Laughing Water Capital, an investment management company, released its second-quarter 2025 investor letter. A copy of the letter can be downloaded here. In the second quarter of 2025, Class A interests in Laughing Water Capital returned approximately 13.1% net of all expenses. The SP500TR and R2000 returned 10.9% and 8.5%, respectively. In addition, you can check the fund’s top 5 holdings to determine its best picks for 2025.
In its second quarter 2025 investor letter, Laughing Water Capital highlighted stocks such as Clarus Corporation (NASDAQ:CLAR). Clarus Corporation (NASDAQ:CLAR) develops and manufactures outdoor equipment and lifestyle products. The one-month return of Clarus Corporation (NASDAQ:CLAR) was 12.71%, and its shares lost 34.05% of their value over the last 52 weeks. On July 23, 2025, Clarus Corporation (NASDAQ:CLAR) stock closed at $3.99 per share, with a market capitalization of $153.223 million.
Laughing Water Capital stated the following regarding Clarus Corporation (NASDAQ:CLAR) in its second quarter 2025 investor letter:
“Clarus Corporation (NASDAQ:CLAR) – Clarus is a consumer products business focused on outdoor adventure gear. Their Outdoor segment is best known for Black Diamond climbing gear, and their Adventure segment is best known for Rhino-Rack roof racks. Clarus is subscale and undergoing a reset after expanding their SKU count a bit too much. The lack of scale and previous lack of focus leads to GAAP financials that are not pretty; the company struggles with profitability.
However, looking past what the quants can see, in my view the company has real brand value. Reviewing precedent transactions suggests that outdoor adventure brands trade hands at 1-2x sales, yet Clarus is valued by the market at less than 0.4x sales. By itself this smells like a value trap, but when you consider the alignment and interests of largest shareholder and Chairman Warren Kanders, the picture begins to change. Kanders owns ~18% of the shares at present, has recently bought shares in the open market, and also owns a series of options on 1,000,000 more shares that will only vest if shares trade at greater than $15, $18, or $50 by 2033. Kanders has a long history of value creation, and while thus far his tenure at Clarus has not mirrored his other successes, he is unlikely to sit still. The most recent evidence of this was the May announcement that Clarus would be selling PIEPS, a small subsidiary focused on snow safety, for 1.7x sales and effectively an infinite multiple of EBITDA.
It is not exactly clear what will happen next with Clarus, but with plenty of cash on the balance sheet, no real debt, a motivated and experienced operator at the helm, and a totally bombed out valuation, there are multiple ways for us to win. If I had to guess, I would say that over the next 6 to 18 months or so the company will continue to rationalize its operations, and then run a sale process for its remaining assets. Assuming the mid-point of the historic range, shares would be worth around $11.00 gross of any taxes (which are likely to be limited) in an out-right sale of the company. However, given Kanders’s options, it is also possible the assets are sold while the entity survives. In this case, I would think that shares would price in some discount to the cash on the balance sheet while Kanders finds some other way to deploy the cash. In both cases, I believe shares are worth more than double today’s prices.”
A hiker in a forest with a backpack of outdoor equipment highlighting the company’s lifestyle products.
Clarus Corporation (NASDAQ:CLAR) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 13 hedge fund portfolios held Clarus Corporation (NASDAQ:CLAR) at the end of the first quarter, which was 13 in the previous quarter. Clarus Corporation’s (NASDAQ:CLAR) first quarter sales declined 13% year-over-year to $60.4 million. While we acknowledge the risk and potential of Clarus Corporation (NASDAQ:CLAR) as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than Clarus Corporation (NASDAQ:CLAR) and that has 10,000% upside potential, check out our report about this cheapest AI stock.
In another article, we covered Clarus Corporation (NASDAQ:CLAR) and shared the list of most undervalued stocks with smart money ratings. In addition, please check out our hedge fund investor letters Q2 2025 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.
