Investment management company Laughing Water Capital released its second quarter investor letter 2022, a copy of the same can be downloaded here. In the second quarter, the fund returned -19.4%, which brings the year-to-date return to -29.5%. The letter discussed the reasons for the underperformance of its portfolios. S&P 500 & Russell 2000 also underperformed in the second quarter and returned -16.1% and -17.2%, respectively. You can check the top 5 holdings of the fund to see its best picks in 2022.
In the Q2 2022 investor letter, Laughing Water Capital analyzed the current events in the market and pointed out how they affected its portfolios. The fund discussed the stocks like Landec Corporation (NASDAQ:LNDC). Landec Corporation (NASDAQ:LNDC) is a health and wellness company headquartered in Santa Maria, California, and has a market capitalization of $308.977 million. The stock of Landec Corporation (NASDAQ:LNDC) closed at $10.48 per share on July 29, 2022. Landec Corporation (NASDAQ:LNDC) had a return of 3.56% for the past month, and its 12-month return dropped to -1.50%.
Here is what Laughing Water Capital specifically said about Landec Corporation (NASDAQ:LNDC):
“Landec Corporation (NASDAQ: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.”
Even though Laughing Water Capital invested in Landec Corporation (NASDAQ:LNDC), the stock is not on our list of 30 Most Popular Stocks Among Hedge Funds. Landec Corporation (NASDAQ:LNDC) was in 15 hedge fund portfolios at the end of the first quarter of 2022, which was up from 14 in the previous quarter. Landec Corporation (NASDAQ:LNDC) shares gained 8.38% of their value over the last 3 months.
We published another article last December on Landec Corporation (NASDAQ:LNDC). In addition, please check out our hedge fund investor letters Q2 2022 page for more investor letters from hedge funds and other leading investors.
Disclosure: None. This article is originally published at Insider Monkey.
