After this segment, you
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JJC:
What if I told you that
there was a stock that
could give you a huge
dividend... a huge
yield... and, when I say
huge here, I'm not talking
about a relatively puny,
5%, 6%, or 7% yield... No.
I'm talking about giving
you a morbidly obese
double-digit yield... a
yield that needs a tummy
tuck!... And, at the same
time, could potentially
deliver serious, maybe as
much as 25% upside...
Would you call me
crazy?...
You don't often find these
two things together...
capital appreciation,
capital preservation...
but I think I've got it...
I've got it all in one
stock... I've got to go to
Scandinavia to give it to
you, but that's okay...
because it trades here...
and that stock is...
NAT is an oil tanker
stock, and tanker stocks
typically have zobtic
yields, but NAT stands
above the rest!... But,
beyond that, this is a
great time for oil
tankers, at $125 oil...
because spot prices for
using these tankers are
going higher and higher...
We've like other oil
tanker stocks, and you
know which one we've liked
all the way...
Frontline (FRO),
which is up 17% since I
recommended it on July
23rd of last year...
giving you a 36% gain,
when you include the
dividend payouts... I see
NAT as the next FRO...
. . . .
.
NAT just reported earnings
this week... Their
earnings per share were
below consensus estimates.
I did wait for that... I
feared that... But the
company raised its
quarterly dividend to
$1.18, to be paid to
shareholders of record on
May 23rd...
Now, listen... That
dividend is double the
size of the dividends that
NAT paid in the 3rd and
4th quarters of 2007. I'm
not so concerned about the
missed earnings report,
because spot rates are
going up huge... NAT
tankers are making...
okay, these are numbers
(i.e., metrics) that are
normally associated with
hedge fund managers...
making $46,600 per day...
Last year, they were
making $27,000 a day, in
the previous quarter;
that's why we stayed away
from these guys. I think
the rates are going
higher...
NAT typically uses
dividends to forecast the
future of profits. But,
before we talk price
increases, let's take a
look at the company...
NAT has a fleet of 12 Suez
Max double-hulled
tankers... with two more
under construction that
should join the fleet
between 2009 and 2010... A
Suez Max is one that can
fit through the Suez
canal... These are smaller
than the largest oil
tankers which, in
professional parlance, are
called VLCCs... Very Large
Crude Carriers...
Of NAT's 12 tankers, 11
are contracted at spot
prices, meaning they're
contracted out at whatever
the current price is...
they've got the
leverage... And, right
now, those prices are
high... Average Suez Max
spot rates, between
January and April, $60,000
a day... higher than
$46,000 that NAT reported
in the latest quarter, the
one that people didn't
like...
. . . .
.
What's causing these high
rates?...
For one, OPEC (i.e.,
oil-producing exporting
countries) production has
increased the volume of
oil imports to the West...
Well, of course, prices
are up... wouldn't they be
doing that?... That means
more demand for tanker
space...
. . . .
.
Beyond that, oil tanker
stocks are very simple...
They don't trade off the
price of crude, so to
speak... They're levered
off the price of
transporting crude... and
that's determined by the
number of oil tankers out
there... Prices are high,
and should stay high,
because some of the
largest oil tankers, the
VLCCs are exiting the
market, being converted to
dry bulk ships... and oil
platforms... That means
that VLCC fleet growth
should be flat. That's the
competition...
We also know from NAT's
latest quarter that Suez
Max fleet growth stayed
flat too... Again, no more
ships... Again, we stayed
away from this group,
because the ships were
being printed... they were
putting so many of them
out there... No more...
So, we've got high rates,
and it looks like we're
not adding ships... That's
a recipe for rates to go
higher...
And... you want trust?...
The CEO, Herbjrn
Hansson... I call him the
IronMan of the Suez Max
industry...
. . . .
.
Now let's throw in
something else... ships
being taken off the
market...
By 2010, 46 single-hull
vessels - remember, our
guy is double-hulled -
should be taken off the
market. You've also got
Suez Max tankers being
converted to offshore
vessels, the dry bulk
carriers... the same types
of ships that NAT uses...
We also know that Iran is
doubling the amount of oil
that they're storing in
idle tankers in the
Persian Gulf, taking
tankers off the market...
again, increasing prices.
Remember, it's the supply
and demand of ships...
Last year, an oil spill in
Korea also increased the
demand for double-hull
tankers. All of NAT
tankers are
double-hulled... That's
helping to keep the spot
rates high... All of this
talk about spot rates is
important, because they
determine the size of
NAT's dividend
distributions, and that's
why you want the stock...
