L1 Long Short Fund Limited

LSF’s October Performance Impacted by Global Headwinds: L1 Long Short Fund Limited (ASX: LSF) stated that they returned -3.9% in the month of October 2018. As per the management of the company, a rise in the US bond yields coupled with the elevated geopolitical worries significantly impacted the stock markets on a global basis. The volatility in the markets was spooked primarily by the trade tensions between the United States and China, uncertainty regarding the Brexit as well as a rise in the Italian bond yields.


LSF’s Portfolio Exposures (month-end) (Source: Company Reports)

The management also stated that the impact of US 10-year bond yield has been felt on the long duration growth assets which include the technology stocks in the United States as well as other high P/E stocks. They are also optimistic about the long-term performance of the Lynas as they stated that the stock price of Lynas is recovering from the oversold levels because of the positive news with respect to the environmental review of the Malaysian Government in regard to the Lynas’ plant. Additionally, the robust operational update added to the favourable views of LSF.

A Quick Look at LSF’s Financials: L1 Long Short Fund Limited recorded total investment loss amounting to $89.5 million during December 14, 2017 to June 30, 2018. However, during the same period, the company did witness dividend income, interest income as well as net foreign exchange gains. Between December 14, 2017 and June 30, 2018, the company incurred total operating expenses amounting to $18.5 million and the largest contributor towards total operating expenses were the dividend expenses.

 
LSF’s Financials (Source: Company Reports)

What Investment Process Company Focuses on Moving Forward: As per the management of L1 Long Short Fund Limited, the company’s investment process revolves around conducting the detailed as well as bottom-up research to pick the companies to have robust long-term growth potential. The management believes that moving forward the investment returns are expected to get improved. Moreover, the company has identified certain opportunities, and they are optimistic regarding those opportunities.
In the annual report, the company stated that its portfolio of longs has robust balance sheets as well as strong industry structures as compared to the portfolio of shorts. This could improve the company’s performance in the case of the bear market.

Stock Analysis: Moving Average Convergence Divergence or MACD indicator has been applied on the daily chart of LSF and default values have been taken into consideration. As per the observation, the MACD line has crossed the signal line and is moving upwards. However, the crossover has just occurred, and investment at this point does not look very appealing. Moreover, the company’s performance is highly sensitive to global macro concerns. Therefore, the investors should Wait and Watch the stock closely while it last traded around $ 1.600.
 

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