Noted investor Jim Cramer doesn’t like tanker companies or their stocks. In case you missed it, he made that very clear on his “Mad Money” daily CNBC show June 3. He didn’t mince words, stating in no uncertain terms that “tanker companies are sinking,” and he sees a “boatload of trouble weighing down” most of the tanker company stocks because they are “downright treacherous.” They all “belong in the sell block” largely because the glut of capacity was expanding faster than the demand.
Cramer made one slight exception for Bermuda-based Nordic American Tanker Shipping Ltd. (NYSE:NAT, http://www.nat.bm/), an international crude oil shipping company with a fleet of double hull tankers. NAT has what the others don’t have, according to Cramer: a strong balance sheet and a fleet that it owns and operates itself. The stock ($1.07 billion market cap) traded for about $30 in July 2010 but has been on a pretty steady downward trend since then. It now averages about 464,000 trades a day and is sitting near the bottom of its 52-week range of $22.90.
The rest of the tanker group he completely dismisses. His criticisms include their debt loads, bad balance sheets, the “awful” day rates they are currently commanding and the companies confusing ownership.
Bermuda-based Teekay Tankers Ltd (NYSE:TNK, http://www.teekaytankers.com/) was seriously lambasted by Cramer, who suggested that the stock was down 16 percent in a year and that the company would be challenged to pay its 11 percent dividend. TNK, which now has a $565.2 million market cap, was up $0.10 on June 7 to $9.13. About a year ago it was trading for nearly $14.
Bermuda-based Frontline Ltd. (NYSE:FRO, http://www.frontline.bm/) is mostly tankers although it does offer some dry bulk carriers as well. Cramer was particularly critical, suggesting that FRO has a debt-laden balance sheet, and doesn’t own nor operate many ships, so investors shouldn’t own the stock, either. A year ago the stock traded at more than $36, but on June 7 it had dropped to $17.10. A recent Bloomberg story quoted billionaire Frontline Chairman John Fredriksen (http://www.bloomberg.com/news/2011-06-06/frontline-billionaire-fredriksen-bets-tankers-collapsing-freight-markets.html) who suggested that the entire tanker market was collapsing and that his company will be around to scoop up the spoils. We’ll see.
Cramer didn’t mention another smallcap tanker company Top Ships Inc. (Nasdaq: TOPS, http://www.topships.org/), once totally tanker focused (formerly called Top Tankers) that has diversified by adding dry bulkers. TOPS has struggled as well. A year ago its stock traded for about $1.12, dropped down to about $0.64 and then rallied again in late December 2010 to about $1.12. Its stock price has declined again since and closed June 7 at $0.57, bottoming out at a 52-week low.