L1 Long Short Fund Limited ($LSF)

Welcome to L1 Capital's First Investor Webinar for 2026 for the Long Short Strategies. I'm Andrew Levy, Senior Investment Analyst in the L1 Long Short team, and I lead coverage of TMT space infrastructure and real estate. I'm joined by Mark Landau, Co-Founder and Co-CIO; and Amar Naik, Head of Research. In this session, we'll be covering a few themes, including global and domestic markets and the major themes driving them, how the portfolios have navigated this period and how we have positioned the portfolio today and finally, where we see the best opportunities going forward. So, let's get straight into it.

Amar, there's been a lot of volatility so far this year. Can we get your perspectives on what's been driving markets to date in 2026?

Thanks, Andrew. There's been two big things that have driven markets year-to-date. The first is the war in Iran and the second is AI. On the war where the conflict escalated in February and March, you saw a huge spike in Brent Crude prices that went up 50% in the space of about 2 to 3 weeks to close to $120 a barrel. You saw a huge shift in markets, energy stocks rallying very sharply, defensive infrastructure holding up relatively well and cyclicals and any rate-sensitive names getting sold off quite aggressively, sometimes more than 20%. And then on to AI, where there's been two impacts on it. The first is the disintermediation risk and the second is the boom in AI CapEx we've seen. If we start with the disintermediation risk, Anthropic and Claude launched a number of software tools such as Claude Code and you -- and the market took the perception that this was going to disintermediate all software companies globally. And you saw the IGV, which is the tech software index fall nearly 25% in March. As investors have tried to get a bit more understanding about which companies will be impacted more or less, you've seen that recover nearly 25% over April and May, but there's still a huge amount of uncertainty as to how AI is going to impact the software sector more broadly. And then the other big theme is the huge increase we've seen in AI CapEx spending. across the large hyperscalers, CapEx is set to exceed $1 trillion in 2027. That's just a phenomenal amount of CapEx spend. That's more than a fivefold increase in only 4 years. And that's been far and away the biggest driver of market leadership that we've seen up to the end of May. And all the AI CapEx beneficiary stocks have been rallying incredibly strongly. So if you just look at the S&P 500 as an example, it's up about 11% to the end of May, but all of those gains have been driven by top 20 stocks. And it's names like Micron and AMD and Broadcom and NVIDIA all linked to this AI CapEx spending. When you look outside of those names, the other 480 stocks have effectively contributed nothing to the index. And so what we've seen is market concentration has reached levels that haven't been there since the dot-com boom. And this is not just a U.S. phenomenon, you've seen it globally. The SOX, the semiconductor index, is up more than 70% year-to-date. Markets like Korea are up 100% and it's two stocks, it's Samsung and SK Hynix that are now more than 50% of the KOSPI. So that concentration risk is across global markets.

Okay. So there are two key drivers there. Let's -- AI and Iran, let's go to AI to start with. How has AI and the software sell-off you talked about impacted the Long Short portfolios? And how are we positioned for the AI thematic more generally going forward?

We haven't been big players in either the software sector or the Mag 7. I mean on the software side, multiples have typically been quite high. And so they haven't screened within our valuation framework. And we think some of the correction you're seeing is the market repricing, how durable these business moats are as things progress. So from an LSF and GLSF perspective, we haven't had any large exposure and therefore, not large impacts from the volatility there. We've mainly been playing AI through, if you want to call it, the picks and shovels of the ecosystem. What we can see and what we can get a lot of clarity on is the spend coming down the pipe. And we've chosen to play that in areas like energy, where there's just an exponential demand for power, and you're seeing that in areas like nuclear, which we are firm believers in and also in areas like copper, where there's huge grid modernization spend. And it's not just AI, it's EVs, it's industrial, there's a very broad demand for copper usage, and that's another key theme. And even tangential sectors, if you think of areas like construction materials, data centers are probably less than 5% of building materials demand in the U.S., but that's -- it's trebling in terms of that growth in the coming years. So that's a nice tailwind to heavy industrials, aggregates, cement. And then on the short side, we've been short a handful of speculative AI names, which I call it the pretenders, the stretched valuations, limited proof that they've got sustainable economics and also a handful of legacy AI businesses where we think the disintermediation risk is high. The AI is going to compress their pricing power and structurally impact their earnings.

And on to the second driver, a really easy one for you, Mark, the conflict in Iran. How do you see the Middle East situation evolving from here? And I should say it's early June at the time of shooting this webinar.