. . . .
.
I gave you all of that
stuff so you understood
why I am confident that
this outsized dividend
could even go higher...
It's the $60,000 per
day... that's the number I
threw at you earlier for
January... If that goes
up... if it's correct,
then NAT's dividend payout
for the current quarter
could be around $1.56 per
share... Hey, it's not me
saying just that... Bear
Stearns is saying it.
Now you're talking about
an implied yield of 17%...
Remember, the dividend
they just announced for
the last quarter was
$1.18... so now it's
11.2%....
This is a company that's
already paying out a
massive dividend. To me,
it looks like it's going
to get even bigger...
. . . .
.
Now, the Street is a lot
less bullish than I am,
when it comes to
tankers... Of the 10
analysts covering NAT,
only three have buys,
against five holds, two
sells... What have they
got against the
Scandinavians?... What is
that all about?... They
never hurt anybody.
The Street expects tanker
rates to pull back in the
second half of the year,
as supply grows... I think
that's a faulty
assumption... I think
they're stupid... I think
they're wrong... I think
they're morons... I can't
see the supply of tankers
growing fast enough to
knock rates down...
The number of
double-hulled VLCCs
available in the next 30
days has been cut in half
over the last month, from
56 to 28... Where are
these analysts? Why are
they taking this into
account? Why am I the only
one doing the work here?
Oh... that's right...
because I'm not paid
billions of dollars, like
they are.
This does not seem to be
in the market, where
supply is expanding... you
just don't get that, with
this kind of work...
. . . .
.
Where does this put
NAT?...
The tanker stocks trade,
based on their yields...
If NAT trades up to a 9%
yield, which would put it
inline with the other
tanker stocks, you've got
25% (projected increase)
in the stock...
. . . .
.
The Bottom Line!:
You've got to love the oil
tanker story... I think
the stock's going higher,
and I think the yield is
going to go lower, because
the dividend is going to
be up. Again, I'm
always trying to get you
that ratio... I want
you to understand that the
dividend is different than
the
yield... The dividend is the amount they give
you (per share)...
It's what you divide the
stock into... So it's
entirely possible the
dividend goes up, which
sends the stock up, which
sends the yield down.
That's the holy trinity of
what we're looking for in
a stock... Right
here, right now, I am
upgrading
Nordic American Tanker (NAT)
to be as good as
Frontline Ltd. (FRO)...
. . . .
.
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JJC: Many thanks to...
Jason Guerowitz, who is
the remarkable producer
who came up with the idea
to talk at length about
the 60th anniversary of a
great country, that is a
fabulous developer of
business too... So we're
going to celebrate the
60th anniversary of the
founding of the State of
Israel tonight on Mad
Money... by, of course,
our signature... we're
going to help you make
some money... in an
Israeli stock that is as
green as they come... but
green is green, as in
dollars, on this show...
This sizzling company is a
vertically-integrated
geothermal power play...
geothermal being a source
of completely renewable
energy...
Now, it's headquartered in
Nevada... it's a stealth
Israeli play. 60% of it is
owned by an Israeli
company, Ormat
Industries... Half of its
employees work in
Israel... The reason why
we went for ORA, a company
that isn't totally
Israeli, is that, even
though there are a lot of
Israeli stocks that trade
in U.S. markets, very few
of them right now, we
thought, were right for
the show...
I mean, for instance, a
lot of people about
Teva Pharmaceutical
Industries (TEVA),
the generic drug maker,
but everyone loves TEVA
even though, to me, it's
just another generic play
with some proprietary
offerings, like Barr
Labs (BRL),
which is down 11 points
today... We've never liked
airlines on this show or
generic drug companies...
and I think you should be
glad that we haven't;
they've hurt a lot of
people.
. . . .
.
You see, I like what ORA
does, a heck of lot more
than I like TEVA... Plus,
ORA's already made you a
lot of money... February
2nd of 2006... at
$35-40... that's when we
put it on the list... It's
up 51% since then...
And this is a stock you
can be proud of...
particularly to those of
you who are oriented
toward totally to negative
emission... no carbon...
This is the least carbon
of anything...none!
The company operates 400
megawatts of power
capacity, mostly in the
Western United States...
It sells power units for
geothermal plants, for
recovered energy...
Recovered energy is energy
created from heat, that
was a byproduct of another
process... and ORA sells
remote power units to
generate power in
hard-to-reach places and
extreme environments.
Power generation is 73% of
ORA's sales... 80% of its
operating income... and
the products it sells
represents the remainder.
