Livewire | The ‘unloved’ stocks fuelling a 30% year in L1 Capital's Catalyst Fund

This article was first published in The Rules of Investing | Livewire Markets on 16 March, 2026.

In September 2024, L1 Capital’s James Hawkins took the stage at Livewire Live as part of a panel titled “The Good, The Bad and The Ugly.” It feels like a distant memory, but at the time the market only had eyes for growth stocks and banks.

Global equities were riding a wave of optimism fuelled by the artificial intelligence boom, with investors showing an insatiable appetite for US technology companies. In Australia, the ASX technology sector had rallied roughly 30% over the prior 12 months, even against a backdrop of higher interest rates that would normally weigh on growth stocks.
The broader macro backdrop also supported risk-taking. Inflation was easing and investors were increasingly confident central banks could engineer a “soft landing” rather than a recession.

As a result, equity markets were trading near record highs and the rally was relatively narrow. A handful of sectors and stocks were doing most of the heavy lifting.

So when Hawkins pitched BlueScope Steel (ASX: BSL) as his best idea, you could have forgiven the audience for wondering whether it belonged in the category of ‘the Good’ or ‘the Ugly’.

Hawkins’ thesis centred on a cheap valuation, growing production in the US and the quality of management. Crucially, L1 Capital believed the US business alone could be worth more than BlueScope’s entire market capitalisation, implying the rest of the company was effectively being valued at close to zero. Perhaps the more nuanced angle was that steel spreads were sitting near cyclical lows and, unbeknown to Hawkins, M&A activity was bubbling away in the background.

Fast forward to today and BlueCcope has been subject to multiple bids for its US assets by a consortium led by Seven Group Holdings (ASX:SGH) and Steel Dynamics. The latest bid valued Bluescope at roughly $31 per share.

L1 Capital owns shares in BlueScope across several strategies with a combined stake of over 7%, making it the second-largest shareholder behind AustralianSuper, which owns roughly 13%.

While much of the M&A back and forth has played out on the ASX and across financial media, Hawkins and his colleagues Raphael Lamm and Mark Landau have been actively engaged behind the scenes encouraging BlueScope’s board to unlock the value they believe the market has been ignoring.

L1 Capital owns shares in BlueScope across several strategies with a combined stake of over 7%, making it the second-largest shareholder behind AustralianSuper, which owns roughly 13%.

While much of the M&A back and forth has played out on the ASX and across financial media, Hawkins and his colleagues Raphael Lamm and Mark Landau have been actively engaged behind the scenes encouraging BlueScope’s board to unlock the value they believe the market has been ignoring.

While the BlueScope story has further to run, Hawkins says it’s a classic example of the approach taken by the L1 Capital Catalyst Fund, which has returned 30% over the past 12 months, making it one of the top five performing long-only ASX large cap funds.

As a value investing house, Hawkins says L1 Capital will naturally gravitate towards businesses with hard assets where it can form a clear view on valuation.

The filter for companies to make it into the Catalyst Fund is extremely narrow. Not only must a stock pass L1’s quality and valuation hurdles, there also needs to be a clear catalyst that Hawkins believes can unlock value. Often those opportunities emerge when a stock has fallen out of favour with the market.

The list of potential catalysts is broad. Sometimes it is as simple as returning more capital to shareholders through a higher dividend payout or a share buyback when the stock is trading well below intrinsic value.

In other cases, the catalyst may involve restructuring the business. This could include separating divisions that no longer fit strategically or demerging a non-core asset that could be more valuable as a standalone entity.

Governance can also play a role. That might involve refreshing the board with directors who bring skills currently missing, or encouraging a company to sell non-core assets in order to reduce debt and strengthen the balance sheet.

Ultimately, the team is searching for actions that can surface value the market has overlooked and move the share price closer to what they believe the business is worth.

An ‘AI proof’ stock L1 Capital is happy to own for the next 5 years
Hawkins acknowledges that this approach requires patience and that activism in Australia tends to play out behind closed doors rather than in the public eye.

In his view, equity markets are becoming increasingly short-term focused, with daily price moves often driven more by sentiment than fundamentals.

For Hawkins, the focus is different. The team is typically looking for catalysts or strategic changes that may take 12 to 24 months to play out. That means holding a view on the medium-term thesis while the market reacts to the next headline or data point.

Viewed through that lens, the stock Hawkins would be most comfortable owning for the next five years is Aurizon (ASX: AZJ).

Beyond that, Hawkins points to several structural advantages that make the business attractive over a multi-year horizon:

• Long-term regulatory certainty: Aurizon recently secured a new 10-year regulatory agreement for its network business, which Hawkins says accounts for more than half of the company’s valuation.
• Hard-to-replicate infrastructure: The company owns rail networks and logistics infrastructure that would be extremely difficult and costly for competitors to replicate.
• Durable earnings moat: Aurizon’s network assets underpin stable cashflows tied to long-term freight contracts.

Add in a reliable dividend stream and, in Hawkins’ view, it’s the type of business that should continue compounding value long after the market’s attention has moved elsewhere.

Listen to the full interview by clicking here.