Nice easy question to start with. Thanks, Andrew. The conflict is obviously changing every day. As of today, there's a lot of uncertainty on the details and the timing of any resolution and when the strait is going to reopen. Both Trump and IRGC at a personal level, they'd probably quite like to continue attacking each other, but we think that reality will set in and they'll both be forced to reach a deal due to the massive pressure they're each facing for their survival. Now survival for Trump means political survival. Given the midterm elections coming up in November, Trump is under a huge amount of pressure to reach a deal, and we think that will act as a release valve for oil prices and interest rates, and that should ultimately boost consumer confidence in the housing market. And hopefully, from his perspective, that will help him into the midterms. The prospect of losing the midterms for Trump and being a lame duck President would be absolutely unbearable, and we think that's going to be a key driver of his decision-making. On the other hand, for the IRGC, which is effectively running the Iranian regime, they're under massive financial and economic pressure as their biggest source of cash flow is oil revenue, and that's basically being cut off by the U.S. blockade. So their oil storage facilities are now reaching capacity. Their wells could be forced to shut in, which basically means you could compromise not only the current production, but future flow rates going forward, and that could have very long-term devastating effects on the oil industry, which is the vast majority of their exports. The deal would also involve unfreezing Iran's offshore assets. Yes, that's a speculation at the moment. That would obviously enable a lot of money to come back into the Iranian economy and resuscitate what's a really struggling economy. They're in a horrific situation economically. The IRGC is also at growing risk of civil unrest as the currencies collapsed, food inflation has gone through the roof, economic outlook is really dire. So given the pressure on both of them, we think they're ultimately going to get a resolution. Now we don't know exactly the timing of when that's going to happen, but we've positioned the portfolio for that to eventually come through. We've used the sell-off in many parts of the market as an opportunity to buy companies where share prices have now detached from long-term fundamentals. So, some of the changes we've made across the funds that we've added to copper exposure. As Amar mentioned, those stocks sold off close to 25% during that period of volatility in March, April. We think the supply-demand fundamentals have actually got better over this period in a weird way, the demand for data centers is going to trigger much more demand for copper going forward as well as other applications like electric vehicles and sustainability initiatives. And then on the supply side, things are getting much tougher because 4 of the top 10 copper mines in the world have announced production downgrades just in the last year. So that's going to curb supply. On the other side of the fence, you're seeing construction materials, that's a sector that's been hit really hard because of rising bond yields, so a lot of pressure on mortgage rates. Activity levels have really slowed, but these companies are really attractively priced on a medium-term view, even if you assume a much softer macro backdrop. If you look at the travel sector, we've primarily added to that space through airlines where we see the current crisis and elevated jet fuel price is largely a one-off event, and it's unlikely to be the new normal going forward. So we're happy to add to that. In the gold space, it's been a really weird period. Gold stocks have actually sold off during a crisis, which is quite unusual. But the producers that we're investing in, they're generating massive profits, massive cash flows. They've got fantastic balance sheets and in many cases, strong organic growth options. In infrastructure, we actually took advantage of some of that outperformance. We've trimmed exposure, taken some profits and rotated that into other parts of the market that have been more oversold. And lastly, in oil and gas, that's been a fantastic performer. Most of those stocks have rallied around 30%. On balance, we think there's more downside than upside risk to these companies over the next 1 to 2 years. So we've used that as an opportunity to rotate out of that, lock in some profits and shift to more attractively priced areas. Within the Global Long Short Fund specifically, we also added to offshore banking stocks. That sector got quite hard hit as people started to worry about global growth concerns and bad debts. And lastly, we closed out some of our unprofitable tech shorts where the share price has had aggressive sell-offs, and we could lock in some gains there.

Another big move year-to-date has been the spike in long-term yields and inflation. Mark, do rates stay elevated? Or could we see some reversion?

What we've seen is that long-term yields are up about 0.5%, 50 basis points or more globally over the last few months. U.S. 10-year yields have recently peaked around 4.7%, and you've seen U.S. 30-year mortgage rates up around 6.5%, which is getting to pretty uncomfortable levels for the housing market. Much of the move reflects the Iran conflict and the higher inflation caused by the spike in oil prices. So in the event that we were to see a deal in the Middle East, we will eventually get there, we'd expect to see a pretty sharp reversal of that move and rotation back into those stocks and sectors that were hardest hit by higher bond yields. From a longer-term perspective, we believe the extent of bond issuance and the enormous amount of bonds that are rolling each year means that it's hard to see a scenario where you get really low bond yields again like we saw a few years ago when we had 0 interest rates.

