The first $100,000 is a b*itch, but you gotta do it. I don’t care what you have to do – if it means walking everywhere and not eating anything that wasn’t purchased with a coupon, find a way to get your hands on $100,000. After that you can ease off the gas a little bit.
-Charlie Munger, Explaining the Difficulty & Importance of Saving Your First $100k
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The late, great, Charlie Munger is famous for giving no nonsense advice on how to accumulate wealth. You may notice that in his short quip is the idea of work, time, and sacrifice.
Yet the American zeitgeist has shifted markedly from the proclivities of Mr. Munger. We seem to be living in a much more severe echo of the film Fight Club. Released in 1999, the last time asset prices rose to untenable levels amidst a speculative mania, the film’s protagonist (?) Tyler Durden barks:
Advertising has us chasing cars and clothes, working jobs we hate so we can buy sh*t we don’t need…We’ve all been raised on television to believe that one day we’d all be millionaires, and movie gods, and rock stars. But we won’t. And we’re slowly learning that fact. And we’re very, very pissed off. –Tyler Durden, Fight Club
Rachel Wolfe’s piece in the Wall Street Journal What Happens When a Whole Generation Never Grows Up does a spectacular job walking through how soaring expectations and asset prices have led to disenchantment.
Many appear to have adopted an if you can’t beat em, join em mentality. With a theoretically limitless supply, dogecoin was built to parody cryptocurrency advocates. Yet Mr. Musk’s intermittent endorsements of dogecoin have made the token one of the most enduring.
2024 was a year of self-reinforcing euphoria as markets appeared to interpret the public’s decision to return President Trump to office, with Mr. Musk in tow, as a green light for rampant speculation. In our painfully non-partisan piece President Elect Trump was Right we warned that the market might be misunderstanding what is coming down the pike. Our suggestion?
Investors should focus on stocks in the Midcap, Small Cap and Microcap spaces which lacked investor interest and coverage. One stock our models like that contrasts sharply with the consensus euphoria in speculative trinkets, is off-shore oil driller Valaris. Despite a relentlessly improving fundamental backdrop and bright future prospects, the stock was shelled in 2024.
By fleet size, Valaris Limited (VAL) is the world’s largest offshore driller. It owns 18 high-spec floating and 35 jackup rigs, or 53 rigs in total. VAL also owns a 50% unconsolidated interest in ARO, a 50/50 joint venture with Saudi Aramco. ARO owns eight additional rigs. As of December 31, 2023, 16 of VAL’s 53 rigs were in the Middle East and Africa, 16 in North and South America, 16 in Europe, and the remaining five in Asia and the Pacific Rim. While there are obviously risks, we think there is a reasonable probability that VAL could double and still have a FCF Yield north of 10%.
Why We are Bullish on VAL:
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January 31, 2025 |
| Authors: Matthew Malgari, Nathan Przybylo, Dr. Sanjeev Bhojraj and John Durkin
January 31, 2025
Authors: Matthew Malgari, Nathan Przybylo, Dr. Sanjeev Bhojraj and John Durkin
