utah778/iStock via Getty Images
The following segment was excerpted from Cedar Grove Capital Q3 2026 Letter.
Position Commentary
Closed Long Positions
During the quarter, we closed our long positions in MTY Food Group (MTYFF), uniQure (QURE), ClearPoint Neuro (CLPT), and Suja Life Inc. (SUJA).
MTY Food Group was a special situation investment based on the view that its strategic review, initiated in November 2025, could result in a sale that would unlock value. As time passed, the macroeconomic backdrop worsened for restaurant companies more broadly. With no update on the strategic review by the beginning of Q3, we decided to manage risk by closing the position.
Just before quarter-end, uniQure published four-year data for AMT-130, its experimental treatment for Huntington’s disease. The results showed that the treatment continued to slow disease progression, but the effect was less pronounced than in the three-year data. The stock sold off, and CLPT declined in sympathy. Although both were small positions, we decided to close them and reallocate the capital elsewhere.
After Suja Life reported its Q2 2026 results, the stock declined more than 45%. We viewed this as an overreaction to the earnings report and shared our notes explaining why we believed the shares were mispriced. The stock subsequently rebounded more than 50% from its level on the day after earnings, and we took profits and redeployed the capital into our core holdings. Read the Suja research note.
Closed Short Positions
During the quarter, we closed short positions in Bending Spoons SpA (BSP), Chipotle Mexican Grill (CMG), The Ensign Group (ENSG), Gemini Space Station (GEMI), Jersey Mike’s Subs (JMKE), Moderna (MRNA), Reformation (REF), Once Upon a Farm (OFRM), and X-Energy Inc. (XE).
Increased Positions
During the quarter, we increased our positions in Abivax (ABVX), Evolv Technologies (EVLV), Tantalus System Holding (GRID.TO) (TGMPF), Hims and Hers Health (HIMS), Kits Eyecare (KTYCF) (KITS.TO), LENSAR (LNSR), Nektar Therapeutics (NKTR), Hydreight Technologies (HYDTF) (NURS.V), The RealReal (REAL), and Starling Oncology (STLN), formerly known as The Oncology Institute (TOI).
New Positions
Zedcor Inc (ZDC.V) (ZDCAF)
We initiated a small tracking position in Zedcor Inc. (ZDC.V) while continuing our due diligence. Zedcor is a Canadian company specializing in customizable mobile surveillance and live monitoring solutions in the U.S. and Canada. You may have seen its mobile camera towers in parking lots or around construction sites without noticing the company behind them.
Zedcor’s share price has gradually declined from its May highs, which provided an opportunity to initiate a position. Meanwhile, the company continues to grow and expand margins while serving an important niche. At quarter-end, Zedcor traded at approximately 13x next-twelve-month EBITDA. Our preliminary estimates suggest revenue growth of more than 65% next year, with EBITDA margins above 40%, an expansion of approximately 200 basis points year-over-year.
OneSpaWorld (OSW)
OneSpaWorld is an asset-light spa operator that derives most of its revenue from the cruise industry. We previously owned the stock in Q1 after oil prices began rising, and we revisit it when we believe the market has misinterpreted its relationship with the cruise industry, which appears to be frequent.
OSW often sells off alongside cruise operators when oil prices rise or investors worry about lower-income consumers reducing discretionary spending, even without company-specific news. While that reaction may seem logical, we believe it overlooks how OSW operates and has once again created an opportunity to buy at an attractive price. At the base level, OSW needs passengers to board ships to sell them spa services. Just this past week, Carnival Corporation (CCL), OSW’s largest customer, announced better-than-expected earnings. Booking trends continued to strengthen during the quarter, and booked occupancy for 2027 is at record levels. You can read more about our long thesis using the link provided.
Auxly Cannabis Group Inc (XLY.TO) (CBWTF)
Auxly Cannabis Group is our first official cannabis investment, and we believe it offers a compelling opportunity for continued growth. Auxly is a vertically integrated Canadian cannabis producer whose Back Forty brand has become the country’s No. 1 cannabis brand by dollar sales. The business is supported by its highly automated, low-cost Leamington greenhouse and its strategic relationship with Imperial Brands, which owns approximately 20% of the company.
