1. Scorpio Tankers Inc. (NYSE:STNG)
14-day RSI Score: 26.87
Number of Hedge Fund Investors In Q3 2024: 32
Scorpio Tankers Inc. (NYSE:STNG) is a Monaco-based shipping company that caters to the needs of the energy industry. The firm transports petroleum products such as crude oil and refined petroleum. As a result, its hypothesis depends on the global energy market, oil price, and economic performance of key regions such as China. Consequently, the fact that Scorpio Tankers Inc. (NYSE:STNG)’s shares are down 22% year-to-date is unsurprising. Conflict in the Middle East has injected considerable uncertainty into the oil shipping industry, which has led to turmoil in tanker rates. Tanker rates fell to $12.34 in regions such as West Africa during August for their lowest level since hostilities started in October last year. The rates haven’t been helped by the fact that voyages from the Atlantic Basin to Asia have dropped, and looking ahead, rate recovery should be key in driving Scorpio Tankers Inc. (NYSE:STNG)’s shares.
Scorpio Tankers Inc. (NYSE:STNG)’s management commented on the rates during the Q3 2024 earnings call. Here is what they said:
“Product tanker rates remain well above historical averages and are at levels which the company generates significant cash flow. We expect this to continue. The ongoing strength in the product tanker market is the result of, one, demand consistently outpacing supply, two, increased ton miles as changes in refinery capacity have reshaped global trade flows, and three, geopolitical events exacerbating points one and two. Despite facing several challenges in the third quarter, including the end of summer driving season, elevated refinery maintenance, and competition from crew tankers, the fleet still averaged over $28,000 per day.
Notably, these rates have been achieved while undergoing a significant drydocking program. By the end of this year, we will have dry docked almost 60% of the fleet, increasing the efficiency and earnings days for next year. Looking forward, our outlook remains constructive. Rates have bottomed at very high levels. The market headwinds are becoming tailwinds, and it will not require much for rates to increase further. The risk is to the upside.”
STNG is an oversold stock that hedge funds bought in Q3. While we acknowledge the potential of STNG as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than STNG but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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