1. Nordic American Tankers Limited (NYSE: NAT)
Number of Hedge Fund Holders: 18
Nordic American Tankers Ltd (NYSE: NAT) is a leading tanker company in the marine shipping industry. The company acquires and charters double-hull Suezmax oil tankers and operates in Bermuda and internationally. The company was founded in Bermuda in 1995 and ever since has grown to be a leader in shipping oil to long-haul trade routes operating its fleet of 20 Suezmax Crude oil tankers.
NAT has one of the largest fleets of Suezmax tankers in the world with a cargo lifting capacity of 1 million barrels of oil each. The company is putting extra effort into maintaining the highest standard of care for the safety of crew, cargo, and environment. In a capital-intensive industry like marine shipping, the careful maintenance of ships and a timely financial expansion are key factors in maintaining financial stability.
In the first quarter of 2024, the company reported a net Voyage revenue of $60.57 million down 30.4% compared to $87.09 million last year. The net voyage revenue represents the voyage revenue minus the expenses incurred such as bunker fuel, port charges, canal tolls, and brokerage commissions. Furthermore, the company had a net income of $15.1 million, down 14% quarter-over-quarter. Although the earnings were positive, the company reported EPS of $0.07 missed the analyst’s expectations by $0.04.
The decrease in net voyage revenue and net income is driven by the decrease in demand for vessels. For instance, the average Time Charter Equivalent (TCE) for spot vessels during Q1 2024 was $34,320 per day per ship down from $51,902 per day per ship in Q1 2023, and the daily operating cost of running a ship was $9000. TCE is a measure of the profitability of running a vessel per day, it’s calculated by the shipping firms by dividing the net voyage revenue by the round-trip voyage duration in days.
Nordic American Tankers Ltd (NYSE: NAT) one of the leading companies in the marine shipping industry is facing challenges due to shipping traffic disruptions caused by the ongoing Israel-Palestine conflict’s effect on international waters. Over the past few months, international trade has faced setbacks, repeated attacks on the Red Sea trade route have reduced shipping traffic through the Suez Canal, a key regional hub for shipping oil and connecting Asia with Europe.
According to a report, 50% of the trade through the Suez Canal has dropped over the first two months of 2024 compared to a year ago while trade through the Panama Canal has dropped 32% YoY. A severe drought broke out last year at the Panama Canal that led the authorities to impose restrictions and limit the daily crossings since October 2023. These challenges in the two key shipping routes have diverted the shipping traffic to the Cape of Good Hope, this route adds thousands of nautical miles to the journey increasing the expenses and delaying the cargo deliveries. With the fluctuations in fuel prices, shipping companies are struggling to manage their operating expenses.
Though Nordic American Tankers Ltd (NYSE: NAT) underperformed and missed expectations on the revenue front, it still managed to keep up strong positive earnings for the quarter amid trade route challenges. Moreover, the company managed to lower its net debt from $232 million in Q4 2023 to $228 million in the first quarter of 2024. Interestingly, the company had an annual dividend yield growth of 13.9% and has recently doubled its quarterly dividend to $0.12 per share from $0.06/share making it an attractive choice for investors looking for dividend growth.
Wall Street analysts expect an earnings growth of 6% this year keeping in view the strong quarterly revenue earnings of the past, the analysts gave a consensus “Buy” rating with a price upside of 36% from current levels.
Looking forward, Nordic American Tankers Ltd (NYSE: NAT) is optimistic for growth despite the macroeconomic challenges, the company sees a high demand for oil, a fragmented trade owing to logistical insufficiencies, and a shortage of ships. The company is looking to benefit from a tight supply of Suezmax tankers that is poised to remain low for at least the next two years. The World’s Suezmax tanker fleet counted as of March 2024 was 588, with only 6 new Suezmax tankers to enter the market by the end of 2024. When the ship numbers are low in a region the rates go up and vice versa, therefore the supply/demand dynamics look favorable for the growth of the company.
According to Insider Monkey’s database, 18 hedge funds held stakes in the Nordic American Tankers Ltd (NYSE: NAT). Two Sigma Advisors fund held the largest stake of 2.18 million shares valued at $8.57 million.
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