Here's Why Night Watch Investment Management Exited Valaris Limited (VAL)

Night Watch Investment Management, an investment management firm, released its third-quarter 2025 investor letter. A copy of the letter can be downloaded here. In the third quarter, the fund LP appreciated by 4.28% net of fees, and YTD, its performance stood at 25.88%. The portfolio continued its strong performance in the quarter. The market also experienced a strong recovery in the quarter. In addition, please check the fund’s top five holdings to know its best picks in 2025.

In its third-quarter 2025 investor letter, Night Watch Investment Management highlighted stocks such as Valaris Limited (NYSE:VAL). Valaris Limited (NYSE:VAL) is an offshore contract drilling services provider. The one-month return of Valaris Limited (NYSE:VAL) was 7.04%, and its shares gained 34.01% of their value over the last 52 weeks. On December 05, 2025, Valaris Limited (NYSE:VAL) stock closed at $59.93 per share, with a market capitalization of $4.268 billion.

Night Watch Investment Management stated the following regarding Valaris Limited (NYSE:VAL) in its third quarter 2025 investor letter:

"We have fully exited our energy positions (Valaris Limited (NYSE:VAL) (NYSE:VAL), TDW, NE). We had a view on the business cycle of offshore energy infrastructure, which bottomed in 2021. Given that there is no new infrastructure under construction, we believed the cycle could keep going for many years to come. However, we did not foresee the pause in offshore spending that started in 2024. We do not expect a resumption of spending until 2027 at the earliest. In the meantime, companies like Noble Energy trade at ~10x Free cash flow, which is simply not as cheap if your cost of debt is 8% and your assets have a limited life span. In total, we lost a very modest 2.67% on our VAL, NE and TDW position. Since inception, energy has been our only significant detractor from performance."

Valaris Limited (NYSE:VAL) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 60 hedge fund portfolios held Valaris Limited (NYSE:VAL) at the end of the third quarter, which was 57 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 a bullish thesis on the company. In addition, please check out our hedge fund investor letters Q3 2025 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.