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AI Soars, L1 Fund Gains 12.7% Amidst Shifting Market Trends
20 Jul
Summary
- L1 Long Short Fund saw a 12.7% gain in Q2 2026, outperforming the ASX200AI.
- AI stocks surged due to strong earnings and supply shortages.
- James Hardie Industries is expected to see volume recovery and valuation multiple expansion.
In the second quarter of 2026, the L1 Long Short Fund reported a substantial gain of 12.7%, outpacing the ASX200AI's 4.0% return. Year-to-date performance stood at 12.5%, compared to the index's 2.4%.
Market dynamics during the quarter were primarily shaped by the Iran conflict and the burgeoning AI sector. However, a ceasefire agreement led to declining oil prices, prompting a market reversal.
AI stocks experienced significant growth, fueled by strong earnings reports, substantial capital investments, and persistent supply shortages. U.S. equities, particularly those benefiting from AI-related capital expenditures, performed exceptionally well.
L1 Long Short Fund specifically noted James Hardie Industries plc (NYSE:JHX), a building materials company. The fund indicated that James Hardie's shares recovered significantly in the quarter, with a +46% increase. This recovery was attributed to easing Middle East tensions and a positive FY27 outlook from management.
The fund anticipates James Hardie's core North American business will return to volume growth, supported by inventory normalization, improved execution in specific channels, competitor exits, and material conversion. Despite current market concerns, L1 believes James Hardie shares are undervalued, with potential for both earnings growth and a valuation multiple recovery.
