People that follow these names have their own personal favorites for different reasons. Just like the "sweet 16". Some want capital gains, some want dividends, some want both. Just like commodity prices , Supply and demand drive price (of service) and price drives revenues. Each company has their own capital structure, some have a lot of debt some have little. Some have dividend payouts based on earnings. Some retain the cash and pay down debt.
A ship has a 25 year life and oil majors prefer ships 15 years or less.
Some companies have a mix, some companies specialize in one type
Risks,
-Slow down of world economies, lower demand for oil
-Peace break out in middle east
- owners go on a buying spree and order new ships (takes 2 years for deliveries)
I think the risk is low on all three
Tailwinds, Carbon tax for going too fast, so older ships are incentivized to slow down. Think Jimmy Carter and temporary 55 mph speed limit
Slower speeds reduces supply, longer routes reduces supply, carbon taxes on older ships increase costs unless they slow down. Ships are getting older and owners ave not put in orders to replace them
There are two primary types of tankers.
Crude Tankers, as the name implies they carry crude. Within the crude segment , there are 3 main types of crude carriers:
Very Large: VLCC = very large crude carriers, carries about 2,000,000 bbls
Large: Suezmax as name implies , sized to fit thru the Suez canal 1,000,000 bbls
Medium: Aframax 750,000 bbls
2nd type is product tankers, they ship finish products from the refinery. Gasoline, Jet fuel, diesel
Scorpio Tankers specializes in product tankers. They have relatively newer tankers, rates are strong and improving and the President is putting his money where his mouth is. Some investors want more dividends but they prefer to pay debt down and buybacks. (helps the Presidents call options)
I like this name and own it for some time now. I previously mentioned another name in this segemt TORM TRMD when it was 10 , now 30 +. STNG was 15 2 years ago, so its already had a nice run.
The suez Canal is blocked and ships have to travel around Africa. That adds time (more revenue for the company) and takes ships away (supply) so for a given demand price is going to go up because there are less ships available to ship.
TRMD has a better dividends and trades higher. STNG is stingy and trades lower relative to NAV.
I personally do not like dividends.
In the crude segment, I own TK and TNK. They specialize in mid size tankers, no debt, middle age ships.
TK has 300 m cash and 9.8 m shares of TNk and no debt. If you add that up (300+ 9.8 m shares of TNK
58.22) = 870 m divided by shares o/s of 90.9 m = 9.57 per share the stock is 8.23, therefore it trades at a 14 % discount. It moves as TNK moves, for every dollar TNK moves up or down, this name should move 10.7 cents. Saver way to play TNK
TNK has 60 + ships , no debt and been hoarding cash
https://www.teekay.com/about-us/fleet/
last earning presentation
https://www.teekay.com/wp-content/uploads/2023/11/TNK-Q3-23-Earnings-Presentation.pdf
I think this moves up another 10 dollars over time. earnings out next week.
So my 3 favorites are TK,TNK< & Stng which I own all 3
Honorable mention (watching)
ASC, TRMD, INSW, DHT, TNP, FRO
Do you own diligence. They can be volatile. If a peace deal happens , people sell off and ask questions later.
There are 2 people to must follow on twitter (daily)
Ed Finley-Richardson
@ed_fin
Chris Shipping
@christankerfund
They follow other segments but post current rates, fundamentals, etc
PS here is link to DHT last earnings call, VLCC segment, good one to follow and understand drivers
https://seekingalpha.com/article/4668197-dht-holdings-inc-dht-q4-2023-earnings-call-transcript
https://seekingalpha.com/article/4668181-dht-holdings-inc-2023-q4-results-earnings-call-presentation
https://ml-eu.globenewswire.com/Resource/Download/0a00347d-498b-448e-aec7-8dab46d4ea04
They made 22 cents in the qtr and pay 100 % dividends.
The ceo of stng is putting 7 m in call options. I don't know any ceo of any company that does this. He has 30 plus years of experience. He is the smart money. That gives me some comfort.
