He is back. Once again, Norwegian tanker owner Herbjorn Hansson is getting air time on US cable financial show “Mad Money” and, like a pied piper, is attracting investors to trade millions of shares in his Nordic American Tankers (NAT).
NAT shares have gained 33% in this week alone, by far the best in the peer group, doubling gains by the likes of Frontline and DHT Holdings and tripling those of Euronav.
But price tells only part of the story.
With its wide base of retail investors, NAT churned an astounding 25m shares on Tuesday, by far the most in a tanker group and thought to be an all-time record for trading in one day. The 10-shipowner pack averaged turnover of about 7m shares that day.
NAT traded 17m shares on Monday and 10m on Wednesday. NAT’s three-month average had been about 4.2m shares.
The record interest stems from collapsing oil prices amid oversupply that has rapidly filled land-based terminals, providing unprecedented floating-storage opportunities for tanker owners. Already-raging rates stand to pop further as capacity is reduced.
But the question is this: for investors perhaps just learning about tanker stocks, is Hansson’s NAT the right bet, or are they backing the wrong horse?
To be sure, NAT is making a lot of money and is poised to make more. Anyone with a tanker is ready to print cash.
But some equity analysts roll their eyes at the extent of interest in NAT as they argue there are better opportunities in big VLCC owners such as Frontline, Euronav, DHT and others.
None are quite so blunt as J Mintzmyer, who is both an investor and analyst with Value Investors Edge and publishes research on the Seeking Alpha website.
He took a shot at NAT this week even as he celebrated renewed interest in some of the other names.
“I believe NAT is overvalued compared to peers and has little remaining upside," Mintzmyer said in his note. "This high relative valuation, despite owning zero VLCCs, is due to its heavy retail following and high-name recognition on CNBC and other shows.”
There was more in an email message to TradeWinds.
“Nordic American Tankers [NAT] is a retail favourite, but the valuations are terrible compared to other firms and its primarily getting bid up due to an uninformed retail crowd trying to ride a wave,” Mintzmyer said.
While Mintzmyer may be more direct than others, he is not alone in having his doubts about NAT.
When asked about NAT’s gains this week, Jefferies lead shipping analyst Randy Giveans put his reservations more delicately.
Not a 'buy'
“I’m not going to use the same wording as J, but I’ll say this: I’m very bullish on the tanker sector and I cover 10 tanker equities," Giveans said. "There are nine buys and the only hold-rated name is NAT. So that may speak for itself.”
It is worth noting that most of the objection to NAT comes on valuation. Its shares are already fully valued, where some of the other names still have a way to go just to get to net asset value (NAV), some analysts say.
For example, at the end of Tuesday’s huge trading day, Giveans had NAT trading at 150% of NAV.
All of the other nine tanker owners under Jefferies’ coverage were below NAV, with only DHT coming close at 99%.
So, by this logic, other names have further to run.
Still, Omar Nokta of Clarksons Platou Securities — an analyst who maintains a “buy” rating on NAT — told TradeWinds this week why he still likes NAT in the current climate.
“Well, some people view NAT in that [overvalued] light but, at the end of the day, they have 23 suezmaxes with a lot of exposure to spot rates,” Nokta said.
“It’s their simple structure, pure suezmax focus and long-term commitment to dividends that has kept the valuation at a premium. Whether people like it or not, it has earned a valuation premium and it continues to keep it.”
As Hansson likes to remind his fans, NAT has paid a shareholder dividend for 91 consecutive quarters dating back to 1997.
The payouts got big in peak tanker markets such as 2006, when NAT doled out $1.88 per share in the first quarter alone.
Leaner tanker markets and a need to restructure its financing have hamstrung NAT more recently, with no dividend bigger than $0.14 per share since 2017 — and that for the current quarter.
But bigger payouts are coming thanks to rising tanker earnings.
Hansson tends to have little time for journalists and equity analysts, instead taking his message directly to his retail base through the occasional CNBC appearance and more often through shareholder letters — his version of Donald Trump’s tweets.
The headline to his 14 April message perhaps said it all: “Dividend is a priority for NAT. The strong tanker market is continuing.”
