Tsakos: Navigating Gains

04/19/2016 10:00 am EST

Focus: GLOBAL

Jason Clark

Contributing Editor, The Prudent Speculator

We continue to recommend this Greece-based international shipping company, which has a diverse and modern fleet of 50 tankers essentially spread out over every major class of ship, explains value investor Jason Clark, editor of The Prudent Speculator.

Shares of Tsakos Energy Navigation (TNP) have been hit hard in 2016 as concerns about new builds coming online and the perceived ramifications of low oil prices have led to a 25% year-to-date decline.

We believe this pullback provides an attractive entry point for those that are looking to initiate or add to a TNP position.

While there is no doubt that there has been a lot of difficulty throughout the global oil patch, many investors have seemingly failed to realize that lower oil prices have proven to be beneficial to shippers.

While some 763 tankers are on order industry-wide and scheduled to be delivered over the next three years, there are 766 vessels that are in excess of 15 years old (which can be less attractive to clients, less efficient and costlier to operate).

Additionally, while new shipping supply is coming online, there is still growing near-term demand and we think attractive long-term demand growth dynamics that can keep shipping rates attractive and quite profitable.

Despite investor concerns, TNP recently reported 4th quarter earnings that beat consensus analyst expectations.

TNP is currently trading with a forward earnings multiple of 4. In addition, the price-to-book-value ratio is 0.4, while the Enterprise value to EBITDA multiple is 6.5.

All of these numbers are very low relative to the company’s one-, three- and five-year averages, as well as those of its peer group over the same time spans.

TNP repurchased approximately 1.1 million shares as of March 15, at an average price of $5.66, while at the same time increasing the quarterly dividend 33% to $0.08 per share. Following the dividend increase, TNP shares now yield 5.4%.

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By Jason Clark, Editor of The Prudent Speculator

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