The fund manager L1 Capital is always on the lookout for good value opportunities, usually finding them where ASX stocks have low price/earnings (P/E) ratios.
L1 says that valuations with cheap stocks appear highly attractive both in a historical context and relative to large-cap and momentum-driven names, "many of which are trading at extremely stretched levels."
Its focus has been on exploiting the recent volatility to identify stock-specific mispricing and taking advantage of the emotional and non-fundamental selling.
The fund manager believes that infrastructure, gold, travel and 'quality value' ASX stocks provide some of the best opportunities globally.
In its portfolio, there are two names that L1 highlighted which could outperform. Let's get into those names.
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NexGen Energy (Canada) CDI (ASX: NXG)
NexGen is a Canadian-based uranium miner that's listed on the ASX.
L1 Capital pointed out in its latest monthly update that NexGen shares rose 17% in May, as the chart below shows. This was due to the uranium price increasing during the month to close at US$72 per pound.
That rise meant the uranium spot price had largely recovered from the decline in the first quarter of 2025, which was driven by low volumes and heightened uncertainty caused by the US tariff policy.
The fund manager pointed out that this happened even as uranium 'term' prices – the agreed contracted price representing almost all commercial uranium demand – held largely steady over the last six months.
L1 highlighted that sentiment "notably improved" during the month as US President Trump signed several executive orders aimed at accelerating US nuclear investment, including a target to quadruple US nuclear capacity from around 100GW today to 400GW by 2050.
The fund manager is attracted to NexGen because it's preparing to develop the world's largest undeveloped uranium deposit, called Arrow, located in Saskatchewan, Canada.
This will be a "major, new strategic" Western source of supply to address the looming uranium market deficit, according to L1 Capital.
The fund manager noted that the company is about to enter the final stage of Federal approval with a commission hearing expected to conclude in the first half of 2026. After that, it can start full-scale project construction.
Once developed, L1 thinks Arrow has the potential to generate more than C$2 billion of annual cash flow, with the fund manager assuming conservative uranium prices. L1 said it believes this is a compelling proposition because its market cap is currently around C$5 billion.
Qantas Airways Ltd (ASX: QAN)
The other ASX stock that the fund manager highlighted was Australia's biggest airline, Qantas. Impressively, the Qantas share price climbed by 20% in May, as the chart below shows.
L1 Capital said that robust and favourable trading conditions persist for Qantas and the oil price has remained at weaker levels. The Qantas share price has now doubled from its low in October 2023, reflecting "continued strong earnings delivery, management and board changes, and the removal of many 'pain points' for customers, according to the fund manager.
The fund manager noted that Virgin has committed to a much-anticipated initial public offering (IPO). L1 believes that Virgin will face increased scrutiny of its financial performance, which "should encourage rational competitive dynamics going forward."
Despite the strong Qantas share price rally, it still only trades on around 9x FY26's estimated earnings, compared to international peers trading on P/E ratios of between 10 to 14.
L1 then explained:
We believe Qantas remains very well placed over the medium term. It has two well-positioned brands in Qantas and Jetstar that serve their relevant markets strongly. In addition, it operates Australia's best loyalty business which is expected to double earnings over the next 5-7 years. Finally, Qantas has a raft of brand new, more fuel-efficient aircraft to be delivered, along with Project Sunrise, which will enable direct flights from Melbourne/Sydney to London and New York from 2026.
…We believe the Qantas multiple fails to fully reflect its leading industry position, structural growth in Asia-Pacific travel demand and the high growth, capital-light loyalty business.
