3 Charts Explain Why I Don't Own Oil Tanker Stocks

I'm always looking to invest my money in oddball places in energy; subs-sectors that are outside the mainstream. That would include areas like ethanol, which I've done quite well at, and technology stocks--where I have sometimes lost a lot of money. 

Other examples include small oil and gas trusts, small refinery MLPs, downstream power stocks...wherever I can make money. My line is--there's always a bull market somewhere in global energy.

And avoiding the losers is just as important as finding the winners. I did my semi-annual look at crude oil tanker stocks this week and....yuck. Tanker stocks would be companies like Frontline (FRO-NYSE), Euronav (EURN-NYSE), DHT Holdings (DHT-NYSE) and TeeKay (TK-NYSE) among others.

The first thing I do is check their stock charts--if they're still going down and not even started to base yet...then forget it. I have no intention of guessing a turnaround. 

DHT is a good example here, as it now has a very juicy dividend yield, with higher revenue and EBITDA lately.

DHT financials Q2 2016

So why does its stock chart look like this?

DHT 5 yr chart Oct 16

When a stock can't even catch a bid with...decent financial numbers...there must be something wrong. 

And there is. 

Here are three charts that show how the increase in the number of tankers--those that are

  a) working
  b) at anchor
  c) on order

And they're all high and rising.Pay special attention to c)--the number of new tankers on order recently has SOARED--setting the industry up for a potential massive oversupply in the coming 1-2 years. The only chart I don't have is the number of vessels being scrapped--which would mitigate some of this new supply.

Crude oil tankers in service Oct 2016

crude oil tankersr at anchor Oct 16

crude oil tankers on order 6 yr chart Oct 16


That last chart...kind of says it all. Those ugly stock charts on tanker stocks?--that's the stock market pricing in a rough couple years ahead for tanker stocks--now.

Those fundamentals with those stock charts mean that--for now--I can start checking out other sub-sectors for other long trades (these tanker stocks are still possible shorts, but I don't do much of that) , looking for under-the-radar companies, or just under-followed (example--most ethanol stocks still only have 3-4 analysts following them at most).

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