Miller Value Partners, an investment management company, released its “Deep Value Strategy” second-quarter 2024 investor letter. A copy of the letter can be downloaded here. The second quarter saw the continuation of the narrow leadership in the equities market, with smaller cap and lower value indices lagging behind the broader market. In contrast, the majority of large-cap indexes had positive gains. In the second quarter, Strategy returned 12.84% (net of fees) well ahead of S&P 1500 Value Index’s -2.25 % return and the S&P 600 Value Index’s -4.85% returns. The strategy returned 15% (net of fees) year to date, compared to 5.17% and -4.72% returns for the indexes. The strategy benefitted from its very high active share in Q2. In addition, please check the fund’s top five holdings to know its best picks in 2024.
Miller Value Deep Value Strategy highlighted stocks like Nabors Industries Ltd. (NYSE:NBR), in the second quarter 2024 investor letter. Nabors Industries Ltd. (NYSE:NBR) is a drilling and drilling-related services provider for offshore oil and natural gas wells. The one-month return of Nabors Industries Ltd. (NYSE:NBR) was 35.63%, and its shares lost 25.07% of their value over the last 52 weeks. On July 16, 2024, Nabors Industries Ltd. (NYSE:NBR) stock closed at $85.45 per share with a market capitalization of $815.213 million.
Miller Value Deep Value Strategy stated the following regarding Nabors Industries Ltd. (NYSE:NBR) in its Q2 2024 investor letter:
“Our two largest detractors during the quarter were Nabors Industries Ltd. (NYSE:NBR) and Gray Television (GTN), whose share prices were down 17% and 16% respectively during the quarter. We think both company’s share prices are at deep discounts to their long-term fundamental value; we have recently increased both holdings.
With the recent pullback in commodity prices and increased industry consolidation there has been growing fear that Nabors will experience greater operational pressure on their North America rig business. However, Nabors’ significant global presence has developed long standing relationships with leading energy companies and national Oil companies. While the recent industry consolidation may lead to some near-term choppiness in industry capital expenditures, Nabors is likely to be a long-term beneficiary with the potential for incremental market share overtime. We believe the North America rig market should bottom over the coming quarter and there is potential for incremental rig deployments over the coming 6 to 12 months. Meanwhile, international rig demand remains very robust. Nabors has signed contracts for a 25% increase in their international working rig fleet over the coming 2 years. In addition, their joint venture (“JV”) with Saudi Aramco should continue to scale over the next couple of years with 4-5 new rigs added each year. The JV free cash flow should also have a meaningful improvement as it transitions from cash use to positive free cash flow generation. Finally, Nabors Drilling Solutions division has a growing global expansion opportunity. The segment has very low capital intensity, further growth should also support company future free cash flow generation. With the recent share price weakness, Nabors looks extremely attractive, at less than 1x forward cash flow (only lower post Covid 2020 outbreak), >50% normalized free cash flow yield and forward EV/EBITDA approaching 3x. We believe long-term upside potential for Nabors is multiples of the current share price.”
A drilling rig on a large oil field, capturing a crucial moment of the extraction process.
Nabors Industries Ltd. (NYSE:NBR) is not on our list of 31 Most Popular Stocks Among Hedge Funds. As per our database, 21 hedge fund portfolios held Nabors Industries Ltd. (NYSE:NBR) at the end of the first quarter which was 20 in the previous quarter. Nabors Industries Ltd.’s (NYSE:NBR) first quarter revenue from operations was $734 million, up from $726 million in the previous quarter. While we acknowledge the potential of Nabors Industries Ltd. (NYSE:NBR) 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 Nabors Industries Ltd. (NYSE:NBR) and shared Bill Miller’s latest stock picks. Miller Value Deep Value Strategy reported in its Q4 2023 investor letter, that the Nabors Industries Ltd. (NYSE:NBR) share price declined by more than 30% in Q4 due to weakening commodity prices. 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.
