I’m going to keep this one very brief today … spent most of the day in a dentist’s chair, but I couldn’t resist this ad from Dr. Kent Moors pitching his Energy Advantage newsletter.
So there’s a hint for you: If you want to get my attention, reference your investing idea as “the second coming.” I’m not a religious person, and I know that whenever financial marketers mention God or Jesus they’re probably trying to take advantage of people who are, but “Second Coming” perks up my ears.
You can click here for the full Energy Advantage pitch if you like, but the short version is:
Lots of shale oil and gas in the US.
It’s changing our economy dramatically and permanently.
And lots of people are going to get rich. (Primarily those who are working the fields or who owned that previously low-value land, of course, but presumably there’s enough for investors like you and I to get filthy rich, too.)
So, yes, nothing we haven’t seen before. Newsletters have been talking up the shale revolution for nearly a decade now, and there is certainly still a lot of cash chasing the oil in boom towns across the country, from the Eagle Ford to the Bakken, and from the Monterey Shale (though folks have been downplaying that one lately) to the Marcellus.
I don’t have any big picture stuff to add about shale oil and gas — they’re real, there’s real fighting about fracking in some areas, and no I don’t know when that production will peak or how the cost curve will change in the years to come.
So we’ll just move on to sniff out some teased picks from Moors — here are some clues:
“New Breed Opportunity No. 1:
“The “Ultimate Underdog”
“This tiny $360 million company could be the biggest beneficiary of America’s Second Coming…
“They are responsible for shipping crude oil to countries throughout the world via large vessels…
“And their management just made a brilliant move, entering into an exclusive deal that will grow this tiny company’s fleet from 5 to 39 vessels…
“In other words, this business has just expanded its operating capacity by 875%…
The thing is…
“99% of the investing public HATES this stock…
“But once they see what’s really going on here, the ‘sky is the limit.'”
So who is this? Well, as of a few months ago, if we assume that Moors might be referencing a pick he made earlier this year, you would have had to say it was Knightsbridge Tankers (VLCCF), which used to be an oil tanker company but is now a dry bulk tanker company (they sold their very large crude carriers, VLCCs, in 2012 and 2013).
And they did make a transformative deal to combine the company with the dry bulk tankers and newbuilding orders of Frontline (FRO), which would indeed increase the size of their Capesize bulk tanker fleet from 5 vessels to 39. That deal is expected to close starting in September, from what I’ve read, and VLCCF did have a market cap in the neighborhood of $360 million a few months ago before this deal was announced.
So perhaps this is the company Moors is talking about, though it would be odd if that’s the case — Capesize bulkers don’t carry any energy products other than coal, they primarily carry stuff like iron ore, wheat and other dry commodities and they have nothing to do with increased energy production in the US in any direct way.
Which is probably a good thing, frankly — unless you’re quite contrarian you won’t be interested in oil tanker stocks. LNG tankers have a long-term tailwind, since more LNG projects are being developed in the coming years, and dry bulk tankers have had a bit of a rebound this year, but crude oil tankers are still in the doldrums. And since most shipowners are heavily levered, with lots of debt, most tanker owners are losing money at current rates.
But… I can’t find an oil tanker company that has dramatically transformed itself in going from 5 to 39 vessels, so VLCCF will have to be our best guess on this quickie. If you’ve an alternate solution, feel free to shout it out with a comment below.
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