Why I Just Put $30,000 into this Oil Tanker Stock! Big ROI OPP
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We know the oil price has been down-trending big time. Oil prices have really fallen through the floor recently! I have been looking for an opportunity and I believe the OPP is the oil tanker stocks. Stocks like NAT Nordic American Tanker should benefit hugely! Would you say NAT is in the stocks to buy now category or just stocks to watch? LMK NAT is definitely an interesting stock for dividend investing. It’s in the loved dividend stocks category for a whole lot of dividend investors.
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Well, guys, as we all know, by now, oil prices are crazy right now. Okay, it was just what a day or two ago, oil prices were trading below $0. Like whoever thought they’d see an oil price in terms of oil price contracts, under $1, it was $0. And then it was negative absolute craziness. We know the oil market is in massive contango right now, which essentially means the backwards looking prices are way below what the forward prices are.
And this is like something almost, we’ve never really seen this type of moves in the oil market. Absolutely. Bananas. I mean, if you think even back to the Great Recession, I believe in the Great Recession at its lows, oil fell to like 30 US dollars, somewhere around there in terms of contracts.
And here we are, you know, like, literally, you’d like the day or two ago trading negative, like that’s just absolute craziness, okay. And this is why the whole contango situation is why I can’t play you. So I’ve thought about it, but the whole contango, that’s just creating a really, really messy situation for you.
So, and so therefore, I can’t get in that one. But I will say that could potentially be a play down the road, but just at the moment, because of the how much contango there is out there. It’s not really the play as of right now. So this got me to thinking.
How can I make money from this mess, there has to be an opportunity in any market you’re in, when you see some type of crazy activity, there’s usually money be made, sometimes it means to go long shares if that’s the situation, sometimes it could mean short selling, actually, believe it or not, or buying put options or call options, or there’s gonna be something whenever you see some type of craziness in the market.
There’s always usually a way you can make money on it and capitalize on it. And so that’s what I put a lot of my time and attention. And it got me to thinking. Imagine if you got paid $100 for every time you ever smash the thumbs up button on YouTube, who would really be the richest person?
Would Jeff Bezos really be the richest person in the world anymore? I don’t think so. Okay, it might be okay, no, seriously, this guy, man think there’s got to be a play. Okay, there must be an opportunity. So over the course this weekend, I spent a lot of time really thinking about this thing about all the different possibilities how I could potentially make money from this.
And we know oil prices are extremely low and maybe even unsustainably low. I mean, they probably can’t stay around this range forever, although it is possible. But I mean, look, look at look at this guys. It’s extraordinary. The June contracts are trading under 14 bucks, July.
I mean, if you don’t compete oil usually is in July and August, July is 20 bucks, August is trading under 24. Even though when you start going out to the full time, it’s not the high mean the highest we can really see effort for 2020 at least our December contracts trading at 29 bucks.
That is extraordinarily low prices. And so over time, you got to assume these prices will come up but it could take a while Okay, with oil prices being so low like that. I don’t want to play any of the bad balance sheet players okay the smaller companies that honestly a lot of these companies going to go out of business do normal corporations the rig the trans ocean, okay.
Devon energy law, these companies they could end up very well going under they have massive debt loads. Obviously with oil prices being where they’re at the none of these companies can even think about making a profit. They’re just going to take massive massive losses.
And when you’re kind of cash strapped, like a lot of these companies are with massive debt loads massive interest to pay, you know, lives a big questions out if the if very many of these companies are going to make through this mess. And so I don’t want to be a part of any of those companies.
I thought about this weekend and I’m like, No, I just know. Okay, then I thought about the big players, a Chevron’s a Phillips 66, Exxon Mobil, BP, all those big players, okay, I don’t want I don’t want to be part of those corporations either. Okay, I just don’t there’s just not enough growth there.
Although those companies should make it through is fine because keep in mind, they also run refineries and they have a lot of different products that just aren’t dependent upon oil prices. I don’t want to be in those stocks, either. Okay.
Meanwhile, over the past couple days, a lot of people have been making jokes because oil went negative right? And so you got paid to basically take oil you know, with those contracts couple days ago, I think at the peak, it was like 37 bucks.
