5. Valaris Limited (NYSE:VAL)
52 Week Range: $49.62 – $84.20
Current Share Price: $50.80
Number of Hedge Fund Holders: 39
Valaris Limited (NYSE:VAL) is another offshore drilling company that ranks 5th on our list of best-falling stocks to buy according to hedge funds. The company provides various types of rigs that enable companies to extract oil and natural gas from the ocean floor. Its fleet comprises ultra-deepwater drillships, semisubmersibles, and jack-up rigs. The company has an international presence with significant operations in the Gulf of Mexico, North Sea, Asia Pacific, and the Middle East.
Valaris Limited (NYSE:VAL) has been focused on implementing its commercial strategy to improve its contract order backlog. The strategy has led to an improved order backlog which stood at $4.3 billion as of July 29, indicating a 42% increase from the prior year. The increase in backlog also represented the seventh consecutive quarter of backlog growth indicating the continued success for the company.
The second quarter of fiscal 2024, came in with a 99% revenue efficiency across its fleet, indicating no lost time incidents. Moreover, the net income of the company improved from $26 million during the first quarter to $151 million in the second quarter of fiscal 2024. Management attributed the increase in income to higher utilization and average daily revenue for both its floater and jack-up fleets.
In addition to the net income, revenue also improved from $525 million to $610 million subsequently. Looking ahead, the management of Valaris Limited (NYSE:VAL) is focused on maximizing its profitability by ensuring high utilization of its active rigs and securing advantageous contracts.
Praetorian Capital stated the following regarding Valaris Limited (NYSE:VAL) in its Q3 2024 investor letter:
“I have always believed that the only way to substantially outperform is to run a highly concentrated portfolio. When things are working, they tend to work beautifully. The flip side is that there will be times when this high level of portfolio concentration becomes a headwind to performance. To illustrate this point, during the first nine months of the year, in Dollar terms, the Fund has produced approximately $21.0 million of total P&L (before management fees). However, that figure is somewhat disingenuous as three large positions (our physical uranium entities, Valaris Limited (NYSE:VAL) along with Valaris warrants, and St. Joe) produced a loss of approximately $20.5 million. More importantly, these three positions represented approximately 49.7% of our approximately $350.2 million of capital at the end of September. Not only did these three positions cost us money, but they also tied up substantial capital. As you can imagine, it’s hard to swim fast when you’re dragging an anchor.
During September, I dedicated substantial time to the first two of these positions, by attending the World Nuclear Association meet-up in London, followed by the Pareto Energy conference in Oslo. As far as I’m concerned, the theses behind our uranium and Valaris positions are quite intact—however, the timing of the next move higher remains uncertain. Meanwhile, St. Joe continues to suffer with many other housing names, despite the fact that it should be an inflation beneficiary on account of its large land bank. …” (Click here to read the full text)
