Nordic American Tanker Shipping (NAT)
Posted by ML on January 17th, 2007
Of the group, I like the current chart of NAT (yielding 15.9%) the most: It bounced off its 200 dma recently within the confines of a well formed triangle.
Cramer vs. the futures market
On the other hand, Jim Cramer has this to say about Frontline and the rest of the tanker companies (subscription required for the whole article)
Frontline and the rest of the big tanker stocks have yields that are can’t miss, right? I don’t think so. Bloomberg has a great story this morning about how the excessive building in tankers could lead to repossession of the giant ships when the new fleets, the biggest additions in 50 years, hit the market. Big yields are always seductive. I got caught up in one two years ago, Fording Coal, 12%; can’t miss. But there’s always a price to be paid for these things, and an outsized yield is often more of a red flag than a opportunity. I can’t tell you how many times people asked me about these stocks on “Mad Money” when oil was going up. They figured rates had to go up. But these tanker stocks are levered to tanker building’s supply and demand, not oil prices. Now oil prices are plunging and tanker rates are…
Depending on your opinion of Cramer, this could be construed as a positive for this sector 
I couldn’t find the Bloomberg article he was referring to; however, my cursory glance at the Imarex tanker futures which go out to calendar year 09 did not reveal anything alarming. So I’ll leave you to decide who to believe.
According to its latest letter to shareholders, NAT currently operates 12 double-hull, suezmax tankers with a low break-even of $9,500 per ship per day. The single-hull tankers are facing mandatory phasing out by 2010 (remember Exxon Valdez?). Perhaps the “excessive building in tankers” is related? Anyhow, the chart by itself was convincing enough for me. Crucially, with a clearly defined trend line, it’s easy to figure out where my stop loss should be.
As always, please do your own research before making any financial decisions.
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January 17th, 2007 at 8:35 am
I actually only own NAT. And I’ve owned it for more than 2 years (maybe 3? can’t remember). Lots of dividends & no foreign tax.
January 17th, 2007 at 8:41 am
At the time when I bought NAT, they only had 3 ships. And now there are 12 ships. Those ships have come by financing through share dilutions, but the dividend yields have stayed the same. Somewhere along the line, I’m sure it’s either the shipping rate went down by 75%, or that the total earning amount has quadrupled (along with shares). It’s probably a mix of factors.
Yeah, NAT has been the strongest technically among all three tanker stocks.
January 17th, 2007 at 11:19 am
Frugal,
Wow, NAT must have made quite a lot for you in the past 2-3 years. The latest additions to their fleet (4 vessels?) were financed with debt. Given the tight spread of corporates over treasuries, it was a better use of money imo.
January 17th, 2007 at 8:23 pm
Haven’t followed NAT for a long long time. I should really trim the number of my holdings, but on the other hand, you can’t find an ETF for oil tanker, or an ETF for canroy, etc. And then you have to diversify within each. Quite tough to manage all these.
I do know that NAT has financed some of their 12 ships with share dilution once. Definitely debts for them is a better choice, because they can invest the proceeds to get more returns.
Overall, oil tanker industry should be bullish for the last standing winners, since single-hull ship must be retired, and only double-hulls ships can remain (which is what NAT has).
I did own VLCCF myself, but it got called away through my covered call long time ago. Didn’t re-enter.
Puplava also bought into this industry at the worst time (after I bought NAT maybe 8 months earlier). They bought FRO/GMR, and have realized probably $2000+ losses in my portfolio. Don’t ask me the exact numbers, because I can’t remember.
At the current price, I don’t have much capital gain at all. Simply collecting my dividends at about 15% annually. Looking at the chart, I remember now that I bought in 2004 March to May at about $33 I believe. I wasn’t too smart not to sell out at above 50. I hesitated for 2 days near peak, but I just don’t know a better place to put my money, especially when I had a lot of sideline cash already.
January 17th, 2007 at 8:54 pm
Anyone who is considering buying oil tankers can also consider OSG and OMM. I’ve screened oil tanker industry 3 years ago, and these two are the better ones I believe. But they only pay out some 2% dividends.
Whatever company that you buy, make sure they have double hull (DH) ships and less SH ships. All SH ships MUST be retired. That is the reason for the over-building. Obviously with SH and newly available DH all competing to ship right now, it’s not great for earning. But once all SHs are retired, or near retiring, you can even go short on those companies that have a lot of SH, but were not able to finance into buying DH. Those companies will take a hit for sure, while the overall shipping rate should go up due to the decrease in ships available.
Here is another list that I used to watch:
EXM ALEX CKH KEX MMLP(This one is Master Partnership) TRMD TNP HOS TK SNSA TOPT SFL GLNG FRO GMR
I’m pretty sure that OSG, OMM, and NAT are the better ones financially. In an upturn wave, FRO/GMR may have a better performance due to their debt leverage.
GLNG is one of the most “interesting” play. You can play GLNG along with LNG. LNG is probably better however. Both may spike VERY high once US is hit with natural gas shortage. Timeframe may be out in 2009/2010 however.
Watch out for Iran war factor! If ships of NAT(or whoever’s) are trapped in the gulf, stocks may take a beating! If it’s not trapped, volume of shipment will go down too, and stocks will probably go down. But market may react differently due to a spike in oil.
That’s the only thing that I’m worried with NAT. I have been thinking of selling out and buying back in the first half of 2007 to avoid the most probable time for war.
January 22nd, 2007 at 10:19 am
I’m very new to this and I was just curious on this from those of you that know. Does it bother anyone that the dividend is higher than than the EPS? This is really my last hurdle because everything else looks great.
January 22nd, 2007 at 12:22 pm
Wealthy1,
Quick answer:
EPS is lowered by depreciation. Dividends are from free cash flow.
January 22nd, 2007 at 12:25 pm
Got ya ML. Thanks for the info!
March 1st, 2007 at 9:52 am
Frugal – thanks for pointing me here from reply in a previous post. Thank you, I appreciated your thoughts.
It has been an interesting week!
October 24th, 2007 at 3:02 pm
I have bought/sold VLCCF over the years. Price fluctuates but dividends are always good. Minimum dividend of .45/qtr. Been looking for a site like this! Thanx!!!!
October 31st, 2007 at 8:54 am
In last years, our transport has been increased of 28% , it is very difficult send all over the world the rubber flexible marine hose without use a sea freight.
But we thinf the situation will be worse.
Bassi Offshore Logisitc team
http://www.bassioffshore.com
March 26th, 2008 at 4:57 am
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