Absolute craziness, you got paid to take oil, so people were like, Oh my gosh, I’m gonna start storing oil barrels in my backyard and there are memes going around it was like a big joke over the past few days right everybody talking about they’re going to fill their houses with oil just so they can collect all the money they would get paid to take oil and so then.
I think it was yesterday there was somebody sent me a DM and I said some type of joke you know about Carnival Cruise Line, and I was like, oh, Carnival Cruise Line, they should start using it for oil stories. Okay, that’s how they start making money because obviously if you don’t know Carnival Cruise is the worst investment I’ve ever been in in my life.
We’ll see how it turns out over the next few years, but obviously they got hit by the ones in the 100 year Roni situation and so I made a joke since all their their ships are down right now. You know, like, like, just just destroy the insides of the ships and just fill them up with oil.
You know, you get paid for Hey, it’s something to do in the meantime. So I made that joke and then coming to thinking oil tanker stocks, okay. oil tanker stocks. I haven’t been interested in oil tanker stocks, gosh, in probably since 2009, or something like that. Like it’s been a long, long time.
And so I started looking at Nordic American tankers, okay. nordik American tankers, and I bought a lot of stock here today. Okay, so let me give you some facts about this one. And let me tell you exactly in detail in this video why I believe I’m gonna make a lot of money from the from this stock specifically, but a lot of the tanker stocks are probably going to make a lot of money.
This is just my one because I know this one pretty decently well. Okay, so ticker symbol, this one is na T, it’s a stock trading in the five today, it’s been all over the place, but it’s in the fives, okay, a market capitalization of, you know, over $700 million, so less than a $1 billion market cap on North North American tanker.
So it’s not a big company at all. Even for me, I you know, I buy some of these smaller companies that sometimes are around 1,000,000,002 billion, but I’ve rarely go under a billion dollar market cap. This is one of those very few opportunities.
And I know some of you guys love to see kind of where stocks been as far as stock price has been. The peak for this company was really around 2004 2005 2005, the stock was trading over $50 a share, and over $50 a share. That was when the business was as good as it can get. In recent times, the best the share price has done is basically about $15 a share.
But this isn’t a stock that’s really known for being necessarily a great stock to get capital appreciation. And this is a stock that’s known to be a dividend beast, okay, a dividend beast, and they just upped their dividend massively recently, because their business is going really good.
And I’m going to show you how good in a moment, okay, they upped their dividend to 14 cents a share. Basically, any shareholders on record as of May 26, will receive that dividend on June 5. And keep in mind, this is a company that has been paying out dividends consistently since 1997. Okay, neck at 97.
I was in elementary school in 1987. That’s absolutely amazing. They just upped his dividend massively, and that’s what Nordic American Tinker is known for. They’re known to pay massive amounts of their cash flow in the form of dividends. Okay, that’s what this company is known for.
Okay, Nordic American tankers in terms of their fleet. They have a lot of they have, obviously a lot of these tankers, okay. 23 vessels in total. Okay. 23, like, MJ, okay, amazing. Now, if you think about these vessels, what are they used for?
Obviously, they’re used to store oil, okay, so imagine you’re a trader or fund out there and you own a lot of oil, and you need somewhere to put the oil, okay, you’re going to sometimes use land based storage options. And sometimes if you’re forced to, or if it makes more sense, you’re going to end up using one of these vessels, okay.
And they’re not the only company in this market. There’s plenty of other companies in this market as well. And it’s a great business model. And it’s usually a very good cash flow business model. Okay. Now, the biggest cost for these guys, when you think about that the biggest cost for these guys is always going to actually be fuel fuel for it because they don’t have massive cruise.
There’s no massive cruise for this. And it’s not like it’s a cruise ship in the sense that you can they got a bunch of costs around food cost and drink costs and all sorts of things. No, these ships run a relatively small crew. And the biggest cost generally speaking, is fuel.
And yes, we’re fuel prices are right now guys, they’re they’re, you know, ridiculously low, like ridiculously low. We just looked at, obviously, oil costs. So fuel costs is going to be extremely low for these ships right now. And that is tremendous news.
Okay, that’s tremendous news that fuel costs are so low, because that just means these vessels are going to be able to operate a lot more profitably, then obviously, you have a situation where fuel cost is very high. Okay. But the real question for me is not just around the fact that fuel prices are low. That’s, that’s almost a very small detail.
