This Little-Known Sector is Making Investors Lots of Money

Christian DeHaemer

Written By Christian DeHaemer

Posted May 10, 2024

This Little-Known Sector is Making Investors Lots of Money

I’ve been writing about oil tanker stocks since at least 2020 when I recommended Euronav (EURN).  The stock was at $8 a share and is now at $19.06.  I wrote at the time:

These shipping stocks are a clear value as EURN has a forward P/E of 3.3 and a price to sales of 1.3.”

Still, no one is talking about oil tanker shipping stocks.  I know this because EURN has a Price-to-Earnings (PE) ratio of 4.38 and a Price-to Sales (PS) ratio of 3.04.  And they pay a whopping 11.96% dividend.

A $10,000 investment in 2020 would have turned into $60,732.22 today.

I recommended buying more tanker stocks in November 2022.  I wrote at the time:

“Frontline Limited (FRO) is an oil tanker company.  Due to the Ukraine war and the closing of pipelines from Russia, oil must now be shipped by sea.  Furthermore, the millage shipped has increased dramatically.

These tanker shipping stocks are making a lot of money.  The stock has doubled this year but there is more to come.  We like this chart pattern.  We are trending upward and got a pull back which allows us to buy on the dip.

Buy Frontier Ltd. (FRO) at the market…”

Here is the chart:


A $10,000 investment in Frontline would have turned into $45,113.69.  A 54.66% annual return.

More Money, More Money

Another stock I recommended in my trading service at the time was TORM Plc (TRMD).  The share price went from $7 to $36.46 where it is today.  However, since they have paid seven dividends over the last two years a $10,000 investment would have turned into $69,650.21.  This equals an average return of 137.25%.

That’s how it is done, people.  Full disclosure: I own TORM.

There are several reasons that oil tanker shipping stocks have done so well.  

The first is the Russia/Ukraine war created a need to ship oil and natural gas to the EU.  

The second is that China imports a great deal of its hydrocarbons used for electricity and the Chinese economy is finally bouncing back from the Covid lockdowns. 

Third is a drought in the Panama Canal which slows trade and increases utilization rates.  

The fourth is that the Houthis are trying to destroy shipping in the Red Sea which means that many tankers now go all the way around Africa which again increases utilization rates and reduces the supply of ships.

The Red Sea remains dangerous and in April only 0.6% of the global fleet was idle (as in, unemployed).  Tonnage supply remains tight.

But the real reason is that there are simply not enough tanker ships and very few are being built.  Just look at this chart:

Tanker Orderbook

The last time earnings were this high oil tanker company DHT Holdings was a $212 stock.  Today it trades at $12.09 with a p/e of 12.22 and it pays an 8.21% dividend.  The stock is up 226% over the last five years and it is still cheap!

Full disclosure: I own DHT as well.  

The upshot of all this is that the tanker industry is on fire.  This will remain the case until more ships are built.  The problem is that it takes two to three years to build new oil tankers. Plus, oil tankers that are over 20 years old get scrapped because they can no longer be insured.

The current fleet is old because after the bottom fell out of the tanker market in 2009 they stopped buying new ships.  So the fleet now has a lot of ships from 2006-2009 and until new ships can replace them the global shipping market will remain tight and the prices they can demand will remain high.

All the best,

Christian DeHaemer

Outsider Club

Here is a cool site that tells you returns including dividends:

From the go woke, go broke chronicles:

Add one more to the list of Covid lies: