Praetorian Capital, an investment management company, released its third-quarter 2024 investor letter. A copy of the letter can be downloaded here. The fund was down by 2.29% net of fees in the third quarter. The core portfolio positions mostly declined in the quarter, while the Event-Driven book produced a slightly positive return. In the first nine months, the net performance was mostly driven by the Event-Driven book, with a modest negative return from the core book. 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 third 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 18.54%, and its shares lost 9.84% of their value over the last 52 weeks. On October 21, 2024, Tidewater Inc. (NYSE:TDW) stock closed at $63.03 per share with a market capitalization of $3.309 billion.
Praetorian Capital stated the following regarding Tidewater Inc. (NYSE:TDW) in its Q3 2024 investor letter:
“Oilfield Services and E&P Basket (Valaris (VAL – USA), Tidewater Inc. (NYSE:TDW) (TDW – USA), other undisclosed positions): In 2020 when oil traded below zero, drilling activity ground to a halt and many energy service providers declared bankruptcy. Many of these businesses had teetered on the verge of bankruptcy for years due to reduced demand and over-leveraged balance sheets. The bankruptcies led to consolidation and reduced future industry capacity, removing future competition in the recovery.
With oil prices now recovering, I believe that demand for drilling and other services will increase from subdued levels. While producers have been slow to increase spending on exploration despite recoveries in energy prices, I believe that this only extends the timing on the thesis. In the end, the only way to reduce future energy prices is to see a dramatic increase in global oilfield services spending. Any postponement of this spending only leads to higher prices and more wealth transfer from the global economy to the oil producers, which will likely end up resulting in an increase in spending on exploration and production.
We purchased many of these positions at fractions of the equipment’s replacement cost, despite restored balance sheets and positive operating cash flow. As spending in the sector recovers, I believe that the potential for cash flow will become more apparent, and this equipment will trade up to valuations closer to replacement cost. With the recent pullback in share prices, I’ve further increased our exposure to this sector.”
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. As per our database, 35 hedge fund portfolios held Tidewater Inc. (NYSE:TDW) at the end of the second quarter which was 36 in the previous quarter. 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 company in the previous quarter. In addition, please check out our hedge fund investor letters Q3 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.