Energy Price Pull Back Impacted Nabors Industries Ltd. (NBR) in Q1
Miller Value Partners, an investment management company, released its “Deep Value Strategy” first-quarter 2023 investor letter. A copy of the same can be downloaded here. In the first quarter, the Deep Value Strategy was down 3.6% net of fees lagging the overall market and the S&P 1500 Value Index. The underperformance of the strategy in the quarter was due to value and cyclical stocks lagging behind the overall equity market. In addition, please check the fund’s top five holdings to know its best picks in 2023.
Miller Value Deep Value Strategy highlighted stocks like Nabors Industries Ltd. (NYSE:NBR) in the first quarter 2023 investor letter. Headquartered in Hamilton, Bermuda, Nabors Industries Ltd. (NYSE:NBR) is a drilling and drilling-related services provider for offshore oil and natural gas wells. On April 20, 2023, Nabors Industries Ltd. (NYSE:NBR) stock closed at $114.63 per share. One-month return of Nabors Industries Ltd. (NYSE:NBR) was 5.79%, and its shares lost 32.86% of their value over the last 52 weeks. Nabors Industries Ltd. (NYSE:NBR) has a market capitalization of $1.084 billion.
Miller Value Deep Value Strategy made the following comment about Nabors Industries Ltd. (NYSE:NBR) in its Q1 2023 investor letter:
"Our two largest detractors during the quarter were Nabors Industries Ltd. (NYSE:NBR) and Gannett (GCI), holdings whose share prices were down between 8 and 21% during the quarter. Both company’s shares appear significantly mispriced as they have multiple business segments embedded that are at deep valuation discounts to publicly traded peers or recent market transactions, providing long-term upside potential multiples of their current share price.
Nabors share price was negatively impacted from the recent pullback in energy prices. The company is well positioned to benefit from ongoing customer demand for their global high spec rig fleet. We believe the marketplace is overlooking the capital discipline within the industry over the past couple of years as the large domestic land drillers did not add incremental capacity. A favorable supply/demand environment should continue to be supportive of higher asset utilization, ongoing pricing power and attractive margins. Nabors’s International operations is also a market leader and well positioned to benefit from the upcoming ramp of their Saudi Aramco JV and the ongoing recovery in international drilling. Nabors has also been scaling up two newer efforts, their proprietary drilling solutions segment and new energy transition businesses. The new efforts combined have the potential to be a meaningful contribution to total company profitability over the next 5 years. With the new businesses having significantly lower capital intensity, Nabors’s business model should benefit from greater free cash flow conversion and reduced operational cyclicality overtime. We also believe the marketplace is underestimating Nabors’s significant ongoing debt reduction potential. Further reducing debt leverage to less than 1x has the potential to unlock significant equity value and help to narrow the greater than 60% valuation discount with its publicly traded peers."
Nabors Industries Ltd. (NYSE:NBR) is not on our list of 30 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 fourth quarter which was 19 in the previous quarter.
We discussed Nabors Industries Ltd. (NYSE:NBR) in another article and shared Miller Value Deep Value Strategy's views on the company in the previous quarter. In addition, please check out our hedge fund investor letters Q1 2023 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.