Let's turn to domestic markets. Mark, how is Australia traveling relative to global markets? And does that influence how the portfolio is positioned?

Sure. I guess the Aussie market, the ASX 200 is up only 1.7% year-to-date. So it's been really strongly lagging global markets, particularly the U.S. and Asia. Australia has got very little exposure to AI and AI CapEx. So compared to other markets like the U.S. and Asia, which are clear beneficiaries, we're sort of lacking that tailwind. A large proportion of the ASX 200 is made up of banks and iron ore stocks. And if you look at the earnings outlook on Bloomberg, most of those companies have pretty modest earnings growth outlooks and they've got quite elevated earnings multiples, both versus history and also on a global basis. So looking forward, we think Australia is in a bit of a tougher spot. CPI in Australia is now running at over 4%. And even if you were to use the RBA's preferred measure, which is the trimmed mean, that's running at 3.4%. So we think the RBA is in a pretty uncomfortable position, and that's even before you felt the lagged impact of the higher oil prices, which are ultimately going to flow through to transport costs and food and retail prices generally. So given that, we think the bond market is currently implying about 1 or 2 more rate hikes later this year, obviously, very dependent on the Iran situation. At the same time, the tax changes that were recently announced in the federal budget in May have had a clear negative impact on consumer and business confidence, and they're adding to investor uncertainty. So in summary, we're relatively cautious on Aussie equities at the current level. We think the ASX 20, in particular, those top 20 stocks, which account for almost 2/3 of the index, where valuations are pretty full. We're not so excited about that part of the market. But in the other 180 stocks in the index, we're finding much better opportunities. There's still some great stocks out there. There's companies with much better outlooks, much better valuations, and that's really where the hunting ground is for us.

Great. Amar, the team attended the Macquarie Australia Conference recently, the largest domestic equities conference with around 120 of Australia's 200 largest companies attending. What were your key takeaways?

We had about 60 one-on-one meetings. Our entire investment team attends the conference. And if I just sum up the conference findings in a single sentence, it's predominantly one of caution, kind of echoing a lot of the comments Mark made. Most of the management teams we speak to, they have some visibility on 2026. They have some hedging protection, and they can manage some of the energy costs and other input inflation we're seeing, but there is a growing uncertainty on what 2027 looks like. Australia is unfortunately in a pretty challenged energy position, and we'll have to wear a lot of that increased cost. And a lot of what Mark touched on in terms of rising interest rates, you've got consumer confidence has fallen to nearly pandemic levels. And you put that all together, and that's a pretty challenging outlook for any macro sensitive companies out there. And then the other big interesting theme is there's a huge divergence in growth rates across the states -- at the top of the pie, you've got Queensland and WA, where if you look at resi or industrial or commercial, generally traveling very well, quite good outlooks, quite strong growth. And then at the bottom of that, you've got Victoria. You've got some growth in infrastructure. But outside of that, all the other areas are lagging quite significantly. And then you've got New South Wales somewhere in between. And that feedback is consistent across companies we speak to in many different sectors.

Given all the moving pieces in America, Mike, how have the funds navigated this period? And how has performance been tracking in LSF and GLSF?

Overall, the funds have navigated the volatility really well. We're really pleased we've been able to deliver some positive returns despite a really challenging and volatile backdrop. The market leadership has been incredibly narrow. There's been very few sectors that have actually performed really strongly, particularly over the last few months. And there's been a lot of pressure on some parts of the portfolio that we're quite heavily exposed to. Cyclicals and rate-sensitive stocks have been some of the hardest hit parts of the market. And at the same time, we've also had a sell-off in some of our gold stocks. So we've really been hit from a few different areas. But despite that, the long-short fund has been able to return roughly 13% this calendar year, and that compares to the ASX 200, which is around 1.7%. So really pleasing absolute and relative performance. Over the last year, the Long Short Fund returned 55% compared to 6.9% for the ASX 200 Accumulation Index. So that's roughly 48% better than the market, and it's a great reflection on the capability across our broader team and also reflects well on our investment process. We're pleased to have delivered double-digit returns over every time period, whether you're looking shorter term, 1-year or 3-year numbers or longer term at 5, 7, 10-year and even since inception in 2014. It's pleasing that we've delivered such strong returns over the last year, but we're always encouraging our investors to look at our performance long term on a 5-year-plus time horizon. We're really pleased to have been able to deliver 15% to 20% net returns per annum over those longer time periods, and we've returned roughly 20% per annum since inception in 2014, and that compares to around 8% for the ASX 200. At the same time, I think one of the underappreciated aspects of our performance track record is that we've been able to protect almost 90% of capital in down markets, and that's the best capital protection of any strategy in the market.