Geothermal energy - for
those who don't eat
granola on a daily basis,
or Kashi... is energy
taken from the Earth's
magma... that's under the
crust... and used to
create electricity...
Geothermal power companies
drill wells into the earth
at points where the magma
is close to the surface.
Then the wells bring up
hot water... the water
turns to steam, and the
steam turns turbines, and
the rest of the water gets
poured back down into the
ground. That's totally
renewable...
Geothermal would be the
future, except there are
only so many places where
it's viable. Geothermal is
competitive with wind
power and dirty coal, on a
cost-per-kilowatt basis
though... but you can only
do it in places with high
geological activity. That
said, where you can do it,
there's almost permanent
capacity... and, unlike
solar or wind, geothermal
is always on. A cloudy,
windless day... you don't
have to shut it down.
. . . .
.
There's a lot of room out
there to expand geothermal
capacity, and ORA's doing
its part to expand its own
capacity...
Right now, there are about
9500 megawatts worth of
geothermal power
generation installed
throughout the world. I
think there is 148,000
megawatts of capacity;
that's 15 times the
current installed base...
This ORA is going to get
its fair share... believe
me... a lot of room to
grow...
ORA, which generates 400
megawatts right now, is
planning to add 100
megawatts of capacity in a
year, so you're talking
about a very nice
percentage increase... It
has 174 megawatts of
capacity under capacity
right now... another
99-128 megawatts under
development...
. . . .
.
The company is also
working with the
Department of Energy on
the next generation of
geothermal power... that
could increase the amount
of energy that could be
extracted in any given
geothermal plant...
ORA is benefiting from
renewable energy
standards, and production
tax credits in this
country where it does its
generation...
I think this would be a
great stock to own, if a
democrat comes, and wins,
okay... I mean, I think
that they really push
this. It's not clear
whether McCain would... We
know he's a nuclear
enthusiast, but that's a
whole other kettle of
fish...
. . . .
.
Because ORA makes much of
its own equipment, and
makes its own drilling
rigs, it doesn't have to
deal with the production
delays that plague other
companies in this
business... they have to
deal with third parties to
get these built... not
these guys.
This also positions ORA to
be a supplier to other
geothermal companies... I
think it could even be a
bigger source of revenue
than the power generation
is for them right now.
. . . .
.
ORA is not liked... Only
one of seven analysts
rates it a buy. The rest
are holds. You see, I like
that situation. It means
there are more chances for
upgrades.
The company also reported
a really solid quarter
this week. I wanted to get
that out of the way... The
2008 revenue guidance that
ORA reiterated is so low,
I just can't help wanting
to buy the stock. I think
it's got a UPOD
scenario... I think it
under-promised... I think
it can now over-deliver...
I want you to be
careful... The stock is
just 4 points and change
below its 52-week high...
Many other stocks in this
alternative energy have
come down a lot... This
one hasn't. It trades at
33x 2009 earnings. Now,
that's a multiple that's
justified, given its 22%
long-term growth rate, but
that's expensive, okay...
. . . .
.
Here's what I would do...
I talk about the five-day
rule here (in his
latest book)...
I would wait five days,
before I'd buy this
stock... You absolutely
cannot buy this
after-hours... the float
is tiny... 16 million
shares. You've got to use
limit orders. I'm
promising you... I am
guaranteeing you that, if
you buy this after-hours,
you will lose money...
. . . .
.
The Bottom Line!:
To celebrate Israel's 60th
anniversary, I like
Ormat Technologies Inc. (ORA)...
a stealth Israeli play on
geothermal power, which
Cramer is 100% behind...
. . . .
.
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Definitions of key phrases
used by Jim, known as
"Cramerisms":
Definition: 'Pull the
trigger' is Jim's phrase for making
the decision at that point to trade -
either to 'buy' or
to 'sell' (although he
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enough to make the final
decision without looking
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Definition: 'Ring
the Register' is Jim's phrase for
selling a stock, and making
it a final sale, that you
should not look back on.
Put it behind you.
Definition:'Let It Come In' indicates how you
may wait for it to pull back, or have the
stock price come down briefly, as your
chance (after letting it come in) to buy
the rest of your position (i.e., total
number of shares you own in that stock).
Definition:'backing it up'
or 'doing a 'mon-back' is Jim's
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truck to load up on a stock by buying
it. 'Mon-back is short for the
imaginary worker saying, 'Come on
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indicates that, after you do
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homework on the stock,
you should feel comfortable
loading up on it, as it is
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