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How Did (LSF) The Biggest LIC Listing In 2018 Do In HY19?

L1 Long Short Fund Ltd (ASX: LSF) was the largest listed investment company (LIC) that made its way onto the ASX during 2018, and it just reported its FY19 half year result.

L1 Long Short Fund aims to invest mainly in Australian and New Zealand shares, but can also invest up to 30% of its portfolio in global shares. As the name suggests, it can invest to short-sell shares to deal with changing stock market conditions. At the end of January 2019 it had 48 ‘long’ positions and 27 ‘short’ positions.

How L1 Long Short Fund did in the December 2018 half year

L1 reported a loss on ordinary activities of $181.7 million and a loss after tax of $147.55 million.

The reason for the loss was a gross portfolio loss, before fees and expenses, of 12% for the half year. The net tangible assets (NTA) per share fell by 18.16% compared to the value at 30 June 2018.

L1 explained that the LIC’s relative underperformance since listing has been negatively impacted for a number of reasons.

First, it said there were unfavourable market conditions where value stocks significantly underperformed momentum stocks in Australia and overseas, whereas L1’s portfolio has a modest value and contrarian bias.

Second, a lot of the LIC’s global shares in Europe and Hong Kong underperformed the Australian share market during the December 2018 half year.

Lastly, L1 said that the performance was hampered by several unexpected, ‘left-field’ events hitting specific shares such as Boral Limited (ASX: BLD). News Corp (ASX: NWS), CYBG Plc (ASX: CYB) and Nufarm Limited (ASX: NUF).

L1 Dividend

Seeing as the LIC made a loss, there was no dividend declared, but the L1 Board do intend to declare dividends in the future.

Is L1 A Buy?

According to L1’s daily NTA announcement this morning, its after-tax NTA was $1.57 on 15 February 2019, compared to today’s share price of $1.45 – which suggests it’s valued at an 8% discount to its underlying assets. That’s not bad for a value investor, but only if the shares chosen for the portfolio deliver positive returns in 2019, otherwise the share price could fall further.

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