Laughing Water Capital, an investment management company, released its first-quarter 2026 investor letter. A copy of the letter can be downloaded here. The Class A investment in Laughing Water Capital returned approximately -4.5% net of all fees and expenses in the first quarter of 2026. The SP500TR and R2000 returned -4.3% and 0.9% respectively, during the same period. Over the first ten years, since its inception, Laughing Water Capital returned approximately 410%, or 17.7% per year. Recent developments, such as AI breakthroughs and U.S. operations in Iran and Venezuela, demonstrate the enduring nature of global uncertainty. The firm believes volatility has generated possibilities that lead to portfolio modifications with recent additions reflecting shorter investment timelines, strong balance sheets, and near-term cash flows, with limited event path risk. In addition, please check the portfolio’s top five holdings to know its best picks in 2026.
In its first-quarter 2026 investor letter, Laughing Water Capital highlighted Liquidia Corporation (NASDAQ:LQDA). Liquidia Corporation (NASDAQ:LQDA) is a biopharmaceutical company focuses on development and commercialization of various products for rare cardiopulmonary diseases. On April 23, 2026, Liquidia Corporation (NASDAQ:LQDA) closed at $37.46 per share. One-month return of Liquidia Corporation (NASDAQ:LQDA) was 5.77%, and its shares gained 162.39% over the past 52 weeks. Liquidia Corporation (NASDAQ:LQDA) has a market capitalization of $3.26 billion.
Laughing Water Capital stated the following regarding Liquidia Corporation (NASDAQ:LQDA) in its Q1 2026 investor letter:
“Liquidia Corporation (NASDAQ:LQDA) – Liquidia is our maker of a drug called YUTREPIA that combats Pulmonary Arterial Hypertension (PAH) and Pulmonary Hypertension Interstitial Lung Disease (PH-ILD). The sales launch of this drug continues to exceed all expectations, and the stock has appreciated nicely. However, I believe shares would be much higher if not for an on-going patent battle with United Therapeutics (UTHR). Legal arguments in the last round concluded last summer, but the judge has not yet ruled. My work around the opinions of legal experts and past rulings in similar cases by this judge suggest a favorable outcome is on the way. The delay is of course frustrating, but I think the likely explanation is that the judge is taking the time to write an opinion that would be bullet proof on appeal. Logically, if he were going to rule against Liquidia he would do so quickly, because every day that he has not ruled is another day that more patients are put on YUTREPIA, and historically judges have not wanted to pull medication from people whose lives are improved by it.
Importantly, this trial is only tied to the use of YUTREPIA to treat PH-ILD. In other words, even if the ruling is unfavorable Liquidia should be able to continue to take share in the PAH market. This should provide downside protection for the stock. If the ruling is favorable and the launch of YUTREPIA continues unimpeded, even a material slow down in the rate of adoption since inception could lead to a revenue run rate north of $1.2B by the end of the year. If Liquidia were to trade at the same multiple of sales as United Therapeutics, shares would be worth more than double where they are today. Additionally, the major pharmaceutical companies are facing an estimated $300B in patent cliffs over the next few years. These same companies have an estimated $1T in dry powder to make acquisitions in order to fill in the looming patent hole. Liquidia appears to be a prime candidate for a takeout by large pharma.”
Liquidia Corporation (NASDAQ:LQDA) is not on our list of 40 Most Popular Stocks Among Hedge Funds Heading Into 2026. According to our database, 44 hedge fund portfolios held Liquidia Corporation (NASDAQ:LQDA) at the end of the fourth quarter, up from 42 in the previous quarter. While we acknowledge the risk and potential of Liquidia Corporation (NASDAQ:LQDA) 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 Liquidia Corporation (NASDAQ:LQDA) and that has 10,000% upside potential, check out our report about this cheapest AI stock.
In another article, we covered Liquidia Corporation (NASDAQ:LQDA) and shared the list of high growth healthcare stocks to buy. In addition, please check out our hedge fund investor letters Q1 2026 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.
