Investment management company Headwaters Capital recently released its second quarter 2022 investor letter. A copy of the same can be downloaded here. In the second quarter, the fund declined by -20.5% compared to a -16.9% decline for the Russell Mid Cap index. High energy prices as a result of the Russian invasion affected the performance of the portfolio. You can check the top 5 holdings of the fund to know its best picks in 2022.
Headwaters Capital discussed stocks like Inotiv, Inc. (NASDAQ:NOTV) in the second quarter investor letter. It is the top detractor of the fund. Headquartered in West Lafayette, Indiana, Inotiv, Inc. (NASDAQ:NOTV) is a research and development company that provides drug discovery and development services. On August 22, 2022, Inotiv, Inc. (NASDAQ:NOTV) stock closed at $20.63 per share. One-month return of Inotiv, Inc. (NASDAQ:NOTV) was 23.16% and its shares lost 20.41% of their value over the last 52 weeks. Inotiv, Inc. (NOTV) has a market capitalization of $528.015 million.
Here is what Headwaters Capital specifically said about Inotiv, Inc. (NASDAQ:NOTV):
“Inotiv, Inc. (NASDAQ:NOTV) -63%. Inotiv’s share price was the poster child for volatility during the quarter. Shares initially sold off due to concerns around slowing biotech funding, which could negatively impact future growth for NOTV. Shares then rebounded sharply by +58% following the Q1 earnings report that showed accelerating momentum in both segments of NOTV’s preclinical CRO business, validating the roll-up strategy that NOTV is pursuing. One week later, shares dropped by ~30% when the DOJ announced that it was pursuing legal action against a facility that NOTV acquired last year, citing non-compliance with regulatory standards. NOTV and the DOJ quickly settled the case with no fines or penalties and the facility is in the process of being closed. NOTV has noted that the facility accounted for less than 1% of the company’s revenue and was unprofitable. Taking a conservative estimate of facility closing costs and legal costs, I estimate that the total loss to NOTV could be ~$10mm. This modest cost compares to ~$220mm of market cap lost following the DOJ announcement. Needless to say, I view the sell-off as extreme and does not reflect the ultimate impact to NOTV’s business and long-term earnings power. As of publication of this letter, NOTV shares have recovered +70% in Q3 as the market digests the limited impact of the closed DOJ investigation.”
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Inotiv, Inc. (NASDAQ:NOTV) is not on the list of 30 Most Popular Stocks Among Hedge Funds. As per our database, Inotiv, Inc. (NASDAQ:NOTV) was held by 14 hedge fund portfolios at the end of the first quarter, which was 15 in the previous quarter.
We discussed Inotiv, Inc. (NASDAQ:NOTV) in another article and shared Headwaters Capital’s views on the company. You can check out our hedge fund investor letters Q2 2022 page for more investor letters from hedge funds and other prominent investors.
Disclosure: None. This article is originally published at Insider Monkey.
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