Nvidia Corp (NASDAQ: NVDA) shares have delivered strong returns in the last 12 months, but there are ASX stocks that have outperformed the US giant that's key to enabling AI. The Australian share I want to highlight is L1 Group Ltd (ASX: L1G), which has a share price of around $1.
At the time of writing, in the last 12 months, Nvidia shares have gone up by 47%, while the L1 Group share price has jumped by 108%.
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Why has the ASX stock risen so much?
I believe a significant portion of the return can be put down to the acquisition of/merger with Platinum Asset Management. Investors are much more excited about the outlook of the business under L1's management than Platinum.
L1 has an impressive track record, delivering outperformance with its ASX shares, global shares and gold shares strategies, with each of those significantly outperforming the S&P/ASX 200 Index (ASX: XJO) since the inception of those respective strategies.
Having a good investment performance as a fund manager is integral for a couple of key reasons. Firstly, it organically helps a fund manager grow their funds under management (FUM) – an essential driver of revenue and earnings.
Additionally, great fund performance can help attract new FUM inflows, further boosting the ASX stock's FUM.
One of the latest moves by the business was to launch the listed investment company (LIC) L1 Gold Fund (ASX: LGF), which raised $950 million and started trading on the ASX in April. This helps lock in more funds within a closed structure, as opposed to exchange-traded funds (ETFs) which are open-ended where it's easy for clients to permanently remove FUM from a fund manager. Shares of LICs are sold from one investor to another – the FUM still exists.
Out of L1 Group shares or Nvidia shares, I think I'd prefer the funds management business.
Excellent outlook
Nvidia is certainly a great business, operating at the pinnacle of one of the strongest growth areas of the global economy right now.
But, it's worth asking how much more demand can continue increasing from where it is today and what the price/earnings (P/E) ratio is implying.
L1 Group points to a number of appealing growth areas including growth of existing funds through performance and flows, extension of strategies from the existing investment team (such as L1 Global Long Short Fund Ltd (ASX: GLS) ), joint ventures and potentially further acquisitions of existing fund managers.
Further growth of the ASX stock's profit could be boosted following the integration of Platinum and the synergies that's expected to deliver.
According to the forecast on Commsec, the ASX stock is valued at less than 20x FY27's estimated earnings, with FY27 profit projected to rise by approximately 25% year-over-year compared to the forecast for FY26.
