Sector: Transportation- Shipping, Oil Tankers
EPS Past 5-years: 131%
PE: 11
Gross Margin: 76.8%
Return on Equity: 13%
LT Debt/Equity: 0.37
Dividend Yield: 12%
In a market overflowing with oil supply, storage and maintenance are in high demand. Nordic American Tanker (NAT) has been taking advantage of this favorable environment and appears poised to continue in the future.
Markets are forward looking and the demand for NAT's services have been seen in the recent recovery of the share price. This glut of Crude Oil is not likely to dissipate any time soon which puts NAT in position to continue its recovery over the next year or more.
They also pay a 12% divided to share holders. While their payout ratio is on the high risk side, NAT has met its dividend obligations for 74 consecutive quarters.
We like a hefty yield, but this thesis is based on genuine price appreciation. For the last few years NAT has carved out a support base built on substantial demand. Looking at the historical volume trends, nearly 3/4 of the total shares exchanged have occurred below current prices. This means investors on the whole are showing gains and are supporting prices at current levels.
Since 2013 the average monthly volume has increased from 11 million shares/month to 26 million shares/month currently. That is an increase of 235% in average shares traded per month. This increase also occurred following an 87% decline from the high in 2005 to the lows in 2013.
When we see an increase in trading volume like this it tells us the "big money" is getting involved. It is up to us to decipher what that means. They are either doing one of two things: either large institutions are liquidating positions or large institutions are accumulating positions. We determine which of these two is taking place by observing the behavior of the share price.
Note on the Monthly chart how the majority of volume didn't take place until the stock already bottomed in June of 2013. When big money distributes shares the price declines, when they accumulate prices rise. We saw the stock stabilize at the $7 level and volume surged through 2014-2015. Was this volume distribution or accumulation? Well, one look at the chart shows the share price appreciating from a low of $7 to a high of $17 over that period. To me this shows blatant accumulation by big institutions who are preparing for the substantial rise in price to continue.
If we zoom in on this same Monthly chart we can see exactly what happened on the recent pullback in February. As the price dipped to retest the prior base highs from 2012-2014, volume surged again as buyers piled in on the markdown. In March we are seeing upside follow-through from that reaction.
Also note in the last quarter Institutions accumulated another 3.41% of the available shares outstanding according to Finviz.com. This is further confirmation of what we are observing.
Institutions are accumulating this stock in an agressive way. While $16-$17 has been a recent ceiling for NAT shares, its only a matter of time until that is broken and a new uptrend ensues.
I also like what is occurring over the shorter-term timeframe. For the better part of the last year the stock has been consolidating the large rally from 2014. NAT has traded from a high of $17.45 in July of 2015, down to the recent low of $9.94. Essentially we have seen a 2/3 retracement of the prior uptrend (Fibonacci aficionados will appreciate the "golden ratio" correction). With the bounce in the broad market since February, shares have recovered and now sit at $14 and change.
The recent bottom came on exceptionally high trading volume (~10x average daily volume) and then formed a reversal base. We now have a valid short-term signal that suggests more upside is likely and that buyers have regained control.
Since 2013 the average monthly volume has increased from 11 million shares/month to 26 million shares/month currently. That is an increase of 235% in average shares traded per month. This increase also occurred following an 87% decline from the high in 2005 to the lows in 2013.
When we see an increase in trading volume like this it tells us the "big money" is getting involved. It is up to us to decipher what that means. They are either doing one of two things: either large institutions are liquidating positions or large institutions are accumulating positions. We determine which of these two is taking place by observing the behavior of the share price.
Note on the Monthly chart how the majority of volume didn't take place until the stock already bottomed in June of 2013. When big money distributes shares the price declines, when they accumulate prices rise. We saw the stock stabilize at the $7 level and volume surged through 2014-2015. Was this volume distribution or accumulation? Well, one look at the chart shows the share price appreciating from a low of $7 to a high of $17 over that period. To me this shows blatant accumulation by big institutions who are preparing for the substantial rise in price to continue.
If we zoom in on this same Monthly chart we can see exactly what happened on the recent pullback in February. As the price dipped to retest the prior base highs from 2012-2014, volume surged again as buyers piled in on the markdown. In March we are seeing upside follow-through from that reaction.
Also note in the last quarter Institutions accumulated another 3.41% of the available shares outstanding according to Finviz.com. This is further confirmation of what we are observing.
Institutions are accumulating this stock in an agressive way. While $16-$17 has been a recent ceiling for NAT shares, its only a matter of time until that is broken and a new uptrend ensues.
I also like what is occurring over the shorter-term timeframe. For the better part of the last year the stock has been consolidating the large rally from 2014. NAT has traded from a high of $17.45 in July of 2015, down to the recent low of $9.94. Essentially we have seen a 2/3 retracement of the prior uptrend (Fibonacci aficionados will appreciate the "golden ratio" correction). With the bounce in the broad market since February, shares have recovered and now sit at $14 and change.
The recent bottom came on exceptionally high trading volume (~10x average daily volume) and then formed a reversal base. We now have a valid short-term signal that suggests more upside is likely and that buyers have regained control.
Remember, major bottoms are not put in by heavy selling. Major bottoms are formed from heavy BUYING. It appears we are seeing this here.
For risk management purposes we want to hold this position above $12.30 which is where the rising 20 Month SMA currently sits. That trailing moving average has acted as support on any dip over the last 18-months.
For risk management purposes we want to hold this position above $12.30 which is where the rising 20 Month SMA currently sits. That trailing moving average has acted as support on any dip over the last 18-months.
It appears there is substantial upside potential from current prices, especially once the $17 resistance is broken. The long-term chart and current base formation suggests measured targets and resistance near the $22-$23 area. If successful we are risking $2 for the potential to gain $8 or $9. Pair that with a 12% dividend payout and the risk/reward sets up very nicely in our favor.
