Teekay Tankers (NYSE:TNK) owns, leases, or "charters in" a fleet of primarily medium-sized tankers mostly operating in spot market pools.
The company recently went through a 1 for 8 reverse split. Prior to the split, the stock of the company traded at one recent point for less than 70 cents a share, jeopardizing the company's NYSE listing.
The company's poor stock performance was the result of persistently depressed tanker rates coupled with the company's relatively high debt load.
Tanker rates have since firmed up. The price of the company's stock has similarly strengthened and, post-reverse split, the stock is currently trading at a price of $21.86 per share.
Teekay Tankers is a bet on the upward directionality of medium sized tanker rates. If you believe that tanker rates will be stagnant or downward biased into 2020, you should avoid this company. If you believe that medium-sized tanker rates have finally reached a inflection point, Teekay Tankers should be an excellent investment.
The reason for this is two-fold. First, Teekay Tankers' relatively high leverage. Second, the company employs its tanker fleet mostly on the spot market. As such, the company’s cashflow is highly sensitive to day-to-day tanker rate trends.
The third quarter of 2019 saw a massive spike in tanker rates that in my opinion indicates a tightness in the market and presages continuously robust rates through 2020.
Given favorable tanker rates, Teekay Tankers will do quite well. Its cashflows will swell, and it should be able not only to pay down its debts but eventually issue generous dividends as well. Only recently on the verge of financial distress, Teekay Tankers should prosper.
The Fleet
Teekay Tankers has a fleet primarily consisting of medium sized tankers. The fleet includes a total of 68 vessels, divided into three main categories: Suezmax tankers, Aframax tankers, and Long Range
