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Laughing Water Capital: “There’s No Guarantee that PAR will Succeed on this Front, but I Like our Odds”

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Laughing Water Capital LP, an investment management firm, published its second quarter 2021 investor letter – a copy of which can be downloaded here. A quarterly median account return of 9.5% net of fees was recorded by the fund for the second quarter of 2021, compared unfavorably to the 8.6% and 4.3% returns of the SP500TR and R2000TR respectively. You can view the fund’s top 5 holdings to have an idea about their top bets for 2021.

In the Q2 2021 investor letter of Laughing Water Capital, the fund mentioned PAR Technology Corporation (NYSE: PAR), and discussed its stance on the firm. PAR Technology Corporation is a New Hartford, New York-based systems and service solutions provider, that currently has a $1.6 billion market capitalization. PAR delivered a 2.33% return since the beginning of the year, extending its 12-month returns to 99.78%. The stock closed at $64.25 per share on July 28, 2021.

Here is what Laughing Water Capital has to say about PAR Technology Corporation in its Q2 2021 investor letter:

"The story remains the same at long time holding PAR. The company has established itself as a leader in each of the major software process areas that allow quick serve restaurants to function, and is attempting to expand their footprint further. There is no guarantee that PAR will succeed on this front, but I like our odds. As a company outsider and an industry outsider this opinion may not carry much weight, but I think the fact that Ron Shaich of Panera Bread fame also likes our odds is a strong signal. Shaich is widely regarded as one of the best operators in the QSR world, and is particularly well regarded for his early adoption of technology. In April, Shaich was part of a group that invested ~$160M in PAR at as part of the acquisition of leading loyalty provider Punchh (not a typo), and one of his partners joined PAR’s board. In this interview he shares his thoughts in a way that is more clear and informed than I can."


Based on our calculations, PAR Technology Corporation (NYSE: PAR) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. CDMO was in 16 hedge fund portfolios at the end of the first quarter of 2021, compared to 19 funds in the fourth quarter of 2020. PAR Technology Corporation (NYSE: PAR) delivered a -21.67% return in the past 3 months.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage.

Disclosure: None. This article is originally published at Insider Monkey.