In this report, we are going to highlight some interesting insider buying at L1 Long Short Fund (LSF:AU). L1 Long Short Fund is an Australian investment company that invests predominantly in Australian and New Zealand securities. Its objective is to deliver strong, positive, risk-adjusted returns to investors over the long term. The company is listed on the Australian Stock Exchange and currently has a market capitalization of AUD $1.5 billion.
L1 Long Short Fund: Insider Buying
Our records show that late in April, two non-independent directors at L1, Mark Landau and Raphael Lamm (the two co-founders of the firm), both purchased large amounts of stock. On 22 April, these insiders purchased 2.7 million shares between them, spending about $5.6 million on the stock. Then, on 29 April, the two insiders added another 3.1 million shares, spending around $7 million on the stock. Overall, these insiders spent about $12.6 million on the stock in the space of less than a week.
These purchases are worth highlighting for a couple of reasons. Firstly, they are substantial in size. This suggests that these insiders are very confident the stock is undervalued at present.
Secondly, these insiders are expert investors. Together, they manage the firm’s two main funds, the L1 Capital Australian Equities strategy and the L1 Capital Long Short strategy (which has delivered net returns of greater than 25% in five out of the six calendar years it has been running). So, it’s likely that they know what they are doing here.
L1 Long Short Fund’s most recent results, for the half-year ended 31 December 2020, were very strong. For the period, operating profit before tax was $461,324,000 compared to $114,936,000 in the same period in 2019. Meanwhile, the net result after tax was a profit of $325,296,000 versus a profit of $83,413,000 in H1 2019. The net tangible asset backing before tax as of 31 December 2020 was $2.3849 per share (31 December 2019: $1.8416). During the period, L1’s performance exceeded its high watermark as of the performance calculation period ended 31 December 2020 giving the Investment Manager an entitlement to a performance fee.
Looking ahead, the company said that it believes 2021 will be a more favorable environment for “bottom-up” stock-pickers and that with its depth of research and ability to position long and short it should be able to take full advantage of these opportunities.
In light of this performance and outlook, we see insider buying here as bullish.