A wide range of S&P/ASX 200 Index (ASX: XJO) shares can deliver good returns, and even outperformance, if investors buy at the right price.
Cyclical stocks can deliver great investments if we buy at the weak point of the cycle. Be greedy when others are fearful, as the saying goes.
The investment team in charge of listed investment company (LIC) L1 Long Short Fund Ltd (ASX: LSF) have a great knack for picking out undervalued stocks that have a relatively low price-earnings (P/E) ratio. Its portfolio has returned an average of 16.9% per year over the prior five years, showing its stock-picking prowess.
We're going to look at these ASX 200 shares that could be compelling businesses to own.
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Qantas Airways Ltd (ASX: QAN)
L1 noted that the Qantas share price rose 27% in the three months to June 2026 following an approximate 50% decline in jet fuel prices after the easing of Middle East tensions, though fuel costs were still around 20% above pre-war levels.
The fund manager also noted that oil refining margins remain Qantas' key residual headwind, which is still roughly double the pre-war level.
L1 highlighted that during an investor trip to the Airbus factory in Toulouse (France), management reiterated the $400 million operating profit (EBIT) opportunity from Project Sunrise ahead of the planned Sydney to London route service launch, which is scheduled for October 2027.
The fund manager said that overall, while the Middle East conflict has created near-term earnings volatility, it sees Qantas' strong underlying competitive positioning and medium-term outlook as unchanged.
James Hardie Industries plc (ASX: JHX)
James Hardie is one of the largest building products ASX 200 shares. L1 noted that the James Hardie share price rose 46% in the three months to June 2026, amid easing Middle East tensions and management's constructive FY27 outlook.
That positive outlook included a pathway to return the core North American fibre cement business to volume growth, despite a subdued US housing market.
L1 expects volume recovery to be supported by: normalisation of channel inventory after the 2025 destocking period; improved execution in repair and remodel; smaller-builder channels; the trim-over installation method; competitor exits; and continued material conversion from vinyl and wood.
In the fund manager's view, the market is still applying a discounted multiple to the ASX 200 share to reflect recent execution, governance, and housing-cycle concerns. As those issues are addressed, L1 believes there is scope for both earnings growth and recovery in the P/E ratio multiple over time.
Goodman Group (ASX: GMG)
The final ASX 200 share in this article is industrial property developer and owner Goodman Group.
The Goodman share price rose 22% in the three months to June 2026, during a growing investor focus on its expanding data centre opportunity and the scarcity value of its powered land bank.
L1 said that the business has advanced its data centre strategy with the announcement of a 50:50 joint venture with DataBank for a 32MW co-location facility in Los Angeles. Its update also reaffirmed its FY26 operating earnings per security (EPS) guidance of growth of "at least 9%" and flagged work in progress (WIP) growth from $14.5 billion to around $18 billion by June.
Overall, the outlook for these ASX 200 shares looks positive, though they're not the only shares I'd want to look at.
