Laughing Water Capital, an investment management company, released its fourth-quarter 2023 investor letter. A copy of the same can be downloaded here. In the fourth quarter, investment in the fund returned 3.2% bringing the yearly returns to 11.8%, net of all fees and expenses. The SP500TR and R2000 returned 11.7% and 14.0% during the quarter, respectively, bringing their year-to-date returns to 26.3% and 17.0%. In addition, you can check the top 5 holdings of the fund to know its best picks in 2023.
Laughing Water Capital featured stocks such as Avid Bioservices, Inc. (NASDAQ:CDMO) in the fourth quarter 2023 investor letter. Headquartered in Tustin, California, Avid Bioservices, Inc. (NASDAQ:CDMO) is a contract development and manufacturing organization. On January 29, 2024, Avid Bioservices, Inc. (NASDAQ:CDMO) stock closed at $7.34 per share. One-month return of Avid Bioservices, Inc. (NASDAQ:CDMO) was 15.41%, and its shares lost 53.63% of their value over the last 52 weeks. Avid Bioservices, Inc. (NASDAQ:CDMO) has a market capitalization of $464.176 million.
Laughing Water Capital stated the following regarding Avid Bioservices, Inc. (NASDAQ:CDMO) in its fourth quarter 2023 investor letter:
“Avid Bioservices, Inc. (NASDAQ:CDMO) – Avid, our large molecule Contract Drug Manufacturing Organization, was by far our biggest loser in 2023. After several years of investment, the Company completed a capacity expansion program just as early phase biotech spending was curtailed, largely due to higher interest rates. This led the Company to cut guidance, which led to a sell off that caused the Company to be removed from the small cap SP600, which of course led to forced selling by indexers. The market is now fixated on ~$143M of 1.25% convertible debt that will mature in March of 2026. The combination of higher costs tied to increased capacity and reduced revenue is not good in front of a debt maturity.
However, for the first time Avid recently issued an investor presentation that provides more insights into their late phase pipeline, backlog continues to grow, and recent industry comments suggest that early phase spending is rebounding hard.iv In the immediate term Avid will need to match increased revenue with stair step increases in OpEx, but in the not-too-distant future massive operating leverage will kick in, allowing as much as 70% of incremental revenue to drop to the EBITDA line.v From there, Avid’s brand new facilities will ensure that CapEx is minimal, and substantial NOLs will shield taxes leading to high FCF conversion. At maturity with a high commercial mix these cash flows are annuity like and deserving of a high multiple, representing the potential for multi-bagger gains from here…” (Click here to read the full text)
A chemist looking through a microscope in a research and development facility as they synthesize recombinant proteins.
Avid Bioservices, Inc. (NASDAQ:CDMO) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 17 hedge fund portfolios held Avid Bioservices, Inc. (NASDAQ:CDMO) at the end of third quarter which was 11 in the previous quarter.
We discussed Avid Bioservices, Inc. (NASDAQ:CDMO) in another article and shared Laughing Water Capital’s views on the company in the previous quarter. In addition, please check out our hedge fund investor letters Q4 2023 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.
