Laughing Water Capital, an investment management company, released its second-quarter 2023 investor letter. A copy of the same can be downloaded here. In the second quarter, investment in the fund returned 13.8%, net of all fees and expenses, compared to the SP500TR and the R2000 returns of 8.7% and 5.2%, respectively. The fund’s return so far in 2023 was 22.4% compared to benchmarks’ 16.9% and 8.1% returns, respectively. In addition, you can check the top 5 holdings of the fund to know its best picks in 2023.
Laughing Water Capital highlighted stocks like Avid Bioservices, Inc. (NASDAQ:CDMO) in the second quarter 2023 investor letter. Headquartered in Tustin, California, Avid Bioservices, Inc. (NASDAQ:CDMO) is a contract development and manufacturing organization. On July 28, 2023, Avid Bioservices, Inc. (NASDAQ:CDMO) stock closed at $13.07 per share. One-month return of Avid Bioservices, Inc. (NASDAQ:CDMO) was -6.64%, and its shares lost 31.28% of their value over the last 52 weeks. Avid Bioservices, Inc. (NASDAQ:CDMO) has a market capitalization of $819.871 million.
Laughing Water Capital made the following comment about Avid Bioservices, Inc. (NASDAQ:CDMO) in its second quarter 2023 investor letter:
“Avid Bioservices, Inc. (NASDAQ:CDMO) – Long time holding CDMO, our large molecule contract drug manufacturing organization, was up ~50% on the year through April, but ended the quarter ~flat on the year. There has been a fair amount of noise from industry comps in recent months, including accounting and operational problems at large competitor Catalent (CTLT), and commentary from just about everyone that biotech spending on early-stage projects has been reigned in. CDMO is not immune from this pullback, and their recent guidance for Fiscal ‘24 was disappointing. At the same time, management noted that late-stage signings increased by 34%.
From my perspective, the wild swings in the stock price are largely about investor timelines. The crux of my thesis is that recent capacity additions will allow CDMO to more than double their business in the next few years. Simply stated, there is a shortage of industry capacity, and CDMO’s long-term track record of success is a considerable advantage vs. upstart competitors. It is unfortunate in the near term that early-stage biotech spending has hit a speed bump because the timing on early-stage spending is typically more predictable, and short dated. However, the fastest way to fill new capacity is with late-stage projects that can quickly move to commercial production. In that regard the company appears to remain well positioned. Additionally, management recently noted that CDMO had been designated as a preferred partner to a large pharmaceutical company. Additional large pharmaceutical companies are conducting site visits and audits, which will likely lead to more large pharma wins. These are the type of customers that can soak up capacity quickly. I continue to expect that we will be well rewarded by our investment in CDMO in the intermediate and longer term, despite near term conservatism from management.”
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Avid Bioservices, Inc. (NASDAQ:CDMO) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 13 hedge fund portfolios held Avid Bioservices, Inc. (NASDAQ:CDMO) at the end of first 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 addition, please check out our hedge fund investor letters Q2 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.
