, financial situation or particular needs of any individual investor, and you should not rely on the opinions, advice, recommendations and other information contained in this publication alone. This publication has been prepared to provide you with general information only. It is not intended to take the place of professional advice and you should not take action on specific issues in reliance on this information. We do not express any view about the accuracy or completeness of information that is not prepared by us and no liability is accepted for any errors it may contain. Past performance is not a reliable indicator of future performance.
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