Over the last five years, Oil Tankers CEOs and analysts have been very bullish on the sector ending up with egg on their face. I compiled a set of videos from various shipping conferences from 2016 to 2020. You can watch them below.
It is interesting to listen to their bullish arguments. At some point, when the supply of vessels was clearly growing too fast, they were rationalizing how the market was going to absorb it. Of course, this did not turn out to be the case. The year 2018 was the worst.
Those who bought the shares in 2016 based on the bullish predictions saw their investments go down as little as 55 percent (Euronav) to as much as 90 percent (Teekay Tankers). This is extremely painful. Why would any investor listen to any bullish arguments now?
You see analysts don’t risk any money by issuing bullish or bearish opinions. Yes, their bonuses can be tied to their predictions, but they just put out opinions. CEOs, on the other hand, are always bullish. Ben Nolan, one of the oil tanker analysts said that it is not shipping if next year is not going to be better.
So after years of hearing bullish arguments about the oil tanker stocks, investors stopped caring. Actually, investors are not even in these stocks. Ben Nolan said that investors have an attitude of dating instead of marrying the oil tanker stocks. In other words, it is mostly traders that are involved in these names.
This is very good for those people that are bullish and willing to hold these stocks for a year or two. You literally have no competition. I first wrote about the segment here.
The charter rates are sky high. The oil tanker companies are swimming in cash. I think this will stay like this for some time because the oil contango is not going away anytime soon. The vessel fleet is restricted. No one will finance the new ships. The companies themselves don’t even know what to order even if they wanted to because of IMO 2030. Every day, more and more ships are taken out of supply for oil storage.
This is all happening while the investment community does not care. What I believe that they are missing is the fact that even a broken clock is right twice a day. I believe that this is the time that the CEOs and analysts are right about being bullish. Because everyone else is so skeptical, I feel that we are about to get paid.
Here are the videos. The last one is really fantastic. Ben Nolan talks about how investors think about the shipping sector.