James Hawkins: Yes to resources, no to Aussie consumers

You’re never going to get a consensus about anything with a room full of investors.

There was one point most were happy to concede at the Livewire Live event this week: the world is becoming more complex.

Moderator Chris Conway said that when he started in markets, you only needed to worry about three things: inflation, interest rates and growth. Not so anymore.

You and I both need all fingers and toes to count all the factors impacting our portfolios today. How to invest with this in mind is the question.

One answer might be to simplify things. That seems to be the approach of James Hawkins, Head of the L1 Capital Catalyst Fund.

It’s unique in Australia, at least as far as I know, because it’s so concentrated: a portfolio of just 10 stocks. Warren Buffett, no fan of extreme diversification, would likely approve.

The fund is up 18% over the last year. Hawkins won’t get any bickering from his investors if he keeps posting returns like that.

How to select the 10? Hawkins gave the audience at Livewire Live one clue. He currently divides the three best ‘buckets’ in the following way: US dollar earners, resources, and defensives.

Left unsaid is to avoid companies exposed to the ailing Aussie consumer and the flagging ASX financials exposed to them. The Australian domestic economy is anaemic, and big revenue growth is hard to find.

Not so the United States. The place is booming. You know the reasons. The AI capital expenditure boom. Big government deficits. Technology leadership.

It’s not such a matter as to why as to where. Any company that can get exposure to this big US expansion has a higher chance of success.

BlueScope (ASX: BSL) is a successful case in point. Light & Wonder (ASX: LNW) also looks well-positioned in his eyes, if you can look two years out.

The second of Hawkins’ buckets is the resource sector. This was the best performing sector in FY26. There’s no reason the good times and earnings growth can’t continue, as long as the commodity price and volume growth stay supportive.

Commodity prices come from the world market and get the added kick of being priced in USD too. Copper, for example, doesn’t care what the RBA does. Neither do lithium or aluminium.

He nominated Mineral Resources (ASX: MIN) and Alcoa (ASX: AAI) as two companies in the right sweet spot.

MIN has a pathway to lift its lithium volumes substantially as the sector recovers, and aluminium is one of his preferred commodity exposures.

A defensive sector that has a trusted history in recessions is gambling. People might risk less in a downturn, but they never seem to stop having a punt.

The Lottery Corp (ASX: TLC) has been hit lately by a run of jackpots that hurt its recent earnings. That has meant a win for the punters that probability statistics say can’t last.

Hawkins is expecting jackpots to revert to a more normal pattern and start attracting the marginal gambler who doesn’t necessarily buy weekly, but responds to the big promotional jackpots that have been elusive in recent times. People like his wife, as it happens.

What about the macro backdrop? The wildcard is the diesel price. 

"It just goes into so many things," said Hawkins, and he’s not wrong. The inflationary impact could get worse if it’s not contained.

That’s a problem when the Australian housing market looks to him "much worse" than people think. Maybe only 10 stocks is not such a crazy idea after all.