Why Nabors Industries (NBR) Stock is a Compelling Investment Case

Miller Value Partners recently released its Q2 2020 Investor Letter, a copy of which you can download here. During the second quarter, Deep Value Strategy led the overall marketplace and S&P 1500 Value index, generating returns in excess of 50%. You should check out Miller Value Partners’ top 5 stock picks for investors to buy right now, which could be the biggest winners of the stock market crash.

In the said letter, Miller Value highlighted a few stocks and Nabors Industries Ltd (NYSE:NBR) is one of them. Nabors Industries Ltd (NYSE:NBR) provides oil and gas drilling services. Year-to-date, Nabors Industries Ltd (NYSE:NBR) stock lost 67.5% and on August 13th it had a closing price of $45.93. Here is what Miller Value said:

“In late March to mid-April we increased position sizes in a couple of our largest underperformers during the first quarter. We were fortunate in our timing as Nabors Industries (NBR) and Taylor Morrison Home (TMHC) quickly reversed course and became two of our largest positive contributors in the second quarter. Nabors Industries (NBR) had been under considerable pressure as the recent economic weakness caused a collapse in oil prices, leading to significant pullback in drilling activity. Nabors management who has successfully managed through prior industry downturns didn’t wait and took aggressive actions to right size their cost structure. The company has a strong global asset base and a significant JV with Saudi Aramco, which provides a considerable margin of safety. Over the past 6 years, Nabors has become the leader in the Supermajors market, gaining 12% of market share from the 2014 market peak. In prior industry downturns, Supermajors have historically benefitted from their size and scale and pulled back less on capital expenditures versus smaller operators. While we recognize that it may take a couple of quarters for the industry to work through the cyclical downturn and see an improvement in new customer demand, we believe Nabors has a strong customer base and the ongoing cost reductions should allow the company to generate strong cash flow. During the upcoming recovery, we believe Nabors should be well positioned to deliver significantly higher normalized free cash flow supporting an intrinsic value that is multiples higher than the current share price.”

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In Q1 2020, the number of bullish hedge fund positions on Nabors Industries Ltd (NYSE:NBR) stock decreased by about 5% from the previous quarter (see the chart here), so a number of other hedge fund managers don’t seem to agree with Nabors Industries’ growth potential. Our calculations showed that Nabors Industries Ltd (NYSE:NBR) isn’t ranked among the 30 most popular stocks among hedge funds.

The top 10 stocks among hedge funds returned 185% since the end of 2014 and outperformed the S&P 500 Index ETFs by more than 109 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds’ poor performance. You could have doubled the size of your nest egg by investing in the top hedge fund stocks instead of dumb S&P 500 ETFs. Below you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.

Video: Top 5 Stocks Among Hedge Funds

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Cannabis stocks are roaring back in 2020, so we are checking out this under-the-radar stock. We go through lists like the 10 most profitable companies in America to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. You can subscribe to our free enewsletter below to receive our stories in your inbox:

Disclosure: None. This article is originally published at Insider Monkey.