What I’m focused on is how much money are these guys actually making right now? Okay, how much money they making? And I’m telling you guys, these oil tanker companies like like Nordic American tanker, are making money hand over fist right now. It’s disgusting. Okay.
So here’s a situation here, essentially, in a normal APR, if you want to, you know, be in one of these tankers, okay. It’s gonna cost you roughly around $25,000 per day, okay. $25,000 per day to store your oil there. Okay. Right now, these guys are getting between $100,000 per day, and $200,000 per day.
Okay, this is ridiculous. Okay, absolutely ridiculous. I mean, these numbers are rather shocking. I mean, just like holy smokes guys. like think about that normal April. They’re getting 25k per day. They’re getting 100k to 200 k plus per day right now. No, I was listening to a gentleman. he’s a he’s a shipping expert on CNBC.
And before I went to bed last night, I think it’s like 3am. And he mentioned a number around a quarter of million dollars per day. Okay. Now, I have not seen any concrete proof of that. So I didn’t put that number in here. But then again, he’s a shipping expert.
I’m not, you know, I don’t think he would make that up. But yes, so some of these vessels are going for, you know, up to potentially a quarter of a million dollars per day, okay, this, this is a massive change to these companies business model, and somebody like an NA t, this is more than a difference maker.
Okay, this is this is like, just, I can’t even explain it. I can’t even like how do you even explain that you go from 25k a day to 100k, maybe 200k. Like we’re talking, you know, a 5x in the business model 10x in a business model, and basically year over year.
Like, that’s actually extraordinary, the profitability for these companies is going to absolutely go through the roof, the profitability for na T is going to go to levels probably haven’t seen since 2004 2005, if not even even better than that. Okay.
It’s an extraordinary time for these different players in this market. Although this isn’t sustainable for long term, I’ll be 100%, you know, upfront about that, I don’t think they’re going to get 100k 200k per day, long term, there’s no way that’s happening.
But if they keep bringing in this money for the next several months, especially if they can bring it in for several quarters, all my goodness, okay, why is this? Well, it will storage is just running out. So So basically, if you want to store oil, you need to store oil somewhere, you have to sometimes go to some of these tankers.
And just like everything else, this is a big supply and demand game. And when there’s a ton of demand for storing oil products, guess what the prices, you’re going to be able to charge are going to go through the absolute roof, like like we haven’t really ever seen, okay, because there’s just nowhere to store this stuff.
Okay. And here’s the other thing, a lot of a lot of these, you know, traders or funds or different individuals out there that own the oil, right, that actually, you know, have own these contracts, they have to take delivery, a lot of them that are that are renting out these vessels to keep the storage of the product.
A lot of them aren’t even having the product moved right now, which means fuel costs is like non existent for these companies right now, because they really don’t want to move it anywhere, they really can’t move it anywhere, like for right now. Just keep it there, man, just keep it where it’s at, you know, I just need to store it somewhere.
And so that that even helps out profitability in a bigger way for a company like this. So if you’re thinking about this, from the perspective of being an individual, or fund or whatever, that that holds a bunch of this physical oil, you kind of don’t really want to get rid of it right now, if you don’t have to get rid of it right now.
And the reason being is that the prices, you could get rid of it at or are really, really miniscule. Like really, if you’re selling this oil, right now you’re getting such low amounts of money, you really would ideally like to hold this for at least a few months, if not a couple quarters into the future, where hopefully, oil prices are at a much more elevated level. And you can get rid of this stuff for you know, better prices.
And now, because getting rid of it right now, at you know, whatever price we’re trading at right now is probably not the most attractive thing if you’re somebody that actually holds the physical product. Okay, so let’s start going through some of these nit numbers, in my opinion, in terms of net income, what I think this company is going to do in 2020.
And then what I think the stock price, or what type of return on investment, I’m going to get in this investment. Okay. And you know, I use investment term a little loosely in this one, because this is not necessarily nearly as much of an investment of mine, like a Facebook stock would be, or a Tesla stock or an Uber stock or a lot of the place I’m usually known for where, you know, I’m planning on holding these positions for years and years to come in the future.
You know, Sky work solutions. This isn’t one of those type of plays. It’s a little short term in nature, and we’ll see how long I can hold this. I can hold it for maybe a few weeks, I can hold this for maybe a year, we’ll see what kind of what happens.
