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Quarter	Letter Date	Fund Name	QTD	YTD	Tickers	Themes	Quick Take

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L1 Capital Long Short Fund 2023 Q4 Investor Letter | Buyside Digest

Back to Fund Profile (L1 Capital Long Short Fund)

Primary Source Intelligence • Q4 2023 Letter Analysis

L1 Capital Long Short Fund Quarterly Analysis

Buyside Digest is not affiliated with, and does not endorse, L1 Capital Long Short Fund. This analysis is provided for institutional research purposes only and is not investment advice.

Fund Returns

QTD+2.9%

YTD+6.2%

Annualized+11.2%

Positioning StanceConstructive

GeographyGlobal

Digest Analysis

Quick Take

"Lagging broader markets due to Energy headwinds. Portfolio maintains five core themes: undervalued Energy positions, global champions at attractive multiples, Gold hedges with production growth, proprietary tech companies, and Infrastructure monopolies."

Executive Summary

L1 Long Short Fund returned 2.9% for the December quarter, underperforming the ASX200AI's 8.4% gain primarily due to Energy exposure amid falling oil prices. The portfolio maintains a concentrated approach across five key investment themes. Energy positions, despite 2023 underperformance, benefit from positive macro outlook with oil above $70, geopolitical tensions, and multi-decade low inventories. Key holdings include Santos exploring structural options and Cenovus generating 14% free cash yield. Global champions like CRH and Flutter offer exceptional growth at attractive valuations. Gold positions including Newmont and Westgold provide portfolio hedging while benefiting from production growth. Hidden tech companies Nufarm and Imdex leverage proprietary technologies for structural earnings growth. Infrastructure monopolies Chorus and Aurizon offer growing dividend streams from regulated positions. Manager expects increased M&A activity in 2024 favoring undervalued assets, positioning the portfolio well despite stretched broader market valuations. Portfolio positioning remains consistent, focusing on low P/E, cash generative opportunities.

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Institutional Meta Strategy

Meta Strategy Gauges

Algorithmic conviction, macroeconomic posture, and risk appetite signals extracted from this quarterly letter with qualitative explanations.

Signal Matrix

Market Conviction

78%

CautiousHigh

High Conviction (78%)

High conviction evidenced by concentrated portfolio with 83 total positions, detailed thesis for each of five key themes, specific position sizing discussions, and willingness to maintain Energy exposure despite underperformance. Manager provides clear catalysts and timeframes for major holdings.

Growth Outlook

25%

BearishBullish

Bearish (25%)

Manager acknowledges the market rally and economic soft landing probability but expresses caution about stretched valuations in larger index constituents and high-multiple growth stocks. Positive on specific opportunities but measured about broader market conditions.

Risk Appetite

50%

DefensiveAggressive

Balanced (50%)

Portfolio positioning remained relatively consistent with prior quarter, maintaining concentrated exposure across five key themes. Manager continues to hold Energy positions despite underperformance and maintains conviction in undervalued holdings, indicating moderate risk appetite.

Capital Deployment

5%

De-riskingDeploying

De-risking (5%)

Portfolio positioning remained relatively consistent with prior quarter. Manager exited Alibaba position but no evidence of significant cash deployment or reduction. Describes maintaining exposure rather than major position changes, indicating minimal net deployment activity.

Forward Guidance

40%

CautiousExpansionary

Neutral (40%)

Manager expects to benefit from increased M&A activity in 2024 and continues to see compelling opportunities in low P/E companies. However, acknowledges stretched market valuations and takes a selective approach rather than aggressive deployment.

Language Signal

30%

BearishBullish

Bearish (30%)

Language balances opportunity identification with risk awareness. Uses terms like 'compelling opportunities' and 'exceptional growth' but also notes 'stretched valuations' and 'relatively fully-priced equity markets.' Net slightly positive but cautious.

Perceived Risk

45%

Low RiskElevated

Moderate Risk (45%)

Manager acknowledges specific risks including oil oversupply concerns, stretched valuations in large caps, and geopolitical uncertainty. However, risk discussion is moderate and balanced with opportunity identification rather than expressing high systemic concern.

Opportunity Density

65%

ScarceAbundant

Abundant (65%)

Manager states they 'continue to see numerous compelling opportunities in low P/E, highly cash generative companies' and expects M&A activity to increase significantly. Selective but positive about opportunity set despite acknowledging stretched broader market valuations.

Time Horizon

70%

Short-TermLong-Term

Decade+ (70%)

Manager discusses multi-year growth trajectories for holdings, medium-term earnings growth expectations, and structural themes playing out over several years. References to 'many years of growth ahead' and long-term asset development indicate patient capital approach.