| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
|---|---|---|
| - | 12.8% | -13.2% |
Cedar Grove Capital Management returned 12.8% net in Q2 2026, rebounding from a difficult Q1 marked by the SaaS downturn and US-Iran conflict. The fund now holds 16 positions across healthcare, biotechnology, consumer discretionary, and technology, with a long/short strategy that delivered alpha through aggressive short positions in overvalued names. The manager explicitly avoids the AI momentum trade, viewing hyperscaler spending on infrastructure as unsustainable and reminiscent of past parabolic sector moves. Instead, the portfolio focuses on unloved small-cap companies with strong fundamentals, including telehealth plays like HIMS (second largest holding) and Hydreight Technologies, biotechnology positions in QURE, NKTR, and ABVX with positive clinical data, and grid modernization exposure through Tantalus Systems. Key detractors included KITS Eyewear (due to unwanted bitcoin exposure) and Sanuwave Health (Medicare reimbursement headwinds). The manager emphasizes patience and diversification, positioning for eventual capital rotation away from AI into fundamentally improving small caps. Despite near-term volatility, the long-term thesis remains intact with a marathon mindset.
Cedar Grove Capital Management maintains a patient, long-term approach focused on fundamentally sound small-cap companies trading below intrinsic value, while actively avoiding the AI momentum trade despite its dominance in 2026.
The manager expects to continue exerting patience as the volatile year continues, maintaining a long-term mindset focused on running a marathon rather than a sprint. While not waiting for the AI trade to collapse, the manager has diversified into more companies and sectors believed to snap back as flows change. The manager anticipates that when AI investors eventually degross, capital could flow into their unloved but fundamentally improving positions. The tone is cautiously optimistic, emphasizing discipline and patience while navigating market volatility.
| Date | Letter | Tickers | Keywords | Pitches | Quick Takes |
|---|---|---|---|---|---|
| Jul 14 2026 | 2026 Q2 | ABVX, CMG, CVNA, ENSG, EVLV, FRMI, GEMI, HIMS, KITS.TO, MTY.TO, NKTR, OFRM, POET, QURE, REAL, RR, SG, SNWV, TOI, XE | AI, Biotechnology, consumer discretionary, healthcare, Long/Short, Patience, SmallCap, Telehealth | - | Cedar Grove returned 12.8% in Q2 2026, rebounding from Q1 losses by diversifying into 16 positions across healthcare, biotech, and consumer sectors while aggressively shorting overvalued names. The manager explicitly avoids the AI momentum trade, instead focusing on unloved small-cap fundamentals including telehealth leader HIMS, gene therapy plays, and grid modernization. Patience and long-term discipline anchor the strategy amid market volatility. |
| Apr 10 2026 | 2026 Q1 | ABVX, EVLV, HIMS, KITS.TO, LNSR, MTY.TO, NKTR, OSW, REAL, SNWV, TOI, WW | Biotechnology, consumer, healthcare, Long/Short, Multi-Strategy, small cap, special situations |
KITS.TO REAL EVLV SNWV TOI ABVX NKTR MTY.TO |
Cedar Grove launched into a challenging Q1 2026 with -23% returns as geopolitical events overshadowed strong earnings from small-cap holdings. The manager deployed aggressively into SaaS and healthcare dislocations, maintaining conviction in quality companies with strong fundamentals. Portfolio focuses on mispriced opportunities in biotechnology, medical devices, and consumer sectors while avoiding crowded AI trades. |
| Apr 5 2025 | 2025 Q1 | ALC, HIMS, LNSR, TLT | healthcare, Multi-Strategy, Short Selling, small caps, special situations, Trade Policy |
HIMS LNSR |
Cedar Grove's multi-strategy approach delivered 465bp outperformance in Q1 despite Trump tariff volatility. Successful LENSAR trade offset HIMS short squeeze pain. Manager sees unprecedented policy uncertainty driving recession risks higher, with bond markets signaling distress. Maintaining cash reserves and disciplined positioning while awaiting political resolution of tariff policies through GOP constituent pressure. |
