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 (sub. req.):
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 2009 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.
Disclosure: I have a long position in NAT. The usual disclaimers apply.