Tanker Companies

[macdaddy]

I want to pick up some dividend stocks for my Roth IRA and I have been looking at fuel tanker companies, specifically NAT, TNP, and GMR. Does anyone know anything about these companies? It seems like with Alaska and Canada producing more, and China's and India's future oil demands, this would be a lucrative or at least stable business to be in. The oil has to be transported somehow. On the other hand, I have read a few things which point to an oversupply of ships which may lead to a decline in rates for the industry. The dividends seem all the over map from 5.5% for TNP to 23% for GMR to 26.10% for NAT (obviously the divs wont stay at those levels for the last two). Can anyone chime in?

 

[brewer12345]

IMO, tanker companies are trading cheap, but do your reserach and figure out what makes sense to you. Everything these guys do hinges on the daily charter rates for ships, which is based on the balance between ship supply and demand.

 

[Brat]

With the entry cost of new ships much higher and the value of scrapers increasing because of the increase in steel prices, the number of ships at sea won't increase significantly unless the industry forcasts significant sustained profits.  You don't build a ship overnight.

The one known unknown is demand.  If the shipments of oil decrease tankers can be converted to other uses -once an industry wag suggested fresh water.  Container carriers depend on the market for goods, bulk carriers for grains (mostly, although construction materials also are a factor).

 

[brewer12345]

I think you are a bit off, there brat. The shipyards are booked up for years to come on oil tankers because all the single-hulled vessels must be retired between 2010 and 2015. Everybody is building all the tankers they can.

Bulkers carry just about anything, but the bigger the ship the more the foocus on coal and iron ore (to the point of exclusivity for the biggest ships). Smaller Bulkers (like the ones EGLE concentrates on) carry everything from grain to cement to coal to phosphate to fertilizer to you name it.

 

[macdaddy]

Backing up the last post, I have read that China is heavily investing in shipyards capable of building tankers. I'm sure it's a profitable market for them that will employ lots of workers and compliment their strategic concerns. So it makes sense that they would build, build, build.

 

[Brat]

My point is the tanker businesshas has high entry cost.  While folks hold their business close to the chest the industry knows how the yards are booked (the business is also insular).  The design of the Milleminum class ships has gone through the shake-out cycle.  Current and future capacity (5 years out at least) is not an unknown to those in the know.  IMHO this business will not be impacted significantly by economic activity as China and India are just getting started.  I think this business is even pandemic-proof.  The only thing that will impact this trade would be that which disrupts crude production.

On the west coast we see grain, concrete and phosphate carriers, as well as a lot of intermodel containter ships.  The demand for charters in this business will be impacted by world wide economic activity.

 

[brewer12345]

On the west coast we see grain, concrete and phosphate carriers, as well as a lot of intermodel containter ships.  The demand for charters in this business will be impacted by world wide economic activity.

Yup. I hold some bulker stock in part as a hedge against a worldwide inflationary run-up that the Fed can't stop because much of it is happening beyond the reach of US monetary policy. Plus the stocks are silly-cheap.

 

[BUM]

Before becoming the stoggy conservative investor that I am now (Boglehead) I was in and out of NAT few times. In those days is was hot for quick gains and didn't hold on long enough for the dividends to accumulate (which is what I'd do now).

If you've got the stomach for the volatility and want exposure to that sector...go for it!

 

[brewer12345]

If you've got the stomach for the volatility and want exposure to that sector...go for it!

That's pretty much the bottom line for any position. I'm happy to hold for the long term through nasty ups and downs if I fundamentally believe in management/the company, there isn't a significant chance of BK, and the business hasn't been permanently crippled by a "down". Worked out pretty well thus far. No doubt that will be the case with shipping companies.