| Jan 2 2025 | 2024 Q4 | AAPL, HIMS, MSTR, RCAT, SNBR | AI, crypto, Hedging, Multi-Strategy, Options, small caps, Telehealth, Trump | - | Cedar Grove Capital's multi-strategy approach delivered 38.5% returns in 2024 by combining small-cap core longs with special situations and hedging. Despite strong performance, the manager is increasingly defensive heading into 2025, citing Trump policy uncertainty, speculative market excess, and dangerous concentration risks. They're raising cash and emphasizing protection strategies over aggressive deployment. |
| Oct 5 2024 | 2024 Q3 | - | Concentration, FOMO, Long/Short, risk management, Strategy | - | Cedar Grove Capital outperformed the S&P 500 by 240bps in Q3 through disciplined execution of a new concentrated, multi-year strategy. Despite facing significant position drawdowns and FOMO pressure, manager Paul Cerro stuck to his research-driven approach, avoiding momentum chasing. The strategy shift prioritizes sleep quality and long-term conviction over short-term trading. |
| Jul 7 2024 | 2024 Q2 | AAPL, AMZN, ANF, BIG, GOOGL, HIMS, LULU, META, MSFT, NVDA, TSLA, XPOF | AI, Banking, CRE, Long Term, retail, small cap, value | - | Cedar Grove Capital's 0.6% Q2 return lagged markets due to an ill-timed Xponential Fitness sale. Despite growing stress in CRE, banking, and concentrated AI-driven returns, the manager maintains his long-term approach focused on debt-light businesses with strong management execution, prioritizing sustainable growth over short-term trading gains. |
| Apr 20 2024 | 2024 Q1 | AAPL, ACI, BAC, CCJ, CPRI, DJT, FVRR, IRBT, LULU, MTCH, ONON, OXY, PTON, RH, SAVE, TPR | arbitrage, Consolidation, Frontrunning, portfolio, rates, risk management, Speculation | - | Cedar Grove consolidated from 25 to 11 positions in Q1, returning to concentrated ownership strategy after underperforming due to failed arbitrage deals. Manager warns of excessive speculation across AI, crypto, and meme stocks amid frontrunning of Fed cuts that keep getting delayed. Expects commercial real estate pain but sees private equity capital ready for distressed opportunities. |
| Jul 1 2024 | 2023 Q4 | AAPL, AFRM, BRCC, BYND, CPRI, IRBT, TSLA, WOOF | consumer, defense, Hedging, Long/Short, M&A Arbitrage, rates | - | Cedar Grove Capital delivered 15.2% in Q4 through disciplined short covering and tactical hedging, benefiting from unexpected defense and energy tailwinds. Manager views the rate rally as unsustainable given elevated valuations and declining earnings. Plans to consolidate portfolio from 20-30 positions to 12-15 concentrated holdings while maintaining M&A arbitrage focus and strategic hedging for 2024. |
| QUARTER | THEMES | TAGS |
|---|---|---|
| 2026 Q2 |
AIThe manager views the AI trade as a momentum-driven FOMO phenomenon, with hyperscalers spending all their free cash flow on AI infrastructure and semiconductors. This has created a massive weighting in the S&P 500 and retail flows into semiconductor stocks. The manager explicitly avoids participating in this trade, believing it will eventually face reality and correct, similar to past parabolic sector moves. |
Semiconductors Hyperscalers Infrastructure Momentum Retail Flows |
TelehealthThe manager has a long history with telehealth and took a position in HIMS after the messiness of compounded GLP-1 drugs is behind the company. HIMS now represents the second biggest holding of the fund. The manager also invested in Hydreight Technologies, which provides white-label telehealth solutions, viewing it as a different angle to play the strong industry tailwinds. |
GLP1 Prescriptions White Label Compliance | |
BiotechnologyThe manager made speculative investments in QURE and CLPT based on potential FDA regulatory changes at CBER. QURE received FDA approval to file for accelerated approval for Huntington's disease therapy, which the manager views positively. The manager also holds positions in NKTR and ABVX, both of which released positive clinical trial data but saw stock prices recede, requiring more time to realize value. |
FDA Clinical Trials Gene Therapy Rare Diseases | |
