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 TransAct Technologies Incorporated (NASDAQ:TACT) and explained its insights for the company. Founded in 1996, TransAct Technologies Incorporated (NASDAQ:TACT) is a Hamden, Connecticut-based software company with a $44.1 billion market capitalization. TransAct Technologies Incorporated (NASDAQ:TACT) delivered a -59.08% return since the beginning of the year, while its 12-month returns are down by -68.50%. The stock closed at $4.46 per share on August 19, 2022.
Here is what Laughing Water Capital has to say about TransAct Technologies Incorporated (NASDAQ:TACT) in its Q2 2022 investor letter:
“Transact, our slot machine printer business that is also developing back-of-house restaurant and convenience store software, has fallen victim to supply chain issues that have slowed its growth. Quite simply, they have been unable to meet customer demand. This is of course frustrating, and it does come with balance sheet implications, but it is not as if this unmet demand is missed opportunity. Rather, it is delayed opportunity because competitors have not been able to meet demand either.
In fact, this delayed opportunity is likely to come with pricing power. My research suggests that on the slot machine printer side – a duopoly market – TACT’s main competitor has been telling customers that it could be 12-18 months before they have product. TACT expects product much sooner, and appears to be in position to decide if they should build relationships with new customers by being accommodative on price, or if they should be a bit more greedy with the expectation that this business may be one time in nature.
Regardless, with time the supply chain issues will resolve themselves, and TACT will continue its march forward. It bears mentioning that the decline in TACT’s stock has shrunk the market cap to a level that we normally would not bother with, and it is possible that selling pressure is tied to the small size. At the same time, at present TACT is trading at 3-4x my estimate of the normalized EBITDA of the slot machine business, which you may remember operates in a unique niche with regulatory protection and only one real competitor.
This gives no value to the restaurant/C-store business, and in my view selling here for structural reasons would make little sense.”
Our calculations show that TransAct Technologies Incorporated (NASDAQ:TACT) fell short and didn’t make it on our list of the 30 Most Popular Stocks Among Hedge Funds. TransAct Technologies Incorporated (NASDAQ:TACT) was in 9 hedge fund portfolios at the end of the second quarter of 2022, compared to 9 funds in the previous quarter. TransAct Technologies Incorporated (NASDAQ:TACT) delivered a 0.00% return in the past 3 months.
In April 2022, we also shared another hedge fund’s views on TransAct Technologies Incorporated (NASDAQ:TACT) in another article. 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.