I want to see how the kind of things transpire here, okay. But here are my number. So three different scenarios. We’re gonna go through kind of like a, you know, a bad scenario, my realistic scenario, my personal opinion, and the best case scenario, okay. Here’s a bad scenario.
A bad scenario for North American tankers. ticker symbol na t would be that they only do $100 million in net income. That would be a bad scenario, in my opinion, for this stock in 2020. Okay, keep in mind, the last year they lost and they had a really, really strong year was 2015. And they in that year, they did $128 million in net income.
And if I’m looking at the rates and what’s transpiring right now, I don’t see any way possible, why they don’t destroy that number and make 128 million look like it wasn’t that good of a year. Because what we’re looking at in the oil markets right now is way more pronounced in terms of storing this stuff.
It’s a way crazier situation than essentially we had it They’re, you know, fiscal year 2015. So 128 million they made that year, by the way, these numbers are all in 1000s. Just so you guys know, I know some people, you know, are kind of newer to stock market investing.
So that’s really 128 million. That’s not 128,000 for those of you who might not know that, but needless to say, I think they’re gonna make way more than $128 million in net income, but that scenario would be the only make 100 mil Okay, my Scenario number two, I believe this company, this is my These are my numbers based upon what I worked out his projections based upon the fact that they’re getting huge numbers in right now.
And likely things will probably slow down throughout the year, I believe the company is going to do 200 million to $250 million of net income in 2020. Okay, 200 to $250 million in net income in 2020. That’s my scenario, this is not some ultra bullish scenario where they continue to get 100 to 200k per day or something like that for the whole entire year.
No, it’s assuming they get some some huge numbers for the next few months. And then you know, rates start to drop and drop as we kind of move into the fall and kind of go from there. And that’s an area based upon what I worked out 200 to $250 million in net income.
And keep in mind, guys, this is a company that’s what what was it a 700, and something million dollar market capitalization. I mean, if they can pull in 200 to $250 million in net income. So I got to say about this case, best case scenario, my personal opinion, for this stock in terms of its net income in 2020, would be they make 300 to $400 million of net income.
Very much a possibility, but you need a strong 2020 period all the way to the end, okay, in order for this company to do 300 or $400 million net income, you would need that the rates to be high for a long time. And so even engage with a 300 or $400 million number, the number could come down over time in terms of what they’re getting per day for these vessels.
But it comes down very, very slowly as 2020 goes along. Okay. I don’t think that’s the most realistic situation. But it is a possibility. That’s the best case scenario 300 400 million, that would be amazing, because once again, the market capitalization is companies $750 million, let’s say $750 million market cap, and you’re gonna do anywhere from $100 million worst case scenario to up to $400 million dollars best best case scenario.
Needless to say, this is a pretty interesting value proposition. Okay. So in terms of what I’m thinking, I’ll make some money on this. So I think between share price appreciation, and what I’ll receive out for dividends, I think I have a legit possibility to x or more my money in 2020, okay.
I’m not even talking about future years, just kind of when I look at this, even even if even if, you know the rates go down, the amount of cash flow his company will pay out in the form of dividends should be like, like a, you know, almost like a level I haven’t really seen before.
And so I think I have a legit possibility to to x or more my money this year in 2020 That’s why I stopped over 30k in the stock here today. 30k. You know, it’s definitely not a big investment for me, but it’s one of those that I’m like, I’m willing to take this risk, because the risk is, you know, let’s say the whole market deteriorate.
And let’s say nobody wants to store oil anymore, or something like that, which doesn’t really make sense. But let’s say that plays out, and the stock goes down, and it goes down with $2.50. And oh my gosh, I lose 15k That would suck. But upside here is I should make $30,000 plus this year, so you know, I’m always in the game of risk reward. And you know, I’m always gonna, if the rewards in my favor.
I got to try to take advantage and the more and more of the rewards in my advantage in a situation like this and more and more, I’m going to go over there. So you know, that’s the situation here. I think we’ll do very well with this one. And if we don’t, we don’t I can tell you if I didn’t do good with this one.
Then I’ll probably never own another ship stock in my life between CCL and then whatever happens here, but I think there’s a pretty high probability we’ll make a lot of money on this one but time will tell All right, thank you for watching and have a great day. Bye bye smash thumbs up if you enjoyed me sharing this.