Praetorian Capital, an investment management company, released its fourth-quarter 2024 investor letter. A copy of the letter can be downloaded here. For the full year, the fund lost 10.55% net of fees. The fund was down by 14.76% net of fees in the fourth quarter. It compounded capital at a 41.76% annual net rate, since inception. The core portfolio positions mostly declined in the quarter, while the event-driven book produced a slightly positive return. The core portfolio positions overall decreased over the course of the year, but the losses in the core book were offset by the event-driven book. For more information on the fund’s top picks in 2024, please check its top five holdings.
Praetorian Capital highlighted stocks like Valaris Limited (NYSE:VAL), in the fourth quarter 2024 investor letter. Valaris Limited (NYSE:VAL) is an offshore contract drilling services provider. The one-month return of Valaris Limited (NYSE:VAL) was 7.47%, and its shares lost 28.98% of their value over the last 52 weeks. On January 13, 2025, Valaris Limited (NYSE:VAL) stock closed at $46.31 per share with a market capitalization of $3.293 billion.
Praetorian Capital stated the following regarding Valaris Limited (NYSE:VAL) in its Q4 2024 investor letter:
“In 2010, at the dawning of the age of shale, offshore oil production accounted for approximately 31% of global oil supply. As shale has encroached on offshore, that number has declined to only 27% of total oil production in 2024. As you can imagine, this has led to a bear market in offshore services equipment that has lasted for more than a decade and bankrupted almost all players in the sector. This offshore equipment (Drillships, Semi-Subs, Jackups, PSVs, AHTS, and other associated pieces of highly engineered steel) is what we own through positions in Valaris Limited (NYSE:VAL), Tidewater (TDW -USA) and Noble (NE – USA), as I believe that the decade-long bear market has now ended, and that the call on this equipment will lead to excess profits for these companies for many years into the future.
Since Valaris is this Fund’s largest position, I thought it would be helpful to focus the rest of our offshore services discussion on it, though we also have substantial positions in Tidewater, the world’s largest player in Offshore Service Vessels (OSVs) and Noble, another owner of high-spec Drillships. At the close of trading on December 2024, Valaris had a market cap of $3.15 billion, and a net debt position of appx. $800 million (as of Q3 2024), for an Enterprise Value of approximately $3.9 billion. What do you get for this price?? You get 12 of the higher spec 7th Generation Drillships, and 1 of the better 6th Generation Drillships. You also get 5 Semi-Subs, 33 modern Jackups (JU) and a 50% ownership in a JU joint-venture with Saudi Aramco (ARO) that owns an additional 9modern JUs. By our math, it would cost well in excess of $1 billion to build and activate each fully equipped 7G, and in excess of $ $250 million per JU. Not that anyone would try to recreate this selection of assets today through a newbuilding program, but you’d be hard pressed to do it for under $25 billion—making our $3.9 billion EV an interesting starting point for us as value investors…” (Click here to read the full text)
A closeup of an offshore oil rig in the international oil and gas industry in the Gulf of Mexico.
Valaris Limited (NYSE:VAL) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 42 hedge fund portfolios held Valaris Limited (NYSE:VAL) at the end of the third quarter which was 39 in the previous quarter. Valaris Limited’s (NYSE:VAL) revenue was $643 million in the third quarter 2024, up from $610 million in the prior quarter. While we acknowledge the potential of Valaris Limited (NYSE:VAL) 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 Valaris Limited (NYSE:VAL) and shared Night Watch Investment Management’s views on the company. In addition, please check out our hedge fund investor letters Q4 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.