Laughing Water Capital, an investment management company, released its fourth-quarter 2022 investor letter. A copy of the same can be downloaded here. In the fourth quarter, investment in Class A shares of the fund returned 4.0%, net of all fees and expenses, compared to 7.6% and 6.2% returns for the SP500TR and R2000, respectively. For 2022 the fund returned 31.7% compared to -18.1% and -20.4% returns for the SP500TR and R2000 respectively. In addition, you can check the top 5 holdings of the fund to know its best picks in 2022.
Laughing Water Capital highlighted stocks like Avid Bioservices, Inc. (NASDAQ:CDMO) in the Q4 2022 investor letter. Headquartered in Tustin, California, Avid Bioservices, Inc. (NASDAQ:CDMO) is a biopharmaceutical company. On February 15, 2023, Avid Bioservices, Inc. (NASDAQ:CDMO) stock closed at $16.91 per share. One-month return of Avid Bioservices, Inc. (NASDAQ:CDMO) was 4.25%, and its shares lost 16.20% of their value over the last 52 weeks. Avid Bioservices, Inc. (NASDAQ:CDMO) has a market capitalization of $1.054 billion.
Laughing Water Capital made the following comment about Avid Bioservices, Inc. (NASDAQ:CDMO) in its Q4 2022 investor letter:
“Avid Bioservices, Inc. (NASDAQ:CDMO) – Avid is our large molecule contract drug manufacturing business. The industry has historically been capacity constrained, and the Company is primed to more than double capacity over the next few quarters. Avid’s long tenured regulatory track record is a distinct competitive advantage vs. upstarts that may also seek to add capacity, and it is likely that Avid is adding new capacity at the request of customers. As this new capacity is filled in the not-too-distant future, the Company will benefit from significant operating leverage, which will drive earnings power.
Perception should change as Avid fills its new capacity and develops into a free cash flow machine.
If CDMO is able to fill their new capacity, they should be able to generate somewhere around $120M in steady state FCF, assuming conversion of convertible debt and utilization of substantial NOLs. This implies CDMO currently trades at ~7x intermediate term FCF. It would not surprise me to see fast growing, recession resistant cash flows valued at 20x, suggesting ~200% upside is possible. This may prove conservative as the Company will retain significant strategic optionality at that time.”
Copyright: dolgachov / 123RF Stock Photo
Avid Bioservices, Inc. (NASDAQ:CDMO) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 15 hedge fund portfolios held Avid Bioservices, Inc. (NASDAQ:CDMO) at the end of the third quarter which was 17 in the previous quarter
We discussed Avid Bioservices, Inc. (NASDAQ:CDMO) in another article and shared the list of most undervalued biotech stocks to buy according to hedge funds. In addition, please check out our hedge fund investor letters Q4 2022 page for more investor letters from hedge funds and other leading investors.
Suggested Articles:
- 12 High Growth Real Estate Stocks that are Profitable
- 10 Jim Cramer Stocks This Month
- Ray Dalio Stock Portfolio: Top 15 Stock Picks
Disclosure: None. This article is originally published at Insider Monkey.