Consumer DiscretionaryThe manager is vocal about the second-hand luxury resale market being a long-term winner but trimmed The RealReal position despite a beat and raise, as the market continues to punish consumer discretionary stocks. The manager believes market tailwinds will persist but opted to diversify during this tumultuous time, expecting future opportunities to size up. |
Luxury Resale Volatility | |
Short SellingThe manager aggressively shorted companies in Q2, targeting fundamentally poor companies bid up to unsustainable levels. All short positions delivered alpha except Fermi. The manager realized shorts in multiple names including Fermi, Richtech Robotics, Gemini Space Station, Sweetgreen, X-Energy, Carvana, POET Technologies, and Chipotle, while maintaining open shorts in Once Upon a Farm, Chipotle, and Ensign Group. |
Alpha Fundamentals Overvaluation | |
DiversificationDuring Q2, the manager decided to diversify the fund with more positions across different sectors and strategies, including event-driven approaches, in an effort to deliver upside while reducing overall volatility. The manager moved from a concentrated approach to a more diversified portfolio of 16 positions to navigate the volatile environment. |
Volatility Risk Management Event-Driven | |
Grid UpgradeThe manager took a tracking position in Tantalus Systems, which provides grid-modernization technology for public power utilities. The technology allows utilities to gather data to prevent outages, integrate renewable energy and electric vehicles, and improve overall energy efficiency, addressing solutions the U.S. grid desperately needs. |
Utilities Renewable Energy Electric Vehicles Energy Efficiency | |
| 2026 Q1 |
BiotechnologyManager holds multiple biotech positions including Nektar Therapeutics with a drug targeting atopic dermatitis and alopecia areata, and Abivax with ulcerative colitis treatment. Both companies are viewed as potential acquisition targets with significant upside if clinical trials succeed. |
Drug Development M&A Targets Clinical Trials Specialty Pharma |
HealthcarePortfolio includes medical device companies like Sanuwave Health in wound care and The Oncology Institute operating value-based cancer care. Manager sees opportunities in healthcare companies benefiting from regulatory changes and operating leverage. |
Medical Devices Value Based Care Wound Care Oncology | |
ConsumerHoldings include consumer-facing companies like The RealReal in luxury resale, KITS Eyewear in direct-to-consumer optical, and WW International in weight loss. Manager focuses on companies with strong fundamentals despite consumer headwinds. |
Luxury Resale Direct To Consumer Weight Loss Consumer Discretionary | |
Special SituationsManager employs special situations strategy including merger arbitrage trades like LENSAR and potential buyout targets like MTY Food Group. This sleeve provides portfolio diversification and reduces beta exposure. |
Merger Arbitrage Buyout Targets Event Driven Portfolio Diversification | |
| 2025 Q1 |
Trade PolicyTrump administration's tariff implementation has created unprecedented market uncertainty and negative economic impacts. Manager notes tariffs were expected to be negotiation tactics but have become permanent policy, causing market drawdowns and forcing strategy adjustments. |
Tariffs Trump Trade Policy Uncertainty |
Biopharma M&ALENSAR buyout by Alcon at $14/share with CVR structure demonstrates ongoing consolidation in medical device space. Deal includes contingent value rights based on procedure volume targets, creating interesting risk-reward dynamics for shareholders. |
M&A Buyout CVR Medical Devices Alcon | |
Rates10-year Treasury yield movements signal market stress, dropping 70+ basis points as bond market reacts to policy uncertainty. Manager watching for potential move to 3% yield as recession indicator and considering TLT position. |
10Y Treasury Yield TLT Recession | |
| 2024 Q4 |
TelehealthHIMS is the fund's second-largest holding with immense long-term potential in cash-pay telehealth. The manager navigated complex option strategies around FDA decisions on Tirzepatide and Semaglutide, ultimately protecting the position while maintaining conviction in the long-term thesis despite short-term volatility. |
