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Opportunities In Tankers: An Interview With Calvin Froedge

May 12, 2020 3:32 PM ETDSSI, EURN, INSW, NAT, STNG, TNK, TNP83 Comments


  • Arquitos Capital interviews tanker expert, Calvin Froedge.
  • We discuss what the markets are missing, the effect of contango, Calvin's thoughts on IMO 2020, and which stocks Calvin likes right now.
  • Calvin also shares the resources he uses to follow the industry.

Earlier this year, I purchased a basket of tanker stocks to take advantage of both structural and cyclical opportunities in the space. I follow a variety of sources and thinkers in the industry, and want to share some of their thoughts with readers.

The first interview in this "Opportunities In Tankers" series is with Calvin Froedge. Calvin writes extensively about tankers and generously shares his thoughts with his followers. You can follow him on Twitter @calvinfroedge and on Medium under the same handle.

SK: Thank you for taking the time, Calvin. What is your favorite position right now?

CF: My favorite position is Euronav (EURN). I think this is the safest "right or wrong" bet on the cycle due to valuation, fleet age, and management quality. Using even the most pessimistic forecasts possible (rates below break-even for two years) it's extremely tough to value them at less than $10 per share.

SK: What about Scorpio Tankers (STNG)? They just released earnings and management was enthusiastic in their earnings call. Where should shares trade at in the near term and why?

CF: Based on a conservative valuation of the fleet value and cash flows, Scorpio should be trading at $30 per share or more. A higher valuation is dependent on the stickiness of the cash flows. If the product tanker market proves to have legs throughout the rest of the year (and we don't need to stay at $160k LR2s, double the $17.5k fleet wide break-even is certainly fine by me) I think Scorpio shares should be hitting $50 by year end. That's highly contingent on rates holding up, of course. If we find ourselves at the beginning of a multi-year cycle of rates well above break-even, I can see Scorpio trading potentially much higher, based on both the cash flows it kicks off and the increasing value of its fleet.

This article was written by

Arquitos Capital Management is the general partner to two private investment funds: Arquitos Capital and Arquitos Epicus. Arquitos Capital is an unconventional hedge fund invested in a small number of unique companies. Learn more here.Arquitos Epicus makes highly concentrated investments in asymmetric event-driven opportunities. Learn more here.

Analyst’s Disclosure: I am/we are long INSW, STNG, TNP, EURN. 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.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (83)