Great. And what about the Global Long Short Fund?

The portfolio is up around 7% year-to-date. We've seen a really solid bounce back in performance after the drawdown back in March due to the Iran war and GLSF has returned more than 50% per annum since it launched in January last year. Importantly, we think both the portfolios look really attractive today, given that we've rotated the portfolio, really took advantage of that volatility in March and April, able to add to some stocks at really attractive levels. And if you look at both portfolios, both LSF and GLSF, the average long position is on a single-digit PE. We've got really strong earnings growth in the portfolio and very strong cash flow generation and balance sheet. So from our perspective, we're really well placed going forward.

That's great. And Amar, maybe diving a little bit deeper into the portfolio. Could you talk to the sectors and themes that we like the most at the moment?

Sure. And just as a brief reminder, I mean, we build the portfolio bottom up from a fundamental basis. But if we kind of zoom out and look at the key sectors that we have exposure to, there's largely five of them. Some of these we've touched on before, so I'll only briefly mention. The first one is banking. We're finding a number of high-quality market-leading opportunities, predominantly offshore. Banks trading on single-digit PEs, 1x price-to-book and double-digit earnings growth outlooks. So that looks really exciting to us. We really like -- second one is copper. Mark touched on that. But ultimately, tightening supply and demand backdrop, we took advantage of the recent derating to come back into the sector more meaningfully. Third one would be gold. We've spoken a lot about gold, but we just see such a fundamental disconnect at the moment between what the gold equities have done even relative to the gold price. And when we look at the drivers of gold going forward, they've only strengthened over the last few months. Fourth big theme would be building products. And you look at that, and Mark touched on it earlier, it's just been a pullback on higher yields. And we think we're finding a handful of positions at really attractive valuations with option value on the recovery and improvement in the market. And then the last one is infrastructure. And it's irreplaceable asset bases, companies where you couldn't build the networks they have today for anywhere near the balance sheet value. And each of them has specific reasons where we see an inflection and a move higher in underlying cash flows and shareholder returns.

The key themes across the Long Short Fund and the Global Long Short Fund Limited are effectively the same. Mark, what are the key differences between the funds? And how does that affect portfolio construction?

Well, the Global Long Short Fund Limited provides our investors with exactly the same proposition as the Long Short Fund Limited. The same portfolio managers, the same investment team, the same process. Both funds are absolute return focused, and they both use L1's quality value investment approach. The main difference is the geographic focus. So LSF has a 30% limit on international exposure, and we're typically pushing up against that limit all the time because we've always got more international ideas than we have space in the portfolio. The Global Long Short Fund has an unconstrained global mandate. So we can invest in anything we find globally without that 30% constraint. In practice, LSF's international book represents our highest conviction global ideas, and that 30% is typically replicated also in the Global Long Short Fund to a large extent. Some Australian names are attractive enough for them to also appear in the Global Long Short Fund. But beyond that, a large proportion of our international longs and shorts only appear in the Global Long Short Fund. So despite the same team, the same investment approach across each portfolio, the portfolio names can look quite different in practice. The geographic constraint is really the main driver of that difference. So maybe just to put into practice, give you an example, if you look at the copper sector, which we've spoken about today, in an Australian context, there's only a couple of large pure-play copper stocks on the Australian market, Sandfire and Capstone. But if you look overseas, there's lots of different opportunities. On the short side, you might be looking at the electric vehicle space. We had a short position in Lucid last year. That's a company that faces massive competitive threats. They've got a really flimsy balance sheet. It's a company we're very happy to be short. But there's no equivalent in Australia. If you want to analyze the electric vehicle space, there's actually nothing listed in the Aussie market.

Just to switch now to a discussion on some of the key themes in the portfolio. Mark, can you give us the latest on your thinking on the domestic and offshore banks and where we see the best opportunities?

