Laughing Water Capital, an investment management company, released its second-quarter 2024 investor letter. A copy of the letter can be downloaded here. In the second quarter, Class A interests in Laughing Water Capital returned about 2.5% bringing year-to-date returns to 11.1%. The SP500TR and R2000 returned 4.3% and -3.3% in the second quarter and 15.3% and 1.7% year-to-date, respectively. The strength of the market is now concentrated in a small number of mega-cap stocks. The SP500's "artificial intelligence"-related equities increased 14.7% during the second quarter, while the overall SP500 fell 1.2%. The firm does not own any of these stocks and focuses on the hidden corners of the market. In addition, you can check the fund's top 5 holdings to determine its best picks for 2024.

Laughing Water Capital highlighted stocks like Avid Bioservices, Inc. (NASDAQ:CDMO), in the second quarter 2024 investor letter. Avid Bioservices, Inc. (NASDAQ:CDMO) is a contract development and manufacturing organization. The one-month return of Avid Bioservices, Inc. (NASDAQ:CDMO) was 44.54%, and its shares lost 21.04% of their value over the last 52 weeks. On July 25, 2024, Avid Bioservices, Inc. (NASDAQ:CDMO) stock closed at $10.32 per share with a market capitalization of $656.157 million.

Laughing Water Capital stated the following regarding Avid Bioservices, Inc. (NASDAQ:CDMO) in its Q2 2024 investor letter:

"Avid Bioservices, Inc. (NASDAQ:CDMO) – Avid is one of our two Contract Drug Manufacturing Organizations that are tied to biologic drugs. I detailed the reasoning behind our investment in Avid in the Q1’24 letter, and would suggest you revisit that letter for a more detailed review of the long-term opportunity and the recent disappointments. In brief, this is a company that is not currently profitable as they are incurring expenses from newly added capacity that is not yet generating much revenue, and they are also victim to a slowdown in biotech spending. However, industry dynamics are very favorable, and Avid enjoys a real competitive advantage in the form of a long tenured favorable FDA track record. I believe favorable industry dynamics and a favorable competitive position combine to make the idea of Avid filling capacity very much a “when” not an “if.” When this capacity is filled, Avid should be able to generate somewhere around $125M in EBITDA which will translate to free cash flow at very high rates as the Company should have net interest income (assuming conversion of convertible debt), very low cash taxes due to large NOLs, and minimal CapEx tied to novel facilities.