Praetorian Capital, an investment management company, released its second-quarter 2024 investor letter. A copy of the letter can be downloaded here. The fund was down by 1.69% net of fees in the second quarter. The core portfolio positions had both profits and losses in the second quarter, but the Event-Driven book saw a decent return—even though it had to give back part of those gains in June. For more information on the fund’s top picks in 2024, please check its top five holdings.
Praetorian Capital highlighted stocks like Tidewater Inc. (NYSE:TDW) in the second quarter 2024 investor letter. Tidewater Inc. (NYSE:TDW) provides offshore support vessels and marine support services to the offshore energy industry. The one-month return of Tidewater Inc. (NYSE:TDW) was 11.00%, and its shares gained 72.14% of their value over the last 52 weeks. On July 23, 2024, Tidewater Inc. (NYSE:TDW) stock closed at $103.44 per share with a market capitalization of $5.458 billion.
Praetorian Capital stated the following regarding Tidewater Inc. (NYSE:TDW) in its Q2 2024 investor letter:
“Let’s look briefly at Tidewater Inc. (NYSE:TDW), a position that we started buying in January of 2022 at a price of around $12. The shares ended June at approximately $95. What led to such dramatic price appreciation?? Well, in the first quarter of 2022, the company reported $105.7 million in revenue and an adjusted net loss of $11.7 million. Fast forward to the first quarter of 2024, and the company reported revenue of $321.2 million and net income of $47 million. More importantly, the company guided to 2024 revenue in a range of $1.40 to $1.45 billion and gross margins of 52%, which is quite the improvement over $361.6 million in revenue, and a gross margin of 28% reported in 2021, the most recently available numbers when we were purchasing shares.
Sure, Tidewater is an old economy, highly cyclical, oil services business. It’s the sort of business that the market currently has extreme disdain for. I like to joke that the cool kids in finance wouldn’t even think to look at it. However, none of this matters—when a company produces results, the shares respond. Inflection investing works in most market environments—even ones where most market participants are chasing an AI bubble—assuming there actually is an inflection in underlying financial performance. Unfortunately, for every Tidewater in our portfolio, we own a number of positions that did not produce outstanding financial results thus far in 2024. Without an inflection in performance, there has been no inflection in their share prices. While I remain optimistic that these companies will have results that inflect positively in the future, until the results actually inflect, the market simply doesn’t care—hence the rather meager returns thus far during the year.”
A fleet of offshore supply vessels and tugs carrying materials to an oilrig in the distance.
Tidewater Inc. (NYSE:TDW) is not on our list of 31 Most Popular Stocks Among Hedge Funds. Tidewater Inc. (NYSE:TDW) was held by 36 hedge fund portfolios at the end of the first quarter, compared to 39 in the previous quarter, according to our database. Tidewater Inc. (NYSE:TDW) reported first-quarter revenue of $321.2 million, up from $302.7 million in Q4 2023, and net income of $47 million, or $0.89 per share. In Q1 2024, the gross margin was $152.5 million, compared to $142.8 million in Q4 2023. Revenue and gross margin for the first quarter were significantly above expectations. While we acknowledge the potential of Tidewater Inc. (NYSE:TDW) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
In another article, we discussed Tidewater Inc. (NYSE:TDW) and shared Praetorian Capital’s views on the stock in the previous quarter. In addition, please check out our hedge fund investor letters Q2 2024 page for more investor letters from hedge funds and other leading investors.
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Disclosure: None. This article is originally published at Insider Monkey.