The L1 Long Short Fund Ltd (ASX: LSF) has suffered a tough start to life as a Listed Investment Company with the value of units in its fund falling over 10% since April 2018.
However, it was able to raise more than $1.3 billion from investors earlier in 2018 thanks to its stunning returns of 36.9% per year net of fees over the period from September 2014 to February 2018.
The fund managers have blamed the fund's recent underperformance on the rise of growth stocks like WiseTech Global Ltd (ASX: WTC) over traditional value stocks like News Corp Ltd (NEWS CORP/IDR UNRESTR (ASX: NWS)) over the past 6 months, although that trend does seem to be reversing over the past month.
Also, their long-term track record suggests these are stock pickers paying close attention to, especially when they're describing a company as "extremely undervalued".
The ASX share in question is building materials group Boral Limited (ASX: BLD). Boral has operations in both North America and Australia with leverage to the strength of new housing markets in both countries.
According to L1 Capital Boral should "average double-digit EPS growth p.a. over the next three years" which suggests it is good value given it trades on a financial year 2019 price-to-earnings multiple of just 12.2x according to L1 Capital.
The fund manager also believes Boral will benefit from the continued strength of new housing starts and rising spends on large infrastructure projects on Australia's east coast in the years ahead.
It also stated that: "Boral USA is well positioned to achieve targeted merger synergies from the Headwaters acquisition while benefiting from a gradual recovery towards mid-cycle housing starts. US housing starts are still tracking below their 50 year average of 1.5m and far below today's estimated household formation (given the US population has increased dramatically over the past 50 years)".
In financial year 2018 Boral grew its dividend 10% to 26.5 cents per share and grew its adjusted earnings per share 20% to 40.4 cents per share.
If it can deliver on L1's expectations for future performance then the stock is likely cheap at $5.63 today.
However, nothing is certain in the share market and investors should do their own research before coming to an investment conclusion.