GLP1 Healthcare Software Pharmaceuticals Specialty Pharma |
Multi-strategyThe fund employs a multi-strategy approach combining core long positions in small-cap names with special situations including M&A arbitrage and event-driven trades. This strategy allows them to reduce beta exposure while capturing alpha in shorter timeframes as they wait for core longs to work. |
Risk Appetite Capital Markets Small Caps | |
AIThe manager notes that anything AI-related skyrocketed in Q4 just from being part of that thematic space, highlighting the speculative nature of AI investments during the quarter. |
AI Technology Momentum | |
CryptoThe manager expresses concern about crypto speculation, citing Microstrategy's Bitcoin strategy and comparing CEO Michael Saylor's approach to failed Celsius CEO Alex Mashinsky. Notes the proliferation of meme coins like fartcoin and PNUT as evidence of market irrationality. |
Crypto Risk Appetite Momentum | |
| 2024 Q3 |
Risk AppetiteManager discusses changing risk tolerance and strategy evolution from trading to long-term holdings. Emphasizes the importance of sleeping well at night and avoiding FOMO-driven decisions that can have disastrous consequences. |
Risk Management Strategy FOMO Volatility |
| 2024 Q2 |
Commercial Real EstateCRE continues to offload entire office buildings at fractions of what they paid for them just a few short years ago. This level of stress in the banking system continues to flash warning signs which have been going on for the last few years. Smaller banks with larger CRE exposure could face solvency issues. |
CRE Banking Stress Solvency Office |
Credit StressCredit card delinquencies are going up, and personal savings rates are still hovering below 4% which hasn't been seen outside the dot com or GFC recessions. History tells us that significant unrealized losses can be a precursor to bank failures, as we saw during the 2008 Financial Crisis. |
Delinquencies Banking Savings Losses Crisis | |
AIAI is driving much of the returns this year, with the Mag 7 contributing to 61% of the S&P gains. It's going to be one hell of a pop once new capex investments in chips even remotely start to slow down. The same companies that held up the market will be the ones to likely bring it down. |
Capex Chips Mag7 Returns Volatility | |
| 2024 Q1 |
AIManager notes AI taking front-row seat despite most companies not understanding how to use it beyond buzzwords and chatbots. Expects capital investment to taper off, ending parabolic growth in semiconductor names. |
Semiconductors Buzzwords Investment Growth Capital |
CryptoManager describes absolute stupidity in crypto prices and euphoric conditions, with many coins having no value and retail investors returning to casino-like behavior. |
Retail Euphoria Casino Speculation Prices | |
Commercial Real EstateManager expects more pain in CRE industry but notes tens of billions in private equity dry powder waiting to pick at bones once bankruptcies and firesales start. |
Bankruptcies Private Equity Distressed Dry Powder Pain | |
SPACsManager highlights Trump's SPAC (DJT) as example of market absurdity, generating only $4.1 million in sales for FY'23 yet losing $58 million, with borrow costs to short ranging from 750% to 900%. |
Trump Absurdity Short Losses Speculation | |
| 2023 Q4 |
DefenseFund was positioned long defense contractors before October 7th Hamas attack on Israel. Geopolitical events including Iran-backed Houthis attacking shipping lanes created unexpected tailwinds for defense holdings. |
Defense Geopolitical Contractors |
Pet CareManager was bullish on pet theme but shocked by industry reversal. Petco was a pain trade as ancillary data suggested consumers cutting back on pet spending beyond bare necessities, serving as economic indicator. |
Pet Consumer Discretionary |
| Date | Pitch Type | Author | Ticker | Company | Industry | Sub Industry | Bull / Bear | Exchange | Keywords | Action |
|---|---|---|---|---|---|---|---|---|---|---|
