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Is the Long Short Fund share price on a road to redemption?

Sebastian Bowen
question

It’s been the poster child of listed investment company (LIC) floats gone wrong. But shares of L1 Long Short Fund Ltd (ASX: LSF) have been quietly rebounding over the last few months, no doubt to the relief of any investors still sticking with the embattled fund.

The L1 Long Short Fund was launched in April last year on the back of a highly successful strategy the company had used for its unlisted fund of the same name, which has returned an average of 19.6% per annum since its inception in 2014. The LIC’s listing was oversubscribed, and raised a record $1.33 billion for the fund’s managers to work with.

What went wrong with LSF?

However, things went pear shaped pretty quickly from there. Frothy global markets didn’t treat LSF’s value-focused  investment strategy kindly, and the stock rapidly dropped from its $2 IPO price to $1.28 per share by Christmas last year on the back of this lacklustre performance. Unfortunately for shareholders, that’s the range where LSF shares remained for most of 2019 – until August that is.

Since tapping a share price of $1.36 in late August, LSF shares have steadily climbed, even reaching close to the $1.70 level just 2 weeks ago. Today, LSF shares are going for $1.56, meaning anyone who bought in around Christmas last year would be sitting on a gain of roughly 17% today.

Being an LIC, LSF shares don’t always trade for what they’re worth in terms of the underlying net tangible assets (NTA) of the fund. In fact, according to the company’s latest disclosure, LSF shares have a pre-tax NTA of $1.74 per share, and a post-tax NTA of $1.82 per share. This means that you can pick up LSF shares for a 16% discount to their real value on today’s prices.

Does that make LSF a buy today?

It certainly adds an incentive for investors to buy into this LIC on current levels. Whilst I’m not too sure on the company’s investing strategy as of yet (I’d like to see some more consistent performance), Long Short Fund is a stock which I’ll be keeping a close eye on going forward.

Its recent bets in Qantas Airways Ltd (ASX: QAN) and Bellamy’s Australia Ltd (ASX: BAL) have paid off handsomely, and so if management can deliver the kind of performance that its unlisted sibling has shown, it might be a lucrative investment yet.  

The post Is the Long Short Fund share price on a road to redemption? appeared first on Motley Fool Australia.

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Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2019