Deep Sail Capital: Bullish on Sanity, Bearish on Stupidity | Buyside Digest
InsightArticleOctober 27, 20256 min read
Deep Sail Capital: Bullish on Sanity, Bearish on Stupidity
By Genevievecjackson@gmail.com
Every cycle has its voice of reason — the investor yelling into the wind while everyone else is busy YOLOing their way into the next mania. For 2025, that might be Sean at Deep Sail Capital. His latest investor letter doesn’t just tap the brakes; it stomps on them.
Deep Sail Capital Partners clocked a +5.8% net return in Q3 2025, bringing year-to-date performance to +18.1% net with an average 80% net long exposure. That’s solid alpha in a market where fundamentals are optional and “AI quantum drone miners” are the new growth stocks.
The fund outperformed both the Russell 2000 Growth and Russell 2000 year-to-date, even as Q3’s rally in speculative junk dragged the short book underwater. The manager doesn’t mince words: we’re in “a bubble similar in size and stupidity to 2021.”
So yes—Deep Sail’s longs are winning, the shorts are hurting, and the tone of the letter sits somewhere between “I told you so” and “I can’t believe I have to watch this again.”
The section titled “Clearly in bubble territory” could have been subtitled “Everything Everywhere Pumps All at Once.” The letter describes investor behavior bordering on euphoria: quantum computing, rare-earth miners, iBuyers, crypto—all soaring together like a speculative conga line.
The manager’s diagnosis? Classic late-stage mania:
Valuation extremes
Deteriorating breadth
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Leverage on leverage
“Blind faith in perpetual liquidity”
The fund’s tone is peak exasperation: “Greed has completely taken over… every new high feeds the FOMO, and rational analysis is dismissed as being early.”
Translation: we’ve reached the “Do you want to be right or rich?” phase of the bubble—right before it all goes sideways.
The fund’s plan is simple: stay patient, stay hedged, and wait for the catalyst. The manager even suggests tax season could be the first crack, when speculators realize they owe real money on their fake gains. It’s the most relatable bearish take of 2025.
Chart: Fund vs. Benchmarks
Year
Fund Net Return
Russell 2000
Russell 2000 Growth
Notes
2021
+24.5%
+14.8%
+11.3%
Smarter small-cap stockpicking
2022
-8.2%
-20.4%
-26.4%
Defensive discipline worked
2023
+29.6%
+16.9%
+12.1%
Recovery year
2024
+22.7%
+15.0%
+13.4%
Quiet consistency
2025 YTD (Q3)**
+18.1%
+10.4%
+10.2%
Outperforming both benchmarks
Source: Fund letters, Bloomberg. Net of fees.
Kraken, ClearPoint, and the Long-Book Heroes
While the shorts suffered, the long book had a blockbuster quarter, led by Kraken Robotics and ClearPoint Neuro—two names that sound like science fiction but actually print cash.
Kraken Robotics: The Real “Ghost Shark” Deal
The market discovered that Kraken is the exclusive supplier of batteries, sensors, and software for the Australian Navy’s $1.1 billion Ghost Shark program. That contract could deliver $150–$250 million in revenue—a huge leap for a micro-cap that used to sell underwater drones to hobbyists.
In true Kuppy fashion, the fund can’t resist a jab: “The size of the prize just changed.” Translation: this thing might actually go parabolic before the next correction kills it.
ClearPoint Neuro: Hunting Huntington’s
Then there’s ClearPoint Neuro (CLPT), which spiked after uniQure (QURE) announced Phase-2 results showing a 75% slowing of Huntington’s disease progression. ClearPoint’s SmartFlow cannula is literally the delivery system for that therapy. The letter notes milestone payments, expanding adoption, and the possibility that CLPT becomes the neurosurgery infrastructure play.
The takeaway: Deep Sail’s long book is full of small companies doing real things—while the rest of the market is busy trading vibes.