| Apr 10, 2026 | Fund Letters | Cedar Grove Capital Management | KITS.TO | KITS Eyewear | Specialty Retail | Specialty Retail | Bull | Toronto Stock Exchange | Canadian, Contact lenses, DTC, e-commerce, EBITDA Positive, Eyewear, net cash, Specialty retail, vertically integrated | Login |
| Apr 10, 2026 | Fund Letters | Cedar Grove Capital Management | REAL | The RealReal | Luxury Goods | Internet & Direct Marketing Retail | Bull | NASDAQ | AI Authentication, EBITDA Expansion, Gmv Growth, Luxury Resale, marketplace, Omnichannel, operating leverage, Second-hand Fashion | Login |
| Apr 10, 2026 | Fund Letters | Cedar Grove Capital Management | EVLV | Evolv Technologies | Security & Protection Services | Technology Hardware, Storage & Peripherals | Bull | NASDAQ | AI Detection, ARR growth, cash flow positive, government contracts, Hardware, net cash, SaaS, Security Technology | Login |
| Apr 10, 2026 | Fund Letters | Cedar Grove Capital Management | SNWV | Sanuwave Health | Medical Devices | Health Care Equipment & Supplies | Bull | NASDAQ | acquisition target, CMS Guidance, debt refinancing, Medical Device, Medicare, ultrasound technology, wound care | Login |
| Apr 10, 2026 | Fund Letters | Cedar Grove Capital Management | TOI | The Oncology Institute | Medical Care Facilities | Health Care Providers & Services | Bull | NASDAQ | EBITDA inflection, Healthcare services, Oncology, operating leverage, Payer Contracts, Pharmacy Growth, value-based care | Login |
| Apr 10, 2026 | Fund Letters | Cedar Grove Capital Management | ABVX | Abivax | Biotechnology | Biotechnology | Bull | NASDAQ | acquisition target, biotechnology, Commercialization, French, Maintenance Data, Phase 3, Special situations, Ulcerative Colitis | Login |
| Apr 10, 2026 | Fund Letters | Cedar Grove Capital Management | NKTR | Nektar Therapeutics | Biotechnology | Biotechnology | Bull | NASDAQ | acquisition target, Atopic Dermatitis, biotechnology, JAK Inhibitors, Phase 3, Quarterly Dosing, safety profile, Special situations | Login |
| Apr 10, 2026 | Fund Letters | Cedar Grove Capital Management | MTY.TO | MTY Food Group | Restaurants | Hotels, Restaurants & Leisure | Bull | Toronto Stock Exchange | acquisition target, Canadian, Improving Fundamentals, M&A, private equity, Restaurant Franchisor, Special situations | Login |
| Apr 6, 2025 | Fund Letters | Cedar Grove Capital Management | HIMS | Hims and Hers Health | Health Care | Health Care Technology | Bear | NYSE | Bear, Healthcare Technology, Options Strategy, risk management, Short Position, telehealth | Login |
| Apr 6, 2025 | Fund Letters | Cedar Grove Capital Management | LNSR | LENSAR | Health Care | Health Care Equipment | Bull | NASDAQ | Cataract Surgery, CVR, Femtosecond Laser, international expansion, M&A Arbitrage, Medical devices, Ophthalmology | Login |
| TICKER | COMMENTARY |
|---|---|
| TOI | Our biggest contributors of the quarter were The Oncology Institute (TOI), Hims and Hers Health (HIMS), and uniQure NV (QURE). |
| HIMS | Our biggest contributors of the quarter were The Oncology Institute (TOI), Hims and Hers Health (HIMS), and uniQure NV (QURE). Some of you may or may not know, but we have a long history with HIMS, technically going back all the way to 2021. More recently, we were one of the first bears that initially pointed out its overall reliance on compounded GLP-1 medications, to its shady prescribing practices for the same drug that led to Novo Nordisk (NVO) terminating their first partnership with the company, and finally, the eventual patent infringement suit against the company by Novo Nordisk in February. Despite us being bears, we did hold a long position in the company for all of 2024 with the belief in the future of telehealth. Now that the messiness of compounded GLP-1 drugs is behind the company (hopefully), we ended up taking a position in the company the day after they reported Q1 earnings. We will share more in the coming weeks about our thesis, but for now, it represents our second biggest holding of the fund. |
