Laughing Water Capital, an investment management firm, published its second-quarter 2022 investor letter – a copy of which can be downloaded here. For Q2 2022 Class A interests in Laughing Water Capital returned approximately -19.4%, bringing our year-to-date returns to approximately -29.5%. The SP500 and R2000 returned -16.1% and -17.2% for the quarter, bringing year-to-date returns to -20.0% and -23.4% respectively. Go over the fund’s top 5 positions to have a glimpse of its finest picks for 2022.
In its Q2 2022 investor letter, Laughing Water Capital mentioned Landec Corporation (NASDAQ:LNDC) and explained its insights for the company. Founded in 1986, Landec Corporation (NASDAQ:LNDC) is a Menlo Park, California-based diversified health and wellness company with a $326.1 million market capitalization. Landec Corporation (NASDAQ:LNDC) delivered a -0.45% return since the beginning of the year, while its 12-month returns are up by 2.41%. The stock closed at $11.05 per share on August 19, 2022.
Here is what Laughing Water Capital has to say about Landec Corporation (NASDAQ:LNDC) in its Q2 2022 investor letter:
“LNDC is new to the portfolio, and is an example of an investment archetype that should be familiar: good co. / bad co. A year or so ago, the company owned several businesses, including a packaged salad business, a processed avocado business (shelf stable guacamole), a salad oil business, a breathable produce packaging business and… a high quality injectables focused CDMO known as Lifecore Biomedical. With a 2-year-old son and a 1 year old daughter, Sesame Street is presently the sound track of my life, and “one of these things is not like the others.”
With help from activist investor and friend of LWC Legion Partners, LNDC has realized that pairing commodity based packaged food businesses with a high quality CDMO makes zero sense, and LNDC has been selling off the food businesses in order to become a pure play CDMO. We bought our shares around $10, and I estimate that Lifecore Biomedical is worth somewhere between $14 and $25 a share today, and that value will grow substantially in the years to come.
At this point, the bulk of the remaining food business is the avocado business, which was purchased 4 years ago for $80M. It is not impossible to believe that the value of this business has declined, but if the CDMO is worth somewhere between $14 and $25 per share, this implies that the market thinks the avocado business is worth somewhere between negative $120 million and negative $440 million. I think this is overly pessimistic…” (Click here to see the full text)
Photo by Brooke Lark on Unsplash
Our calculations show that Landec Corporation (NASDAQ:LNDC) fell short and didn’t make it on our list of the 30 Most Popular Stocks Among Hedge Funds. Landec Corporation (NASDAQ:LNDC) was in 15 hedge fund portfolios at the end of the second quarter of 2022, compared to 14 funds in the previous quarter. Landec Corporation (NASDAQ:LNDC) delivered a 21.96% return in the past 3 months. You can find other investor letters from hedge funds and prominent investors on our hedge fund investor letters 2022 Q2 page.
Disclosure: None. This article is originally published at Insider Monkey.
