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NAT

Thoughts on Nordic American Tanker?  NAT.  30 cent dividend per quarter, 10% yield.

Company not making money but dividend policy strong.  I see it as a recovery play (?).  Best house in a bad neighborhood?  They make money based on shipping rates of oil (sorry this isn’t a green play).  Company has little debt on balance sheet <15%. 

I guess the overall market for shippers is swamped :) by a large supply of ships. 

An analyst I know strongly likes this stock based on dividend policy and management.  Thoughts from the community?

Thanks for your opinions.

Sell crazy someplace else, we're all stocked up here

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I mean……why this as a recovery play? Lots of firms can be recovery plays. Furthermore, being shipping, they dont have much pricing power…

Lots of firms also have good divs. I don’t think you should consider DY to be as important as future cash flow. DY is seductive but can be ephemeral.

The key is - What’s your estimate of valuation? What if your macro thesis is wrong?

Not trying to criticize but I’m interested in thought process esp when it comes to developing stock ideas via macro ideas.

Personally I think it’s difficult for outsiders  to evaluate shipping firms….

we had a poster on the same topic OSG….the stock was 12 and now its 7 and change…..

This is why your reasons for buying this stock make no sense to me(excuse the harsh language):

1. Dividend Policy - In 2003 the dividend per share was 63cents, the latest dividend was 30cents. Dividends per share have NOT gone up; instead the stock price has decreased so much that the yields are still high. This is a very bad thing NOT a good thing as you seem to suggest.

2. Best house in bad neighborhood - This is NOT true. For example, take a look at SFL; fundamentals are way better than NAT(they are in the same industry)

3. Cash/Debt position - At first glance, this looks really impressive. They have $104M in cash and $250MM in debt. But if you dig, you’ll see that they recently issued $75MM in common stock  to help increase their cash balance from $24MM to $104MM. Again, this is not good if you plan to be a common stockholder(they’re diluting shareholder value).

3. Rovery Plan - I have a bridge to sell you

In conclusion, they’re diluting shareholder value, dividends per share and stock price have been in decline, there are better alternatives and they’re losing money. Why is this a good stock to buy?

Being Born Wealthy > Being Jewish or WASPY > Born Pretty > Top 5 MBA > CFA > Avg MBA > Born middle class > Born lower class > Born in crack house > Working in IT but looking to switch to buyside

Palantir wrote:

I mean……why this as a recovery play? Lots of firms can be recovery plays. Furthermore, being shipping, they dont have much pricing power…

Lots of firms also have good divs. I don’t think you should consider DY to be as important as future cash flow. DY is seductive but can be ephemeral.

The key is - What’s your estimate of valuation? What if your macro thesis is wrong?

Not trying to criticize but I’m interested in thought process esp when it comes to developing stock ideas via macro ideas.

Personally I think it’s difficult for outsiders  to evaluate shipping firms….

Good insight, thank you for your thoughts. 

Why recovery play?…yeah a lot of companies could be considered recovery plays.  This, although perhaps mislabled, represents an opportunity to capture upside of economic development.  ie, recovery play (at least how I’m thinking).

NAT gets paid on demand for OIL.  At least at its at some basic level.  Shipping prices for OIL, not to be confused with other shipping cost, were as high as 40k a day in 2007.  They dropped drastically, as low as 8k a day.  I’ve heard the CEO (never to be trusted) of NAT claim a break even at 11.5k a day.  Current rates (last checked) app. 13k.  Things are looking better.  The Macro thesis might be with the infrastructure development happening, oil demand will pick back up. The glut of supply ships (for oil) will be put back to work.  NAT is positioned to benefit as they have strong contracts with Exxon, modern fleet, and very little debt compared to the industry.

Impossible to predict the shipping rates, thats why the stock is sub 12 bucks a share.  Very difficult for an outsider, I couldn’t agree more.

My valuation, don’t know.  Book value, could be meaningless but the price at 16 a share.  I’m looking for more than book value on the stock given the relationships and history they have.  We’ll see.

Divs are worthless as long as the company isn’t earning, I know.  However, the management phillosphy of supporting shareholders by paying dividends and consistently doing so through good markets and bad gives me a warm fuzzy feeling :)

Sell crazy someplace else, we're all stocked up here

FrankArabia wrote:

we had a poster on the same topic OSG….the stock was 12 and now its 7 and change…..

Scary!  If I were that investor, and I’m not, I’d pray I had enough conviction to buy more.  The buy and the sell price are really what concerns us as investors.  OSG appears to have a much higher leverage use than NAT.  That might scare a few people away. 

Anyway, I’ve seen people post on Teekay Tanker and that has a similar run of dissapointment.  But again, TNK has more leverage.  I’d like to think good management levers up when things are bad, not getting bad.  Borrow on the recovery, be lean and healthy on the peak. 

Sell crazy someplace else, we're all stocked up here

Zesty wrote:

This is why your reasons for buying this stock make no sense to me(excuse the harsh language):

1. Dividend Policy - In 2003 the dividend per share was 63cents, the latest dividend was 30cents. Dividends per share have NOT gone up; instead the stock price has decreased so much that the yields are still high. This is a very bad thing NOT a good thing as you seem to suggest.

2. Best house in bad neighborhood - This is NOT true. For example, take a look at SFL; fundamentals are way better than NAT(they are in the same industry)

3. Cash/Debt position - At first glance, this looks really impressive. They have $104M in cash and $250MM in debt. But if you dig, you’ll see that they recently issued $75MM in common stock  to help increase their cash balance from $24MM to $104MM. Again, this is not good if you plan to be a common stockholder(they’re diluting shareholder value).