The Australian banks are among the most expensive in the world. They offer very low earnings growth and yet they trade at very high multiples. If we compare it to the European banks that we like, they're typically growing earnings at double-digit rates and they trade on a fraction of the multiple. The domestic banks enjoyed a strong couple of years of share price performance recently as investors were happy to pay up for earnings stability. They were having some modest EPS upgrades, which gave them a bit of a tailwind, but we think that dynamic has now changed. And we think it's interesting over the last 6 months -- if you look in February at the results, they had consensus upgrades in the bank sector, and then that flipped dramatically in May, where you've had sector-wide downgrades and they've had basically a period where they're starting to face headwinds from weaker revenue and also from higher bad debt provisioning. We think there's downside risk to earnings persisting. The federal budget in May created enormous uncertainty for individual investors investing in property, and we're already seeing a really sharp reduction in demand for investor property lending. Rising interest rates and affordability pressures were already squeezing consumers and an uncertain macro just raises the risk of higher bad debts from very depressed levels at the moment. And lastly, Macquarie continues to be a really aggressive and capable competitor. They're winning market share at the expense of the big 4 banks with a really efficient and compelling proposition for the mortgage brokers. When you look at the European banks, on the other hand, it's a completely different situation. They've got fundamentally more attractive valuation support. They're trading on single-digit PEs. They're growing earnings at double-digit rates. They're giving you roughly double the dividend yield, and they've got unbelievable balance sheets with excess capital. So to us, it's a really comfortable position for us to be long the European banks and short of some of the Australian banks.

That's great. And moving to copper. It's a sector that we've traded in and out of over the years. Amar, why is the setup attractive to us again?

I think copper is a really good example of how we can dial up exposure at certain times when we think the opportunity set is really attractive. And we did that in 2022, where we meaningfully increased our net long to copper, and we called it one of the best opportunities in commodities. We saw a 600% rally from that point, and we largely exited our positions in late 2025. We've been fortunate through March and April where the 25% to 30% sell-off has given us an opportunity to come back into the sector in a meaningful way. And our supply-demand view has always been quite positive. But if we think about what's changed since 2022 even, on the demand side, you've seen a step-up again in demand, and that's data center growth has accelerated. We've continued to see growth in renewables, in EVs, in industrial demand. And so that demand side growth has stepped up from that period. And on the supply side, that's even more constrained than it was. You've continued to see grade declines, and we've also had a number of high-profile disruptions at really large copper mines. And from a development perspective, it takes well over a decade to get a new copper mine online, and that hasn't changed. So if anything, the supply-demand backdrop is even tighter than it was a few years ago.

And staying with commodities. Mike, Gold has had a tough run year-to-date. What's been driving it? And why do you remain bullish?

Sure. I'll try to cover a lot of our thinking on gold, but I'm sure I'll miss something. There's essentially three reasons why we're positive on gold long term. The first is that U.S. debt levels are rising exponentially, and they've now reached an unbelievable USD 39 trillion and are expected to exceed USD 65 trillion in a decade. In addition, the U.S. federal government is running a huge deficit of almost $2 trillion a year despite having strong economic growth and relatively low unemployment. So we believe that dealing with those enormous budget deficits and the huge debt levels is ultimately going to pressure the U.S. dollar long term, and gold provides a really unique way of hedging against U.S. dollar depreciation without relying on another fiat currency, which might have the same issues as the U.S. Central bank buying from China and India looks like it's here to stay. China, in particular, appears to be making a structural shift away from primarily holding U.S. dollars and U.S. treasuries to holding a far larger proportion of their reserves in gold. The Chinese have the largest central bank reserve in the world at around USD 3.4 trillion and more than half of those reserves are held in foreign currencies, primarily in U.S. dollars. China has begun a very long-term switch away from U.S. dollars towards gold, and we're starting to see that play out. They're only in the very early stages of this. So it's only about 10% of their reserves that are currently in gold, and that compares to about 70% of reserves from Western central banks that are held in gold. And we think ultimately, the Chinese are going to be moving a long way towards that. India just adds another leg to the story. So the Indians have been even more aggressive with their gold buying. They're up to about 20% of their reserves in gold, but we believe we're going to see ongoing buying from both of those massive central banks for many years to come. And the last factor is that there's way higher geopolitical risk these days, and there has been for many decades. What you've seen at the moment across the Middle East, across Russia, Ukraine and in Taiwan, more broadly, that's leading to a fracturing of the Western Alliance. And we think ultimately, you're going to see elevated geopolitical risk as an ongoing theme in markets. We've never seen a period of such high geopolitical risk since the end of the cold war. And gold has proven over many times to be a valuable safe haven against geopolitical risk and also against currency devaluation.

That all sounds very positive. Why is it then that gold hasn't performed so well this year?

