Tidewater (TDW): Long-Term Industry Dynamics Look Intact

Third Avenue Management, an investment management company based in New York City, released its “Third Avenue Small-Cap Value Fund” first quarter 2025 investor letter. A copy of the letter can be downloaded here. During the quarter, the fund returned -4.54% compared to -5.87% % for the MSCI USA Small-Cap Value Index (the “Index”) and -7.74% return for the Russell 2000 Value Index. The Fund has returned +15.46%, annualized, for the trailing five-year period. For more information on the fund’s top picks in 2025, please check its top five holdings.

In its first-quarter 2025 investor letter, Third Avenue Small-Cap Value Fund highlighted stocks such as Tidewater Inc. (NYSE:TDW). Tidewater Inc. (NYSE:TDW) provides offshore support vessels and marine support services to the offshore energy industry. The one-month return of Tidewater Inc. (NYSE:TDW) was 21.83%, and its shares lost 60.17% of their value over the last 52 weeks. On May 8, 2025, Tidewater Inc. (NYSE:TDW) stock closed at $41.13 per share with a market capitalization of $2.035 billion.

Third Avenue Small-Cap Value Fund stated the following regarding Tidewater Inc. (NYSE:TDW) in its Q1 2025 investor letter:

"Detractors from performance this quarter included offshore oil & gas services provider Tidewater Inc. (NYSE:TDW). Tidewater represents an interesting case study. In recent quarters, the company has been a poor performer and one of the larger drags on Fund performance. As recently as a year ago, the company had been a star performer for the Fund and was benefiting from a strong tightening of the supply and demand balance for global offshore support vessels. In that environment, with a favorable outlook and far higher share prices, the Fund sold a material portion of its Tidewater shares. It is notable that several growth-oriented funds filed as significant new shareholders around the time of the Fund’s sales. As an investment approach, we tend to buy grey clouds and sell sunshine and that period was starting to look like sunshine in the sense that the share price was increasingly reflective of the very positive near-term outlook.

However, outlooks change and, to the extent one has purchased an investment at prices reflective of a very favorable outlook, a deterioration of that outlook can be very painful. Since the second half of 2024, several large offshore projects have been temporarily delayed, limiting the immediate demand for more offshore service assets. While the current consensus forecast for Tidewater’s 2025 operating performance is roughly flat compared to 2024, the share price has seen a considerable decline. We continue to believe that the long-term industry dynamics - marked by virtually no new supply of offshore service vessels for the foreseeable future, gradually declining supply of the existing global vessel fleet through aging and attrition, along with increasing long-term demand - are very much intact. Our job, as we see it, is to estimate the value of businesses, across a range of scenarios, and with a good bit of conservatism baked in, and then try to seize opportunities to buy them at significant discounts to those estimated values. Our view is that Tidewater’s share price decline represents a large overreaction to the softening of its near-term outlook and the Fund has once again begun to grow its Tidewater holdings."

Tidewater Inc. (NYSE:TDW) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 33 hedge fund portfolios held Tidewater Inc. (NYSE:TDW) at the end of the fourth quarter which was 35 in the previous quarter. Tidewater Inc. (NYSE:TDW) reported strong financial results for the first quarter of 2025, achieving revenue of $333.4 million, which surpassed expectations due to increased day rates and better utilization. While we acknowledge the potential of Tidewater Inc. (NYSE:TDW) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

In another article, we covered Tidewater Inc. (NYSE:TDW) and shared the list of stocks with heavy insider buying in 2025. In addition, please check out our hedge fund investor letters Q1 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.