| QURE | Our biggest contributors of the quarter were The Oncology Institute (TOI), Hims and Hers Health (HIMS), and uniQure NV (QURE). During the quarter, we made investments into both QURE and CLPT, exploiting a potential mispricing that traders had opened the door to. The premise was that changes to the Center for Biologics Evaluation and Research (CBER) department at the FDA could allow these companies to gain favor again as potentially viable options for patients seeking treatment. QURE being for Huntington's disease, while CLPT being the delivery system for various neurological therapies. Given that this was a speculative investment, we sized them both appropriately and were pleased that the FDA gave QURE the 'ok' to file for accelerated approval after rejecting its clinical trial data last year. This optimism spilled to CLPT since QURE's Huntington's disease therapy is administered using CLPT's technology. We'll be keeping an eye on developments in QURE, though do not expect filing until late Q3, which, if accepted, could mean that an FDA decision might arrive before the end of the year. |
| KITS.TO | Our biggest detractors were KITS Eyewear (KITS.TO), Sanuwave Health (SNWV), and Evolv Technologies (EVLV). We've been impressed by the KITS growth story and it being the founders' second act (originally highlighted here). However, in Q4'25, the company surprisingly made the decision to use excess cash to buy into a bitcoin (BTC) ETF as part of a long-term investment strategy. We voiced our concerns to management about this capital allocation shift, and they acknowledged it as a miscalculation on their part and that they would be looking to offload that ETF and go back to focusing solely on the business. Once Q1'26 was announced and they did not get rid of the bitcoin ETF as they had led on, we decided to considerably reduce our holdings in the company, which was our top holding at the time, realize the tax loss, and reallocate capital elsewhere. We do not believe in bitcoin, let alone crypto in general, and as stewards of capital, we will not partake in companies that determine this to be a strategy to implement. Upon meeting with management at the Planet MicroCap conference, they acknowledged that they no longer own that ETF. KITS, unfortunately, was another considerable drag on our quarter's performance. |
| SNWV | Our biggest detractors were KITS Eyewear (KITS.TO), Sanuwave Health (SNWV), and Evolv Technologies (EVLV). Sanuwave was a position that we first highlighted almost a year ago, and we were bullish on the long-term prospects of the company in the wound care space. While we knew that changes to overall wound care reimbursement were coming from the Centers for Medicare and Medicaid Services (CMS), we felt confident that their main device, the UltraMist, would come out unscathed. This turned out to be true, but unfortunately, the damage done to the overall market (clinics, centers, mobile care, etc.) effectively made Sanuwave collateral damage above and beyond what any long investor had thought. First occurring in Q4'25, it spilled into 2026 and led to Sanuwave having to lower Q2'26 guidance dramatically on the device front. The stock dropped ~40% that day, and while we are bullish on the device and the space, it's clear that not many people know exactly where the bottom is. We decided to exit the position to secure a tax loss but would still like to keep an eye on the company and the space if/should evidence arise that the wound care tides are turning once again. This position had a large negative impact on the quarter's performance due to the surprising guidance cut in mid-June. |
| EVLV | Our biggest detractors were KITS Eyewear (KITS.TO), Sanuwave Health (SNWV), and Evolv Technologies (EVLV). During the quarter, we increased our positions in Nektar Therapeutics (NKTR), Abivax SA (ABVX), The Oncology Institute (TOI), and Evolv Technologies (EVLV). NKTR and ABVX had good clinical data reported, which we talk about at the end, while EVLV delivered outstanding earnings and showed that the demand and growth for weapons detection systems is alive and well. |