The current Iran war is one of the only times in history that the geopolitical crisis has not led to higher gold prices and higher gold equity. So we think it's a really unique opportunity to take advantage of that. To a large extent, that softness that we saw in March, April was actually caused by some pretty weird technical events. One of those events that didn't receive a lot of publicity was that the Turkish Central Bank was aggressively selling their gold holdings. And at the same time, we saw similar actions from Russia as well, which just added to the pressure on the gold price. We also saw ETF selling and quant selling. A lot of that was to do with breaching certain technical levels, and it was a very hot part of the market. So you saw a lot of hot money come out. But as a result, we saw a sell-off in gold stocks. It was close to 30% in the space of a relatively short period of time. So we've used that as an opportunity to add to our positions. Many of the stocks we're buying are listed in the U.S. or Canada. They're trading at massive discounts to valuation. In many cases, we're paying 5 or 6x PE for companies that have good earnings outlook and they're very undergeared. And importantly, we're not betting on the gold price rising for the investment case to just stack up. I think that's one of the underappreciated aspects of the investment. These companies that we're invested in are very undervalued even if you assume way lower gold prices versus today's level.

And we've launched the L1 Gold Fund as a listed investment company recently. What was the key thinking around that?

We originally launched an unlisted version of the gold fund back in March last year. And the thinking with that fund was that it would be a temporary event. It was a 3-year closed-end fund. We thought there was an anomaly in terms of the valuations of these gold stocks and would play out in a relatively short period of time. When we launched that fund, it returned more than 180% after fees in just over a year. And through that period, we realized that the opportunity set in gold equities would be far more enduring than what we first realized when we launched the unlisted fund. So as a result, we closed the unlisted version of the fund, created the LIC and we'll be able to invest in gold equities long term. Across the gold sector, there's dozens of interesting opportunities and valuation dispersion and valuation upside is really large compared to a lot of other parts of the market. We believe that having patient capital is a massive advantage. The vast majority of retail investors and institutional investors these days have become increasingly short term in their focus, which gives us an opportunity to find businesses that have really compelling medium-term upside, have a stable capital base given the listed investment company, and we can exploit those periods of market volatility. Our investment team invests a huge amount of time meeting with senior management and boards of these gold companies, visiting mine sites around the world, assessing geological risk and opportunities and understanding the strategic value of various assets. The network of relationships that we've built globally across the mining sector is really unique, and it helps us understand the long-term value of these businesses in much more detail. The scale that we bring also enhances our ability to engage proactively and unlock value. We get much better access to management teams, mine sites, placements, deal flow, and we've resourced our team really well to completely cover the space globally. The long-term horizon lets us pivot actively to the opportunity set as it evolves, rotating between producers, late-stage developers, funding situations and strategic assets as the risk reward shifts over time. And at the moment, we see the best opportunities in the existing producers given their massive cash flow generation, derisked operations, and it's a lot less funding and approval risk.

On to Building Products, a more recent addition back into the portfolio. Amar, why have we lent in now?

We touched on earlier that the sector sold off about 20%. And what was interesting for us is it was kind of indiscriminate sell-off. It didn't matter whether you were exposed to resi or commercial or infrastructure. It was a movement more in response to long-term bond rates. And so what we did was we lent into a number of opportunities where we see option value ultimately. And you take a couple of our positions. CRH is a name we've owned in the past. We were able to come back into the stock. It's largely U.S. infrastructure-related exposure, and it derated from about 20x earnings to about 16x. So that gave us a good opportunity to come back in. There's very little change to the infrastructure backdrop in the U.S. It still remains incredibly robust. And then you take a name like James Hardie, which, yes, it does have residential exposure, but it derated to about 14x earnings. And it usually typically trades on 20-plus times earnings. So when we look at a name like that, we think we're getting it at a very favorable valuation. But also when you look at the earnings base that it's pricing off, U.S. housing starts today are probably about 10% below mid-cycle levels. So we think you're getting a cyclically depressed earnings base and a cheap multiple. And we have option value on both of those aspects getting better as time goes and as rates hopefully come down. Add to that, we think there's a lot of self-help within a name like James Hardie between merger synergies, cost outs and other company-specific initiatives. So when we look at this, we think the building products setup is incredibly attractive at the moment.

Thanks a lot, guys. That wraps up the Q&A section of this webinar. Just to recap, it's clearly been extremely tough markets so far this year. We've had very narrow leadership in what's been driving markets. Essentially, AI and energy are the only 2 strongly performing sectors on a consistent basis across the market. There's been a lot of volatility, and we've used this opportunity to lean into copper, gold, building products and travel. Thank you very much for your time today. If you have any follow-up questions, please reach out to the L1 Investor Services team.