Matt Sweeney is the Managing Partner of Laughing Water Capital. Laughing Water Capital is a private investment fund formed in February of 2016 which employs a value-based strategy to identify mispriced securities for inclusion in a concentrated portfolio of eight to 20 investments that the Managing Partner believes provide the opportunity for anomalous returns over three-to-five-year periods. While the fund’s mandate allows it to seek long and short investments across geographies, market caps and capital structures, the fund primarily invests long in small and midcap U.S.-based equity securities that are off the radar of larger, less patient investors. In this exclusive interview with the Wall Street Transcript, this highly regarded value investor discusses his recent top picks.
Matt Sweeney points out the key investing characteristic for his portfolio. “We are looking for situations where over the next three to five years, something drastic is going to change, whether that be operational improvement at the company or a change in perception by the Street or some kind of combination of both of those factors.” This strategy has yielded returns far above the market comparisons.
The stocks identified are far off the beaten path. “An example of something that we would look at that is just off the beaten path for most investors would be Redknee Solutions (TSE:RKN), and it is a Canadian microcap stock. When you look at it on the surface, it basically has all of the things that Wall Street hates. It has some operational problems. In fact, a year ago, they ran into balance sheet problems and had to do some restructuring and then announced they were undergoing a strategic review. More recently, they completed a rights offering, whereby they raised money to fund a turnaround of the company.”
“We generally avoid turnarounds, but what I think is interesting in this case is that prior to the rights offering, when the company first announced that they were putting themselves up for a strategic review, there was a bidding process whereby two of the world’s best software investors essentially fought for the right to invest in this company.”
To get more insight into Matt Sweeney’s investment philosophy and details on more of his top picks, read the entire interview in the Wall Street Transcript.