The New Favorite: Hydreight Technologies
Of the fund’s three new Q3 positions, the showstopper is Hydreight Technologies (NURS.V)—a vertically integrated, app-driven, nurse-powered telehealth company.
Think of it as “Uber for nurses meets Shopify for telemedicine.”
Hydreight combines software, regulatory compliance, payments, and pharmacy distribution across three platforms:
Hydreight App – mobile IV and wellness services delivered by registered nurses.
VSDHOne – white-label SaaS for consumer health brands launching telehealth (GLP-1 weight loss, anti-aging, genetic testing, you name it).
Hydreight MD – the compliance and clinical infrastructure that keeps the other two legal in all 50 states.
The fund calls it a “self-reinforcing growth loop”: more nurses → more patients → more brands → more transactions → more revenue.
The Math: From $3 Million to a Billion
Hydreight has gone from $3 million revenue in 2022 to a forecast of $100 million in the next 12 months—a 30× jump that would make even NVIDIA blush.
VSDHOne processed 80,000 orders in August, and management projects 1.3 million orders for 2025. Using $100–$125 per order, that’s $130–$162 million in gross revenue next year. At this pace, the letter says, they could hit $1 billion within three years.
Even better: the company’s EBITDA breakeven and trades at ~16× 2026 EBITDA—a number the fund argues is too low given growth and margin expansion. Their internal model pegs $20 million EBITDA and $100+ million revenue in 2026.
The valuation pitch is classic: software-style multiples on healthcare-style defensibility. “Hydreight should trade like a SaaS platform,” the manager writes, “at 5×–8× sales, not 1×.”
At 3× sales, that’s $8–$11/share, double the current CAD $4.10 price.
The Story Everyone’s Missing
Despite its ridiculous growth, Hydreight remains a micro-cap orphan on the TSX Venture exchange. The fund argues that if it were U.S.-listed, it would already be a momentum darling.
It’s also Deloitte’s #9 fastest-growing company in Canada and #56 in North America. Yet almost no one on the Street is paying attention—because everyone’s too busy buying companies with “AI” in their ticker.
The letter calls Hydreight “the Uber-style medical tech platform investors are sleeping on.” Expect that line to age well—or painfully—depending on how long this bubble lasts.
AI IV Drips and GLP-1 Everything
Hydreight isn’t content to stick with hydration drips and Botox. It’s diving into AI too (because 2025 demands it). The company acquired a Dynamic IV Therapy Support AI agent from Auxano to personalize IV treatments in real time.
They’re also rolling out GLP-1 weight-loss programs with celebrity doctors and moving into genetic wellness, diagnostics, and anti-aging injectables.
Basically, it’s everything the modern consumer wants: weight loss, peptides, and plausible deniability that it’s medical.
Shorts in the Crossfire
While the longs soared, the short book got run over. The fund lost 14.6% on its shorts as “the less real the business, the better” stocks exploded.
It’s the same kind of speculative insanity that ruined short sellers in early 2021—only this time the manager is ready, calling it the “re-bubble.”
The fund’s plan? Sit tight, wait for gravity to return, and prepare to make back the losses in one glorious downdraft.
The Two-Year Mark
July marked two years since Deep Sail Capital opened to outside investors, and the tone turns almost sentimental. The manager thanks LPs for their trust, calls managing capital a privilege, and promises another 20–30 years of “thoughtful compounding.”
It’s a nice palate cleanser after 15 paragraphs of bubble rage.
The Read Between the Lines
What makes this letter pop is the tone: equal parts exasperated trader and thoughtful stock picker. The manager clearly sees himself as one of the few adults left in a meme-stock casino.
He knows this cycle ends the same way they all do—liquidity dries up, risk unwinds, and everyone suddenly remembers valuation. But until then, he’ll keep buying real growth, shorting fake stories, and quietly compounding.
It’s a fine line to walk, but based on the returns so far, Deep Sail’s doing it better than most.
