Miller Value Partners, an investment management company, released its “Deep Value Strategy” first-quarter 2025 investor letter. A copy of the letter can be downloaded here. The year 2025 has been unpredictable. After setting new highs in mid-February, the market saw a double-digit decline towards the end of the quarter, capping off a strong start to the year. As the administration implemented global tariffs, sentiment swiftly deteriorated due to growing economic uncertainty. In the quarter, the Deep Value Select strategy had a -12.8% drawdown compared to -.2% return for the S&P 1500 Value Index and -9.9% return for the S&P 600 Value Index. In addition, please check the fund’s top five holdings to know its best picks in 2025.
In its first-quarter 2025 investor letter, Miller Value Deep Value Strategy highlighted stocks such as Nabors Industries Ltd. (NYSE:NBR). 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 -35.93%, and its shares lost 64.60% of their value over the last 52 weeks. On April 22, 2025, Nabors Industries Ltd. (NYSE:NBR) stock closed at $28.37 per share with a market capitalization of $408.633 million.
Miller Value Deep Value Strategy stated the following regarding Nabors Industries Ltd. (NYSE:NBR) in its Q1 2025 investor letter:
“Our two largest detractors during the quarter were Gannett (GCI) and Nabors Industries Ltd. (NYSE:NBR), with shares down 43% and 26%, respectively, during the quarter. Both companies’ share prices are at deep discounts to our view of their long-term fundamental value, and we have recently increased position sizes in both holdings.
Nabors recently completed the acquisition of Parker Drilling. The transaction is accretive to free cash flow per share. Parker provides Nabors greater access to the growing lateral drilling marketplace. In addition, the transaction will significantly increase Nabors Drilling Solution (“NDS”) segment, which has market-leading technology and strong global growth opportunities. With very low capital intensity and high free cash flow conversion, Nabors NDS segment should support accelerating future free cash flow generation. While there is ongoing near-term risk on weaker than expected domestic and international drilling expenditures, we see these risks significantly discounted in the current share price. While there is also potential integration risk with doing an acquisition, the Parker Drilling transaction provides significant margin of safety in our opinion (attractive cost savings, balance sheet benefits, potential non-core asset sales and accelerating free cash flow generation). Nabors share price looks extremely attractive, below one times cash flow (approaching their Covid 2020 all-time lows). At a greater than 50% normalized free cash flow yield and EV/EBITDA (2025) below 3x, we see long-term upside potential 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 30 Most Popular Stocks Among Hedge Funds. Our database shows that 19 hedge fund portfolios held Nabors Industries Ltd. (NYSE:NBR) at the end of the fourth quarter, compared to 16 in the third 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 covered Nabors Industries Ltd. (NYSE:NBR) and shared Miller Deep Value Select Strategy’s views on the company in the previous quarter. In addition, please check out our hedge fund investor letters Q1 2025 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.