Auxly has undergone a sharp turnaround, reporting approximately C$131 million in first-half 2026 revenue, up 20% year over year, and C$26.5 million in adjusted EBITDA, up 40%. Its shares trade at approximately 11x last-twelve-month free cash flow. Despite these improved fundamentals, Auxly trades at a discount to Canadian cannabis peers and has several avenues for future growth. While the U.S. cannabis market remains in limbo, we find Auxly’s prospects attractive at the current valuation and have initiated a position
Select Position Commentary
Abivax (ABVX)
When we last spoke about ABVX in our Q2’26 letter, we noted that the company released updated safety information that reduced concerns of reported malignancies of its ulcerative colitis (UC) drug, obefazimod. However, as time went on, the stock experienced a slow decline in the quarter. We believe there are two reasons for this. 1) Without an impending takeover announcement, arbitrage traders have largely been reducing their exposure in the name, and thus, leaving long investors to be the only incremental buyers of the stock. 2) With yields trading at where they are, historically speaking, biotechnology companies tend to bear the brunt of such a move. Neither, in our opinion, change the long-term potential of this drug, which we estimate can still make ABVX be valued at north of $170/share with the soon-to-be commercialization, or >$200/share in the event of a buyout. As a reminder, with phase 3 maintenance data already released, this is a mostly de-risked drug asset in a pharmaceutical environment that is actively looking for high-quality assets to add to their portfolios considering many will be experiencing patent cliffs over the next five to ten years. One way or another, excluding any left tail events, ABVX’s intrinsic value should be realized over the coming years.
Nektar Therapeutics (NKTR)
Similar to ABVX, NKTR also experienced its own drawdown during the quarter. However, semi-positive highlight came from the eventual conclusion of its lawsuit against Eli Lilly (LLY), where it sought damages in their handling of the drug when it held co-development and commercialization rights dating back to 2017, came in favor for NKTR. LLY was found in breach of contract and NKTR was awarded $90 million in damages. Including simple interest, the gross amount would be ~$115 million, or ~5% of its market cap.
However, before the verdict came, the market was spooked when a jury note to the judge asked to explain the difference between ‘no breach’ and ‘breach with a $1 damage award.’ This led to an >$200 million loss in market cap for the company which did not recover once the verdict came in favor of NKTR and damages were awarded and was only exacerbated by the rise in yields. While we were hoping for more in damages — NKTR was asking for as much as $1 billion, which frankly, we were not underwriting anywhere close to — we believe that his is a net positive for the stock and removes an overhang that has been in the works for years.
Additionally, while it did not occur in Q3, NKTR released updated Alopecia Areata (AA) off-treatment data on October 1st. The data showed that 75% of the patients in a subgroup maintained the same amount of hair on their scalp four months after ending treatment, and 63% managed to do so after six months. Given that AA could be approved as a second indication for rezpeg, the results seemed directionally positive despite the small sample size.
Despite the readout, the stock sold of >20%, which is odd considering the market had already appeared to assign it no value to AA prior to the release. Seeing how NKTR is now officially in a catalyst desert until the next read in Q1’27, stocks like this end up becoming a consensus short rather than one that trades around logic.
None of this changes the prospects for rezpeg in the treatment of atopic dermatitis (AtD) and even without AA, we still believe that the intrinsic value of NKTR could be worth >$165/share.
Hims and Hers Health (HIMS)
Lastly, we have a long history with HIMS both on the long side and the short. More recently, we officially shared our investment thesis on the company, and why we think that with the legal overhang behind them, the company looks strategically positioned to capture significant share in the cash pay space. This is all assuming that Andrew (CEO) doesn’t fly too close to the sun again.
We believe that should management be able to execute the way we think they can, a path to tripling our investment over the next few years appears to be in the cards. If interested, you can view our podcast episode on the opportunity via the Yet Another Value Podcast.
Editor’s Note: The summary bullets for this article were chosen by Seeking Alpha editors.
