Here’s Why L1 Capital International Fund was Not able to Monetize the Growth of NVIDIA (NVDA)

L1 Capital, an investment management firm, released its “L1 Capital International Fund” second quarter 2024 investor letter. A copy of the letter can be downloaded here. A copy of the letter can be downloaded here. In the June quarter, the fund returned -3.0% (net of fees) compared to 0.3% return for the Benchmark (all in Australian dollars). The Australian dollar appreciated 1.8% against the U.S. dollar in the quarter and 2.7% against the Euro, decreasing the Fund and Benchmark Australian dollar reported quarterly returns. The Fund returned 22.2% (net of fees) outperforming the Benchmark return of 19.8% (all in Australian dollars) for the year ended 30 June 2024. The Australian dollar appreciated 0.3% against the U.S. dollar and 2.0% against the Euro, thus currency had a limited impact on Australian dollar returns of the Fund and Benchmark over the past 12 months. Please check the fund’s top five holdings to know its best picks in 2024.

L1 Capital International Fund highlighted stocks like NVIDIA Corporation (NASDAQ:NVDA), in the second quarter 2024 investor letter. NVIDIA Corporation (NASDAQ:NVDA) offers graphics and compute and networking solutions. The one-month return of NVIDIA Corporation (NASDAQ:NVDA) was 4.94%, and its shares gained 199.26% of their value over the last 52 weeks. On July 9, 2024, NVIDIA Corporation (NASDAQ:NVDA) stock closed at $131.38 per share with a market capitalization of $3.232 trillion.

L1 Capital International Fund stated the following regarding NVIDIA Corporation (NASDAQ:NVDA) in its Q2 2024 investor letter:

“Simply not owning NVIDIA Corporation (NASDAQ:NVDA) was a key contributor to the relative underperformance of the Fund against its Benchmark. The Wall Street Journal even published a recent article with the title ‘No Nvidia in Your Portfolio? You’re Just Toast’. While that is a little melodramatic, it is rare for one company to have such an outsized impact on index returns.

We readily admit that we underestimated the speed and scale with which Nvidia has been able to monetise its leading position in supporting the growth of AI. We have refreshed our financial analysis and while our valuation of the business has increased materially, we continue to view the current share price as providing an unattractive risk adjusted return in most scenarios. We appreciate the business has surprised to the upside in the past and we continue to follow Nvidia closely.”

A close-up of a colorful high-end graphics card being plugged in to a gaming computer.

NVIDIA Corporation (NASDAQ:NVDA) is in 5th position on our list of 31 Most Popular Stocks Among Hedge Funds. As per our database, 186 hedge fund portfolios held NVIDIA Corporation (NASDAQ:NVDA) at the end of the first quarter which was 173 in the previous quarter. NVIDIA Corporation (NASDAQ:NVDA) reported another record quarter in Q1 with $26 billion in revenues, representing a 262% year-over-year increase. While we acknowledge the potential of NVIDIA Corporation (NASDAQ:NVDA) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock

We discussed NVIDIA Corporation (NASDAQ:NVDA) in another article and shared ClearBridge Large Cap Growth Strategy’s views on the company. NVIDIA Corporation (NASDAQ:NVDA) ranks 2nd on the list of best AI stocks for the second half of 2024. In addition, please check out our hedge fund investor letters Q2 2024 page for more investor letters from hedge funds and other leading investors.

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Disclosure: None. This article is originally published at Insider Monkey.