Paid subscribers to Jonah’s Growth Stock Deep Dives receive:
2-3 deep dives per month (8,000+ words)
1-2 mini deep dives per month (2,500+ words)
15-20 quarterly earnings writeups (2,000+ words)
Investment models for 20+ holdings (updated quarterly)
Investment portfolio spreadsheet with all of my core holdings, non-core holdings, swing trades and hedges
Investment portfolio spreadsheet also contains real-time activity (buys, sells, adds, trims) plus real-time notes/commentary/charts throughout the day
My investment portfolio is up +220.8% in 2024, after being up +134.7% in 2023; now up more than 3,000% since January 2020 when I got back into investing full-time.
Here’s my investment strategy which focuses on high-quality growth stocks… I own 15-20 core holdings (great fundamentals, compelling valuation) plus another 5-10 non-core holdings (good fundamentals, reasonable valuation) plus another 5-10 swing trades (good fundamentals, reasonable valuation, compelling technicals).
As long as the fundamentals remain strong and valuation remains compelling/reasonable, then I’ll add on pullbacks.
I only want to own stocks that have at least 50% upside within the next 1-2 years and at least 100% upside within the next 3-4 years.
My objective is to maximize the upside in good markets and minimize the downside in bad markets. I accomplish this by being very selective with my stock picking and disciplined on valuations while using a variety of hedging strategies to protect my gains in market downturns.
Here’s my most recent webinar with Trendspider, don’t forget to signup and use my discount link for 50-65% off their annual plans… trendspider.cc/luptoncapital
TDW Q2 earnings report: https://investor.tdw.com/news/news-details/2024/Tidewater-Reports-Results-for-the-Three-and-Six-Months-Ended-June-30-2024/default.aspx
TDW Q2 earnings webcast: https://events.q4inc.com/attendee/537200210
Introduction
Tidewater is the world's largest OSV (Offshore Support Vessel) operator, servicing offshore oil and gas exploration and drilling companies.
Its high-specification fleet includes 213 vessels that transport supplies, materials, and people from land to offshore rigs across all major offshore regions.
In 2022, the offshore vessel market finally reached the long-awaited inflection point when day rates and cash margins began growing again after years of stagnation (the prior peak was in late 2014). The Tidewater stock is up more than 800% since the beginning of 2022.
This industry is primarily driven by day rates, which, in turn, depend on oil prices. While oil prices may fluctuate, energy demand is still strong and it should stay that way unless we run into a global recession.
The need for more energy means higher offshore investments, leading to higher demand for drilling rigs. Most industry experts believe that the offshore drilling industry is at the beginning of a new cycle, which means increased need for OSVs.
At the same time, the vessel market is currently supply-constrained (with the industry's order book of new vessels near zero) in a rising demand environment, which leads to a further push in day rates. This drives revenue up, converts into positive earnings, and generates extensive free cash flow for Tidewater, which it then uses for buybacks, paying off debt, and possible M&A deals that will further cement Tidewater's market-leading position and borderline monopoly in several geographic regions.
Tidewater is a boring company in a boring industry but it’s also one of my best performers over the past 22+ months. I continue to have a position because the fundamentals are great and the valuation is still very compelling. I think TDW still has more room to the upside and I’ll continue adding on pullbacks.
Despite TDW being up 400% from the August 2022 lows, the stock only trades at 7x NTM EV/EBITDA with EBITDA expected to grow 58.4% in CY2024 and then 30-32% for each of the next 2 years which would put the 3-year CAGR at 39.5%
There are plenty of tech companies growing slower than TDW yet trading at 5-10x higher EV/EBITDA multiples — I’d rather own TDW than most of them because on top of strong fundamentals and compelling valuation… TDW is doing stock buybacks that actually reduce the float whereas most tech companies are doing stock buybacks to offset dilution via SBC. Although this is not a truly fair apples to apples comparison because many of those tech companies have recurring revenue models whereas TDW is more beholden to oil prices and offshore drilling demand however they do have most customers locked up in contracts.
TDW is expected to have 43% EBITDA margins this year, perhaps expanding to 50% EBITDA margins over the next couple years. I understand that TDW is operating in a cyclical industry where the tailwinds for day rates won’t last forever but I still think TDW is too cheap assuming oil prices stay in the $70s (not including their offshore wind business) and the global economy doesn’t fall off a cliff — both of which are needed to keep demand strong for TDW services.
The longer oil prices stay in the $70s, it’s possible there will be some slight demand destruction for offshore drilling but that might already be priced in at the current valuation (7x NTM EBITDA) —if oil was still in the mid $80s, I think TDW would be closer to the all time highs ($110+) and not -20% off those highs from early May.
