Landau: “Volatility has created a particularly attractive time to put capital to work”

Global equity markets are sending investors two very different signals. Major indices remain near their highs, yet beneath the surface, some sectors and individual stocks are making extraordinary moves.

Construction materials fell almost 20% in the September quarter, airlines dropped 15%, while Brent crude and gold miners surged. For L1 Capital Co-Founder and Co-CIO Mark Landau, that disconnect is creating exactly the kind of market long short investors should relish.

“One of the most interesting things that we’ve observed recently is that the headline global stock market indices don't really tell the full story of what’s been happening in the market.

The MSCI World Index, S&P 500 and Nasdaq 100 have all been relatively stable recently, however, there’s been enormous share price movements beneath the surface.”

That dispersion is opening opportunities in both directions. L1 Capital, via the L1 Global Long Short Fund (ASX: GLS), is finding quality businesses where short-term fears have been extrapolated too far, while the ability to short provides another way to profit when fundamentals and expectations diverge.

For Landau, this is not simply a volatile market. It is an unusually rich one for stock pickers.

A market made for stock pickers

The numbers illustrate just how much is happening beneath relatively benign index returns. During the September quarter, the S&P 500 gained 2.3%, the MSCI World rose 1.9%, and the Nasdaq 100 added just 0.6%. Meanwhile, construction materials fell 19.5%, airlines dropped 14.9%, and utilities lost 12.4%. Brent crude jumped 34.8%, and gold miners gained 16.4%.

Landau sees higher bond yields, energy prices and uncertainty around AI spending as key forces behind those dislocations. Importantly, he believes markets are often taking genuine short-term problems and pricing them as though they will persist indefinitely.

“We are finding many mispriced stocks where short-term headwinds or fears are being capitalised well into the future, while our view is that the medium-term impact for many of these companies is much less than what is now being priced in.”

For a long short investor, that creates two opportunities – buy businesses where pessimism has become excessive, and sell (short) companies where valuations or expectations remain disconnected from fundamentals.

A much bigger hunting ground

The L1 Global Long Short strategy uses the same investment team, philosophy, and process as its Australian-focused Long Short Fund, but removes the geographic constraint. The Australian strategy caps global exposure at 30%, while the Global Long Short strategy can invest entirely offshore.

That expands the opportunity set significantly, giving the team access to a broader range of potential mispricings across sectors, themes and countries.

The portfolio currently reflects that freedom, with long positions trading at a median valuation of around 11 times FY27 earnings, while delivering expected median earnings growth of about 15% and strong cash generation.

"Our investment approach remains contrarian", says Landau.

"We typically invest where our research identifies compelling value, rather than simply following the crowd.”

The result is a portfolio that looks very different from global indices dominated by US mega-cap technology companies.

Returns without relying on one big bet

The strategy’s early performance has been substantial. From its inception on 1 January 2025 to 30 September 2026, the L1 Capital Global Long Short strategy returned 108.3% after fees, compared with 35.3% for the MSCI World Index. The listed L1 Global Long Short Fund (ASX: GLS), meanwhile, returned 19.4% from 1 December 2025 to 30 September 2026, against 12.7% for the index.

Perhaps more important to Landau is how those returns have been generated. As at 31 August, 65 stocks had each contributed more than one percentage point to the strategy’s return, spanning multiple sectors and geographies.

That diversification sits alongside another central objective - protecting capital when markets fall. The strategy targets a long-term net return of at least 10% per annum over the long term, together with better downside protection than the market. The strategy is typically 30% to 100% net long and generally holds between 70 and 130 stocks.

Where the fund is finding opportunities

Several current positions show how the fund is taking advantage of the dispersion.

Alcoa (NYSE: AA) is a long after its shares almost halved from late May. Weaker commodity prices and an acquisition that delayed shareholder returns have weighed on sentiment, but the team sees longer-term aluminium demand supported by electrification and infrastructure spending.

“With a capable, shareholder-focused CEO, we think the market has overreacted and is putting too much weight on near-term uncertainty and too little weight on the medium-term earnings potential of the business", says Landau.

Eldorado Gold (NYSE: EGO) offers a different catalyst. Two major projects have produced first concentrate, potentially shifting investor attention from construction spending towards the earnings and cash flow those assets can generate.

Fraport (ETR: FRA) has also been hit by short-term concerns, falling 15% over the quarter as higher jet fuel costs and disrupted flying activity weighed on near-term traffic. L1 Capital believes those pressures are temporary. With major investment programs at Frankfurt, Lima and Antalya completed, management’s 2030 targets imply €1 billion in annual free cash flow.

National Bank of Greece (ATH: ETE) provides exposure to what the team regards as Greece’s highest-quality bank, backed by strong corporate lending, higher rates and surplus capital.

SK Hynix (KRX: 000660), meanwhile, is the fund's contrarian way of playing AI. Its shares fell roughly one-third during the September quarter as investors questioned AI spending. The fund bought during the sell-off at around four times earnings, arguing constrained memory supply and strong demand should support pricing, margins and earnings.

On the other side sits Rivian (NASDAQ: RIVN), the US electric vehicle manufacturer. The fund is short the company because it believes the financial model remains challenged.

“The business continues to post losses and burn cash. Its lower-priced R2 needs to deliver a major step-up in production and sales, which we believe will be challenging in a highly competitive market.”

Investing alongside clients

Landau and Co-Founder and Co-Chief Investment Officer Raphael Lamm already have a large personal investment in the strategy, putting a significant amount of their own capital alongside investors.

“One of our core values at L1 is having strong alignment of interests with our investors and shareholders", says Landau.

That philosophy extends across the broader investment team. The firm does not allow its investment staff to trade individual shares personally, meaning their best ideas are directed into client portfolios.

For Landau, that alignment matters even more when the opportunity set is expanding. With unusually large dispersion between stocks and the freedom to invest both long and short across global markets, he believes the conditions are firmly in favour of active stock picking.

“Market volatility has created what we believe is a particularly attractive time to put capital to work.”

Explore the L1 Global Long Short Fund (ASX: GLS).