The fund manager L1 has told investors about three ASX shares that it owns which it thinks are exciting.
Often, investors like to look at technology businesses as ones that can outperform. But, there are other sectors that can also help our portfolios beat the market. Without a crystal ball, we can't know for sure which stocks are going to do great. But, L1 thinks the below names are compelling ideas.
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Newmont Corporation CDI (ASX: NEM)
L1 noted that Newmont shares had fallen recently because of expectations that the ASX gold share's 2024 production volumes dropped due to a number of operational downgrades across the portfolio.
The most recent downgrade was with the Telfer and Brucejack mines being temporarily suspended due to environmental and operating safety issues.
That's not exactly a positive picture, is it?
L1 expects much of this near-term operating weakness will be "transitory and supportive of Newmont's strategy to focus on execution at its large, low-cost and high free cash flow generative assets, while divesting smaller operations to simplify the portfolio."
After the acquisition of Newcrest, Newmont is the largest gold producer in the world. L1 points out the ASX gold share has an extensive portfolio of tier one mines with several development-ready growth assets that can support production growth in the next few years.
As an added bonus, the ASX mining share has "strong exposure" to copper, with annual copper production of around 150kt.
Nexgen Energy (Canada) CDI (ASX: NXG)
Nexgen is a Canadian uranium miner which is benefiting from a strengthening price.
According to L1, the uranium price recently reached a 15-year high as medium-term demand tailwinds indicated the possibility of "material, potential supply deficits by the end of this decade."
The fund manager noted this sentiment was further amplified because the world's largest uranium producer called Kazatomprom (which supplies a fifth of global supply) revealed a downgrade to its 2024 production expectations. L1 says this shows the "fragility of current supply".
NextGen is working on plans to develop the world's largest uranium deposit, called Arrow, which is located in Saskatchewan in Canada.
L1 then said it "would be a major, new, strategic Western source to address the anticipated market deficit. At the current uranium spot prices, Arrow, once developed, has the potential to generate more than C$2 billion of cash flow per annum."
Resmed CDI (ASX: RMD)
Resmed has certainly been one of the ASX shares that have received a lot of investor attention over the last several months. Incredibly, Resmed shares are up around 4% over the past six months, despite the uncertainty surrounding the ASX healthcare share.
This company is a large manufacturer of continuous positive airway pressure (CPAP) machines and masks to treat sleep apnea.
The fund manager noted that the company recently reported its FY24 second quarter that included a gross profit margin which saw improvement that was better than expected. This update reportedly "allayed fears over the impact of GLP-1 weight loss drugs."
L1 decided to buy shares in September 2023 after talking with more than 20 sleep physicians and distributors. The fund manager decided that weight loss drugs are "manageable" and the stock was "oversold".
The investment team attended the JP Morgan conference in San Francisco, where Resmed presented its own analysis of the GLP-1 sleep impact, which confirmed L1's views.
While the Resmed share price has climbed, it is/was trading at a discount of more than 20% to the ASX share's historic average forward price/earnings (P/E) ratio.
