What Makes Valaris Limited (VAL) a Strong Long-Term Bet?
Third Avenue Management, an investment management company based in New York City, released its “Third Avenue Value Fund” first-quarter 2026 investor letter. A copy of the letter can be downloaded here. The fund returned 7.28% in the first quarter compared to the MSCI World Index (Net) at -3.57%, and the MSCI World Value Index (Net) at 1.18%. It had a strong three- and five-year annualized return of 16.26% and 15.38%. The letter noted that before the U.S. and Israeli military campaign in Iran, non-U.S. equities outperformed U.S. equities, value strategies performed well, and the U.S. dollar weakened. The Fund excelled then, but the subsequent outbreak of war led to a significant drop in equities. While the Fund performed better in the former environment. The firm aims to build a portfolio of undervalued, well-capitalized businesses capable of building shareholder wealth over time. The value-oriented approach has invested mostly outside the U.S. and in smaller companies in recent years. During the quarter, global markets deteriorated, creating opportunities for the Fund to add to existing holdings and initiate new positions. In addition, please check the Strategy’s top five holdings to know its best picks in 2026.
In its first-quarter 2026 investor letter, Third Avenue Value Fund highlighted Valaris Limited (NYSE:VAL). Valaris Limited (NYSE:VAL) is an offshore contract drilling services provider. On June 18, 2026, Valaris Limited (NYSE:VAL) closed at $78.56 per share. One-month return of Valaris Limited (NYSE:VAL) was -22.35%, and its shares gained 73.04% over the past 52 weeks. Valaris Limited (NYSE:VAL) has a market capitalization of $5.44 billion.
Third Avenue Value Fund stated the following regarding Valaris Limited (NYSE:VAL) in its Q1 2026 investor letter:
"In the Fund’s Q4 2025 shareholder letter, we explained that the Fund’s energy industry exposure lies mostly within offshore energy services businesses, Tidewater, Valaris Limited (NYSE:VAL) and Subsea 7. The Fund also holds one upstream oil and gas producer, Harbour Energy. We went on to explain that “During the quarter, and 2025 more broadly, the Fund’s oil and gas related businesses mostly did not perform well.” In writing these words, we did not necessarily anticipate that each of these investments would be among the largest contributors to Fund performance in the following quarter. Counterintuitively, almost all of the performance produced by Valaris and Tidewater occurred prior to the Feb 28th onset of military action in Iran. In both cases, resource conversion activity enabled by very well-capitalized balance sheets, played a large role. Our third offshore service business Subsea 7 is also going through the process of being acquired in an industry-consolidating transaction that was announced in July 2025
During the quarter, Valaris became the subject of a takeover offer from a larger industry peer, Transocean. The premium price offered to Valaris shareholders stems from several factors, each central to our investment thesis; I) a building cyclical recovery of demand for offshore energy services, II) Valaris’ extremely difficult to replicate fleet of high quality floating drilling rigs and III) Valaris’ very well-capitalized balance sheet, which offers an indebted Transocean the opportunity to reduce its own financial leverage through an all-stock merger transaction with far better capitalized peer Valaris…” (Click here to read the full text)
Valaris Limited (NYSE:VAL) is not on our list of 40 Most Popular Stocks Among Hedge Funds Heading Into 2026. According to our database, 52 hedge fund portfolios held Valaris Limited (NYSE:VAL) at the end of the first quarter, compared to 62 in the previous quarter. While we acknowledge the potential of Valaris Limited (NYSE:VAL) as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.
In another article, we covered Valaris Limited (NYSE:VAL) and shared the list of most profitable stocks in each sector so far in 2026. In addition, please check out our hedge fund investor letters Q1 2026 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.