In a recent investor webinar, James Hawkins, Partner and Head of the L1 Capital Catalyst Fund, provided a mid-year update on market dynamics and the fund’s strategic positioning. The presentation, held in June 2025, focused on four key portfolio holdings approaching significant inflection points: Santos, Aurizon, Mineral Resources, and Qantas. These stocks are part of L1 Capital’s concentrated, long-only activist portfolio, poised for potential growth.
Hawkins emphasized the strategic catalysts on the horizon for these holdings, expressing confidence in the portfolio’s positioning. He also offered insights into the soaring share price of the Commonwealth Bank of Australia (CBA) and its valuation concerns.
Macro Moves and Capital Flows
Hawkins outlined the major forces that have shaped markets in 2025 so far, including the Liberation Day tariffs announced in April and the subsequent temporary pause by President Trump. Additionally, the passage of Trump’s “One Big Beautiful Bill” and a stronger-than-expected federal election win for Labor in May have been pivotal.
Offshore capital has increasingly flowed into large-cap Australian equities, transforming the ASX into a perceived safe haven. However, Hawkins cautioned that this influx is distorting market fundamentals.
“CBA now trades on 30 times forward EPS… in line with Nvidia, Microsoft, Walmart – and trades on twice the multiple of the best bank in the world, JP Morgan,” Hawkins noted.
He attributed this trend to global capital seeking Asia-Pacific banks outside China, with Australia benefiting disproportionately. CBA now represents 12% of the ASX 200, up from 8% just 18 months ago.
Constructive Engagement and Portfolio Potential
Hawkins highlighted the increasing openness of company boards to L1’s brand of shareholder engagement, which focuses on long-term value creation. He stressed that successful activism relies on building trust and presenting well-researched, credible cases to decision-makers.
The Catalyst Fund has avoided crowded sectors like major banks, instead targeting companies trading below intrinsic value with identifiable catalysts expected to materialize in the coming quarters.
“We’ve done the groundwork and laid the foundations. The next step is to ensure these companies execute successfully. That’s when the share price upside will start to crystallize for the benefit of investors,” Hawkins stated.
Santos (ASX: STO): Strategic Assets and Value Disconnect
The recent ~$9 per share bid for Santos by ADNOC and Carlyle validates the Catalyst Fund’s view on the potential of the company’s LNG assets. Hawkins said the bid underscores the disconnect between Santos’ market valuation and the intrinsic worth of its assets.
He addressed regulatory risk concerns, noting ADNOC’s existing stakes in major Australian infrastructure and Carlyle’s global reputation.
“ADNOC’s lower cost of capital could help bring future gas supply to market faster, which is essential given Australia’s looming gas shortfall. This whole process really highlights something we say often: activism is a game of patience,” Hawkins remarked.
Aurizon (ASX: AZJ): Regulated Strength and Growth Potential
Aurizon’s network of regulated rail assets provides a stable revenue stream with strong cash flow visibility. Hawkins expressed confidence in the stock, bolstered by the company’s recent review of its network business ownership structure and a $50 million cost-saving initiative.
He also highlighted a new Olympic Dam contract with BHP as a potential growth catalyst, aligning with BHP’s ambition to expand Olympic Dam beyond 2030.
“It’s a stepping stone that could lead to expanded bulk haulage opportunities more generally with BHP,” Hawkins added.
Mineral Resources (ASX: MIN): Onslow Progress and Conviction
A site visit to the Onslow iron ore operations reaffirmed L1’s bullish stance on Mineral Resources. Hawkins noted the project’s progress towards its 35Mtpa capacity and the expected completion of the haul road by September 2025.
He drew parallels with Qantas in late 2023, which faced criticism but achieved a significant operational turnaround.
“We think MinRes has a similar opportunity,” Hawkins said, reflecting on past successes.
Qantas (ASX: QAN): Recovery and Future Prospects
Qantas exemplifies how quickly market sentiment can shift when a company addresses its issues. Under CEO Vanessa Hudson, the airline rebounded from public scrutiny in 2023, with operational improvements and strategic growth initiatives.
L1 Capital sees further upside in Qantas, driven by customer experience improvements, fleet reinvestment, and a strong balance sheet.
“The share price has more than doubled. This shows how quickly equity markets can reward investors once a company gets back on track,” Hawkins observed.
Looking Ahead
As the second half of 2025 begins, Hawkins emphasized the Catalyst Fund’s focus on opportunities that combine improving fundamentals with near-term catalysts.
“We’re not paying up for thematic growth. We’re focused on improving earnings and cashflow, strong valuation support, earnings resilience, and clear and near-term catalysts,” he concluded.
The fund’s hands-on engagement model, including site visits and direct company meetings, continues to shape outcomes and surface value.