3. Rovery Plan - I have a bridge to sell you

In conclusion, they’re diluting shareholder value, dividends per share and stock price have been in decline, there are better alternatives and they’re losing money. Why is this a good stock to buy?

Zesty, I see no harsh language here….but don’t hold back.  Thanks for your advice and input.

1) Dividends have certainly gone down.  Let’s not extrapolate the past into the future though.  Does this imply they will continue to go down?  Have I missed some emperical study that shows all companies that lower dividends eventually go out of business?  Or, is this a result of OIL shipping rates haven dropped so much?  I’d guess the later.

2) SFL has a great deal more leverage, I’m being a little lazy not giving you the actual figures…I admit.  Plus they seem to be more of a conglomorate of shipping, not just focused on OIL.  Not the same neighborhood but I’ll give you the same zip code. 

3) You can dilute my shareholder value by adding debt or issuing new equity.  They chose equity.  I get it.  If this continues, I’d be concerned.  However, I’d prefer the managment to lever up right now.  They are still positioned with less leverage than (fill in the blank).  Isn’t this the time for them to get aggressive?  I’m comfortable with it.

3.a) We’ll see. 

I think if I had an answer why this stock was a good buy, it wouldn’t be a good buy.  It clearly doesn’t suggest a good buy with declining dividends and loosing money.  However, that’s what companies do when the economy sucks.  With low leverage, this company still seems more likely to withstand a continued slow economy than highly leveraged companies.  So, why would you buy a company that already has high debt and debt service as apposed to a company that is raising new capital after the economy has already fallen?  Again, no figures…but ships are selling for a lot less now than they were three four years ago. 

Sell crazy someplace else, we're all stocked up here

What’s your objective here? Are you a long-term investor or looking for a quick day trade??

If this is a long-term buy, then go back to the drawing board and do your homework. If this is a day/short term trade, then good luck.

Being Born Wealthy > Being Jewish or WASPY > Born Pretty > Top 5 MBA > CFA > Avg MBA > Born middle class > Born lower class > Born in crack house > Working in IT but looking to switch to buyside

Zesty wrote:

What’s your objective here? Are you a long-term investor or looking for a quick day trade??

If this is a long-term buy, then go back to the drawing board and do your homework. If this is a day/short term trade, then good luck.

Long Term for me.  I’m not trying to convince you, not my objective.  But, you did offer up an opinion and for that I thank you. 

Best,

Sell crazy someplace else, we're all stocked up here

I don’t know specific issues with NAT, but from bitter experience, I don’t trust the managements of tanker companies at all. They will dilute your stake in a minute. Not really suitable for a long-term buy-and-hold.

The only people worse are BDCs.

--
One Rec Ho

1recho wrote:

I don’t know specific issues with NAT, but from bitter experience, I don’t trust the managements of tanker companies at all. They will dilute your stake in a minute. Not really suitable for a long-term buy-and-hold.

The only people worse are BDCs.

Wait,…what?  Tell me please which tanker company you are referring to.  Further, what bdc you are referring to.  That’s kind of a sweeping generalization, Susie orman.  Kidding, but seriously what experience have had?


Sell crazy someplace else, we're all stocked up here

Tanker companies: DSX, TNK, you name it.

BDCs: ACAS, AINV, any others. 

In both cases, check out the expansion in share counts in the last 10 years.

I am prety sure BDCs almost always pay dividends by issuing more equity.

--
One Rec Ho

@pdx, Did you buy it? How much have you lost so far?

Being Born Wealthy > Being Jewish or WASPY > Born Pretty > Top 5 MBA > CFA > Avg MBA > Born middle class > Born lower class > Born in crack house > Working in IT but looking to switch to buyside

Stay classy Zesty.

Classy like a one legged stripper!

Being Born Wealthy > Being Jewish or WASPY > Born Pretty > Top 5 MBA > CFA > Avg MBA > Born middle class > Born lower class > Born in crack house > Working in IT but looking to switch to buyside

zesty,…wow.  so you are the guy that picks the bottom :)  Holy Rusted BS batman!

Yeah, I own it.  I’ve collected two dividends thus far and am still positive on my purchase price. 

Enjoy the sidelines, don’t get splinters in your ars.

Sell crazy someplace else, we're all stocked up here

You a funny guy…

Sell crazy someplace else, we're all stocked up here

not trying to rain on your parade here, but if you have collected two divs that means your ownership period was roughly 6-9 months….using google, i can see during this period, the lowest the stock has ever gone was roughly $12 bucks (it dipped over the last month or so but because you collected two divs, you cannot have possibly bought during that period)…the stock is at 11.50….

Thats not exactly emperical evidence, charts don’t always show intraday lows.  Regardless, I’ll save you the research and CONFESS I’m underwater on the position.  Truth be told I spoke a little quickly.  For that, apologies to all posters here.  I am quite close to even on purchase price.  take it or leave it.

My intention on this post was certainly to gather opinions not defend my position.  I’ll take a different approach on futures post.  Not my best use of time.  I should be reading my L2 material.

I’ll make this my last post on the topic, call me running for the wood shed if you like.  Let the market shut down for five years and the trade be judged then.  On any given day in the short run I’ll except the possibility of being wrong. 

Nordic American Tankers Limited (NYSE:NAT) - Telephone Conference for Shareholders, Investors and Analysts - September 25 at 9 am US Eastern time.

Thank you again, now get back to work.


Sell crazy someplace else, we're all stocked up here