There are plenty of wonderful S&P/ASX 200 Index (ASX: XJO) shares that could be top buys today.
We don't need to just look at the biggest companies or fast-growing businesses as the only opportunities. There are some compelling options that fund manager L1 Capital has identified.
One of them is a major rail infrastructure operator in Australia, while the other is involved in slot machines and gaming. Let's take a look at the appeal of the two businesses.
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Aurizon Holdings Ltd (ASX: AZJ)
L1 points out that rail business Aurizon recently reaffirmed its earnings guidance at its annual general meeting (AGM) during the month and continued to execute on its $150 million share buyback program that it announced in August.
The fund manager said that commodity network volumes suggest a strong start to FY26, with robust coal volumes in New South Wales and Queensland, as well as Western Australian grain volumes are on track for a record year.
L1 said the Aurizon share price has benefited from a broker upgrade which highlighted potential upside from the value in its 'network' business.
Additionally, the investment team pointed out that Australia's rare earths deal with the US may have drawn additional attention to some of the medium-term and long-term opportunities for the 'bulks' segment where the ASX 200 share is "uniquely positioned both as a logistics partner and as a rail network owner through the central corridor of Australia."
L1 then said it believes Aurizon shares are "materially undervalued", with the regulated network business representing more than half of the company's value and remains "significantly under-appreciated by the market."
The fund manager also notes that the coal haulage business remains substantial and a strong cash generator for the company. L1 is also expecting improving cash flow from the 'bulks' business, supported by growth opportunities and a tighter approach to expansionary capital expenditure than it has had in recent years."
L1 concluded:
With strong and growing cash flows from the underlying business, we anticipate continued solid returns to shareholders through dividends and share buybacks.
Light & Wonder Inc. CDI (ASX: LNW)
The other business that L1 highlighted was Light & Wonder, which is a cross-platform international gaming business that has a sizeable presence in the North American market. Light & Wonder also offers digital game content.
The fund manager said that the business has been impacted recently with softer US gaming revenue across the industry, as well as the impact of a change in listing locations where the company will de-list from the NASDAQ and the overhang from a litigation dispute with Aristocrat Leisure Ltd (ASX: ALL).
Despite the impacts of a tougher consumer backdrop, gaming revenue remain "mostly positive overall" across the industry. L1 believes the ASX 200 share is well-placed to continue gaining market share.
The fund manager believes the listing change will lead to forced selling from US passive investors as the company transitions from a dual NASDAQ and ASX listing to a sole primary ASX listing by the end of this calendar year.
While the listing changes are likely to cause short-term volatility, L1 believes the company is well-placed to deliver solid earnings growth over the medium-term, driven by its strong land-based game performance.
