Tuesday, November 11, 2008
(Cont'd from above)...

Jim (cont'd):   

Nordic American Tanker (NAT), which, as you can guess is an oil tanker play. But the tanker business hasn't been so hot either, with rates for Suez Max size tankers... they're medium-sized tankers that can get through the Suez Canal... down 44%, since I first recommended NAT on May 8th. The stock, at that point, was at $36.64. The stock's down 16% since then. Or down 10% when you include dividends. These tanker stocks tend to live to their... tend to really react to their shareholders, and they pay high yields.

They're not growth companies. They're almost pure income plays.

Now I like NAT right now. It reported a strong, better-than-expected quarter last Friday. You may have seen the company on (CNBC's) Squawk On The Street... Now, when I recommend a tanker stock, you have to understand that the price of crude is only indirectly related to how much money these tanker companies make. So just because oil prices have gone through the floor, that doesn't directly affect what the tanker companies can make. What determines tanker prices, is the supply and demand for tankers... for the ships themselves. It comes down to the number of ships there are out there.

Why then do we like NAT?...

It's got 12 Suez Max tankers, and day rates for these are about $60,000 which is actually more than the much bigger, very large crude carriers are getting in the Middle East. Their day rate is about $40,000. So NAT has the right ships for this environment.

It has no downtime for its existing vessels until 2010, so they'll always be at work, and it has another 2 additional Suez Max tankers that should be finished in late 2009 or early 2010. And it has the financing available to fund both ships, with a credit facility that doesn't mature until 2013.

NAT... a low-cost operator. Break even if rates are $9,000 a day. Can you imagine? They're competitors need rates to be about twice that to break even.

So, if ever there was a tanker stock built to withstand a downturn, this one is it. A pristine balance sheet. No debt at the moment. No interest payments eating into their earnings, unlike many of its tanker competitors.

It's expected to pay an annual dividend of $3.06 in 2009. This price implies a 9.9% yield. That means, using the Rule of 72, that even if NAT's share price does nothing, you'll double your money in about 7 years, as long as you reinvest your dividend in the stock, and the payout remains the same.

I like the yield, which is essential in this market. I think NAT is really one of the better operators out there that can survive in a really tough, tough shipping environment.

That's why I want to talk to the CEO, who is one of my favorites... and sends out fabulous letters about what his company is up to... and is, by far, the visionary in this group... and his name is Herbjorn Hansson. He will explain to you the way this business works, and why his company is different from all the rest.

Mr. Hansson, welcome back to Mad Money...


Jim's comments AFTER the interview:      Thank you for making people who watch our show so much money. You've done a great job. Great to talk to you. Now... NAT is now the only one I'm going to recommend. That's it. Okay, you call me... just like I only have a couple of banks that I like... From now on, you call me on all these other tanker companies, and I'm sending you to Nordic American Tanker (NAT). The others are just too dangerous.

[verbatim recap]

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