calvinfroedge profile picture
So a few years later how we feeling? Tankers did ok, eh?
Little, Einstein profile picture
These fuel-cargo companies will soon move to BK, when oil almost ceases to exist.
After the corona, there will finally be strong initiatives around the world, to drastically reduce highly polluting materials ..., Clean energy will be the strong point
Tommy Goula profile picture
A practical inevitability that tanker shareholders will be rich now or in a few years? Wow. That’s about as bullish a statement as I’ve seen in the tanker space.
HariSeldon522 profile picture
Thx for this interview!!!
Great interview ! also long most of the same issues you mentioned. gl to us
Mariusz Skonieczny profile picture
This is a fantastic interview. Thank you. I did an interview with Calvin today for those who are interested www.youtube.com/...
Great interview. I am Long EURN.
Do you know why two of the big stockowners have sold there shares?
Arquitos Capital Management profile picture
Thank you for your comment, Lecluyse!
a thank you bot working on your behalf? saw many questions unanswered by the thank you statement.. funny to read ;)
Little, Einstein profile picture
In fact, forget about that sector.
Today's abundance will be short-lived and famine will arrive.
Buy companies with solid and consistent gains in the maritime sector and sleep well at night. Are they:
Everything else in the marine industry, you will be just cannon fodder.
Anyone can see that. Since 2008, always eating money to shareholders.
Spoken like someone that doesn't understand the sector at all, thank you.
Greg_Maryland profile picture
Nice interview.
Arquitos Capital Management profile picture
Thank you for your comment, Greg_Maryland!
Little, Einstein profile picture
Thank you.
I hope to see NAT in 15 US
And the others nowhere
RayLorrey profile picture
go back and read the interview
Arquitos Capital Management profile picture
Thank you for your comment, Einstein XXI!
Little, Einstein profile picture
go back and read the interview
Joeri van der Sman profile picture
Very nice interview!
Arquitos Capital Management profile picture
Thank you for your comment, Joeri van der Sman!
The Warren Buffett Spreadsheet profile picture
Thanks great interview. I am somewhat concerned that the tanker stocks has become mainstream in the financial media recently. I would like to own stocks that very few are talking about. Now it's lots of talking about them but still trading lower. And all I see online is mostly very bullish people. Then who are actually selling these stocks when the profits soars? And how was the sentiment and discussions online in 2003 before the last supercycle? Which stocks to the best if there is a new supercycle? My bet is stocks with an absolute low shareprice and levered to the gills.
That might be NNA
Arquitos Capital Management profile picture
Thank you for your comment, Warren Buffett Spreadsheet! Definitely a great point.
Arquitos Capital Management profile picture
Thank you for your comment, mdn38559!
Really good explanation, long $EURN, $TK and $DSSI.
I prefer $TK from $TNK for stability
If you haven't noticed, TK is without doubt the weakest stock in all the energy sector. Stay far far away from that pos.
Arquitos Capital Management profile picture
Thank you for your comment, Pedro Boronat!
Arquitos Capital Management profile picture
Thank you for your comment, mo2dafo!
I appreciate the article. I'm curious why you don't own DSSI? It's so cheap. Management? Age of fleet?
Arquitos Capital Management profile picture
Thank you for your comment, Socially Distant! No particular reason.
Calvin, thanks for the interview.

Wanted to ask about last-cycle performance. I've heard elsewhere that FRO was a 50-bagger but based on the stock price chart on Google and adding in dividends from 10-K I only could come up with about ~30x. What am I missing? Also, which year did FRO pay out 2x its share price in dividends? Just looking at Google's price chart and the 10-K it's not clear

More generally, other than FRO, OMI, and GMR, which public companies performed best last cycle?

Thanks again.
calvinfroedge profile picture
I think it was either 2003 or 2004. Their history is here:


You need to look at their reports to see prices back then because there have been reverse splits and other dilutions since end of last cycle that throw off historic charts.
Arquitos Capital Management profile picture
Thank you for your comment, greeninla!
Bsoidonym profile picture
Great article with interesting additional information. Thanks a lot.

I am long $EURN only. Simple reason is, that in this uncertain times it seems to be a stock, that profits from the situation and has a very prudent management.
It is a stock, where it is quite difficult to lose a lot of the investment, especially if the incredible high profits are shared with shareholders.
JWVGOETHE profile picture
As the USA is such a large energy consumer, clicking around inside some of the suburban and rural counties helps show why -- even upon "re-opening" -- many folks are rather hesitant and concerned coronavirus.jhu.edu/...
Arquitos Capital Management profile picture
Thanks for your comment, JWVGOETHE!
Great interview. Learned a ton! Thank you.
Arquitos Capital Management profile picture
Thanks for your comment, howwitzer!
Thewaltzy profile picture
Nice article. It’s funny: q4 good, q1 good, q2 gonna be very good. We’re half way through may now and rates are persisting. Is q3 gonna be good? Will we get a full year?
Orderbooks are low. Time is passing and the fleet is aging. The actions of Nat (and other silly companies) will be interesting.
I think you’ll do fine here, Calvin. Keep up the good work!
Arquitos Capital Management profile picture
Thanks for your comment, Thewaltzy!
Keerthi Prasad profile picture
Nice interview! I'm holding EURN, DHT and STNG. Unfortunately, earnings are not helping share prices. Any thoughts on TRMD or why its not mentioned often? Seems like a solid product tanker oppurtunity.
Arquitos Capital Management profile picture
Thanks for your comment, Keerthi!
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