| CMG | During Q2, we realized short positions in Fermi (FRMI), Richtech Robotics (RR), Gemini Space Station (GEMI), Sweetgreen (SG), X-Energy (XE), Carvana (CVNA), POET Technologies (POET), and Chipotle Mexican Grill (CMG) as a quick trade. We're pleased to report that all our short positions delivered alpha to the fund aside from Fermi (FRMI), which we were flat. At the end of the quarter, we still had open short positions in Once Upon a Farm (OFRM), Chipotle Mexican Grill (CMG), and Ensign Group (ENSG). |
| REAL | We've been vocal about the second-hand luxury resale market being a long-term winner in the consumer discretionary space. However, after Q1'26 results, we opted to trim the position despite another beat and raise for earnings. It's become clear that the market is still punishing consumer discretionary stocks, and while we strongly believe that the market tailwinds will persist into the future, we decided to trim our position in an effort to diversify our holdings during this tumultuous time. Given the volatility that the company has, there should be more opportunities to size up at a future date if it makes sense to. |
| MTY.TO | MTY was a speculative restaurant special situation regarding the company being a take-out target. Considering that management started its strategic review in Q4 of last year, having entered summer with still no update on the review aside from being 'active and ongoing.' In an effort not to get caught offside again, like our previous M&A arbitrage position in LENSAR (LNSR), we decided to trim our position and reallocate. |
| NKTR | During the quarter, we increased our positions in Nektar Therapeutics (NKTR), Abivax SA (ABVX), The Oncology Institute (TOI), and Evolv Technologies (EVLV). NKTR and ABVX had good clinical data reported, which we talk about at the end, while EVLV delivered outstanding earnings and showed that the demand and growth for weapons detection systems is alive and well. Lastly, Nektar Therapeutics released its positive alopecia areata trial data in April that showed its second indication for its Rezpeg drug could be a viable option. The stock rallied ~50% on the news but has since receded to near our original cost basis. Like ABVX, we unfortunately did not receive any benefit from positive trial data. NKTR will also need more time. |
| ABVX | During the quarter, we increased our positions in Nektar Therapeutics (NKTR), Abivax SA (ABVX), The Oncology Institute (TOI), and Evolv Technologies (EVLV). NKTR and ABVX had good clinical data reported, which we talk about at the end, while EVLV delivered outstanding earnings and showed that the demand and growth for weapons detection systems is alive and well. There were two instances that, while fortunate, led to an unfortunate response in our P&L. One of the long special situation trades we had on was for Abivax SA (ABVX) and either the release of its ulcerative colitis (UC) maintenance drug data or the announcement of a buyout. No buyout has come (yet), but the company released the maintenance data on June 1. In essence, the drug showed above and beyond an efficacious response that any bull or sell-side research shop had expected, making it, at face value, an almost equal drug to JAK inhibitors on an efficacy level. However, the market got spooked that some cancer reports arose, and the company did a pretty poor job of explaining why those cancer reports did not show signs of being caused by the drug. An initial pop of >30% quickly became a sell the headline and the stock dropped ~50% at its worst in after-market trading. We did not agree with the market's interpretation of the data and found the opportunity to size up the position during the sharp drawdown. Fast forward to the end of June, and the company released updated safety data that showed the drug's cancer reports were indeed most likely not linked to the drug itself. The market rebounded well off the news, though the unfortunate part was that the stock did not rebound to its highs established earlier in the month for what is now arguably the best disease drug. While we got the positive news we've been waiting for, we unfortunately did not get to reap the rewards that we would have otherwise. ABVX will need more time. |
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