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Why Nordic American Tankers Still Has Plenty Of Room To Run

May 03, 2020 10:51 AM ETNordic American Tankers Limited (NAT)90 Comments
RJW Insights profile picture
RJW Insights


  • Lots of media attention has created increased volatility, but the fundamental thesis remains intact.
  • The oil glut is here to stay.
  • Short-term spot rates averaged $112k/day for the week of April 24th showing a continued increase in demand.


After a nearly 75% increase in the past three weeks, Nordic American Tankers (NYSE:NAT) has become one of the most talked-about stocks in the oil tanker industry. Benefiting from recent national attention of CNBC’s Mad Money, NAT has seen an increase in price but also volatility as retail investors begin to enter this space. Even with this increased volatility, I believe that NAT still has plenty of room to grow as the oil glut is here to stay, short-term spot rates remain lucrative, and the potential for an unprecedented earnings report is right around the corner.

Introduction into the national spotlight

On April 27th, Herbjorn Hansson, the CEO and chairman of Nordic American Tankers, had a featured interview with Mad Money host, Jim Cramer. Through this interview, Hansson detailed how NAT was making "a lot of money." Obviously, this is good news for the future of NAT and flocked investors into this oil tanker play but also brought with it increased volatility.

Falling from $9 on the morning of April 28th, to $6.00 as of the morning of April 29th, investors now have an incredible opportunity to add to their position prior to their May 18th earnings.

Get ready for incredible earnings

NAT currently operates in the Suezmax market with 21/23 ships available on the spot market. In Q4 2019, the Suezmax spot market increased 76.9% from $17,300/day in 2018 to $30,600/day in 2019. To put this in perspective, these tankers are averaging $62,600/day in 2020, and $112,800/day for the week of April 24th. These earnings as of last week are 6.52x their Q4 2018 report and 3.69x their Q4 2019 report. As seen in the image below, rates have gone completely parabolic since February, and I believe they should level off relatively soon close to the $80k/day rate, given the current

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RJW Insights profile picture
The focus of this page is to find esoteric investment ideas and view them with a unique perspective. Applying information learned from working in the finance industry, I believe a salient point of view regarding value and a long-term perspective will help assist in finding mispriced equities with massive growth potential.

Analyst’s Disclosure: I am/we are long NAT. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Comments (90)

Dr. Helmut Moss, who most of you know from YouTube, says we are going into the high $3s and that we might even go lower!
05 May 2020
arok79 profile picture
@KWSB that's rose colored glasses price target. highly unlikely it hits it.
Are people still buying or selling?
I see the dividend at 4.50%, not 9%. Am I seeing this wrong?
Just waiting for the Q2 numbers, the dividend and after that selling it all. The numbers we be amazing. stock is undervalued, waiting for the 10 to 14 dollar range. No greater time for oil tankers than right now! (according to the CEO). Hold for 6 months and sell after that!
arok79 profile picture
@Krisie300 after Q3 earnings is when you should sell it. next couple quarters earnings should be stellar. look for a decent dip here. these tanker stocks did have a solid runup past couple weeks. NAT should drop to about $4
canyonwlf7 profile picture
I sold at 7, glad I did, it’s over
gios95 profile picture
lmao it just started, these are just people who bought at 3/4 taking profits after a 100%
sgtgibby profile picture
Numerous great comments pro and con on NAT. Question to all:

I remember that NAT has paid a huge Special Dividend about seven or ten years ago. I cannot find this information on NAT's website or other financial website. Does anyone remember the Special Div?
@sgtgibby You can check out their dividend history here:
Joeri van der Sman profile picture
Note that there are many more shares outstanding now, and the fleet is smaller and older.
They have debt covenants now related to their refinance last year. 50% of FCF services debt. Special div unlikely.
Phil Anthropy profile picture
Let us not forget that the NAT CEO has been beating the same drum ever since NAT was in the high 20s many years ago. When the profits start to gain traction, he may decide to issue a secondary and buy some more/newer ships. Note also the downgrade.
06 May 2020
Interesting comment. Do you have a link or a reference? I would be curious to compare his past drum beating to the current drum beating. Thanks.
HariSeldon522 profile picture
Thx for the article!!!
Evercore downgrade this morning. $4 target.
Rico Sid profile picture
Evercore also mentioned that the company name was “North” American tankers. If they don’t even know the name of the company they’re covering, how worthy is their research ? It’s a joke tbh.
This is a short term play and probably has around $2 more in it and it it can squeeze another $1 after that depending on if we see Oil go negative again. QuickMoney
arok79 profile picture
better play is to sit back and watch this whole movie play out. tankers are the best shorts during these runups when we have had oil gluts in the past. 2003, 2010, 2016, all excellent short opportunities on tankers. i am waiting for my 4th opportunity to make money shorting tankers.
adam22164 profile picture
NAT is overbought based on one interview. The real value in this space is in the VLCC segment, bigger ships hold more oil. The better plays in my opinion are: Euronav, Frontline, and DHT. Long all three.
For what it's worth, many of the smaller ships (Suezmaxes which hold 1 MM barrels) go for the same daily rates as VLCC's (2 MM) so presumably margins are better
Joeri van der Sman profile picture
@2-contango That's not true at all.
1Horse profile picture
Of the three, it looks like Euronav has a 30% witholding tax on dividends? Kinda important in a segment where its all about the dividends?
tothemoon! profile picture
The opportunity thesis seems on point, yet the stock has been turbulent and is trending down, is there something we’re missing as to WHY the stock/tanker is choppy of late, and not on a continued upwards trajectory?
"After a nearly 75% increase in the past three weeks"
Yup up nearly 75% from basically nothing to more then nothing...
I sold my NAT at over 7 3/4, bought it at 3 1/2. I am looking to buy it again if it gets lower. I don't see too much problem in this company though there are better ones out there. The debt of $400 million should be manageable at current spot rate. I now own DHT and FRO, also looking at STNG.

Fact is, no one knows for sure how quickly the economy will kick start again, but Q2 and Q3 should bring lots of revenue for tanker companies, including NAT, I would not rule out NAT going back below 5, or going up above 10. If you feel like NAT is a bargain at a specific price, then invest it, if not you should find better companies, simply as that.

There is one analyst from one big firm (I cannot name it here), it has NAT first quarter 2020 earning estimate of 0.15 per share. At 30k spot rate for Suezmax, the earning is 0.08, at 40k earning is 0.20, at 50k = 0.32 eps, at 60k = 0.44 eps, at 70k = 0.56 eps. So using this as a guide, perhaps one can find the 'bargain' price for NAT. I would not use 70k for the whole year.

I welcome all comments.
BTW, NAT is paying off its entire debt. I got in at 4.75 and the upswing went to fast. If you look at whose buying NAT on bloomberg, around 40% are retail investors during the press coverage of NAT. Its still pretty good, but I think EURO, FRO, and INSW does everything better than NAT. They havent shot up because CNBC didnt interview them.
Richard Lejeune profile picture
Thanks for the article, although I prefer other tanker plays such as TNP.PE, TNP.PF, the NNA 2020 bonds and writing covered calls on EURN. The author makes some good points. Tanker rates appear likely to remain elevated for some time. There are also some problems with this article. For example, the author says:

"For example, if the June contract trades at $-10 and the July contract trades at $20, an investor could spend $1,000,000/day on storage and break even. Of course, this assumes they buy the June contract, sell the July contract, and have a tanker ready to store the oil."

The super-contango on WTI oil (the price of oil at Cushing which is located inland and has limited pipeline capacity to seaborne oil tankers) helps a company like BKEP that owns storage terminals at Cushing. I'm long BKEP and the BKEPP preferred for that reason. Brent Oil is also in super contango, but not as extreme as for WTI oil. Brent oil is the correct oil price to look at for calculating implied tanker rates from contango. Brent oil has not traded negative.

Disc: I am long TNP.PE, TNP. PF, EURN, NNA, the NNA bonds, BKEPP and BKEPP. Those are among the high yield issues that I cover for the Panick High Yield Report (seeking alpha marketplace).
You think the earnings report will be good this week? Did the glut impact the first quarter that much? I would think Q2 would be impacted more.
Richard Lejeune profile picture

Q2 will probably be better for the tanker plays than Q1, but Q1 had plenty of high rates and will be a great quarter for most tanker plays. Q4 had lots of high rates and many leases were signed in Q4 and active in Q1.
WhateverWorks profile picture
Q2 will be impacted more but they will give updated guidance for Q2 in this report, presumably, so there could be a catalyst there.
WhateverWorks profile picture
Forgot to say that, despite my comment, post Cramer pump there is better value to be found in other tanker stocks in my opinion.
Herbjorn Hannsen has always been a farcical cheerleader.
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