For the last 12 days the trend has been essentially this: Dow up day after day, NNA down day after day. I had expected that the Dow was going to be in a tailspin this whole time with all the handwringing over the fiscal cliff. But the market is up day after day. This is the very definition of madness, where nothing makes sense anymore.
I had thought I would start moving back into NNA at this level. But I don't know anymore. I'm going to feel like a dolt if tomorrow they announce an agreement on the fiscal cliff and the market runs away from me.
Foo speculated on if NNA could go as low at $2 My guess is that we won't see that level. The stock has found support previously at $2.25, though that is no guarantee. But, NNA has a dividend that is secure in the short to medium term and would pay 10% at the $2 price level. That would seem to be supportive of the share price.
What seems to be weakening NNA and other shippers is a resignation that 2013 will be another stagnant year. Though supporters of STNG seem to be anticipating recovery by 2014, given their recent purchases of 6 more MR's for delivery in Q2/Q3, 2014. If charter rates are in fact on the way up when those vessels hit the water, then all of us in NNA will be enjoying better results too.
The only factor making me nervous on NNA is the speculation that ts the large holders that ar weighing on the share price as they exit some of their positions. I tend to think the big holders are always better informed. But perhaps it is the small holders who are scattering at the worst possible moment because they just cant bear another loss.
My posts seem to be disappearing. Just posted a long one and it's gone. Frustrating. So let me keep this short. I am already overweight NNA. I revisited my analysis thoroughly. The market is saying NNA is worthless, not figuratively, literally, as in the numbers, worthless, worth $0. Conversely, market quite enthused about STNG. Something is wrong - NNA cheap or STNG expensive. Take your pick. Bought alot more today. Classic case of market irrationality. Classic Warren Buffett, buy a $1 for 50 cents scenario. Good luck.
I guess it could hit $2, but I've gone back into my analysis over the last few days and tried to rethink things. I concluded to buy more even though I was already overweight. As I said we are beyond silly territory. The mkt cap is $92MM, which is $20MM more than the cash they have on the balance sheet. The market is saying this company, essentially, is worthless - that all the contracts (24 of them at my count), all the future productive years of the vessels' economic life will not be enough to cover the liabilities. No matter what rates are or will be, no matter the remaining roughly 500 ship years of economic productive capacity of this young fleet, NNA will simply never cover the liabilities on the books. That is what the market is saying...utterly worthless. Meanwhile over at STNG, the market is clearly enthused. IMO this is a textbook case of market irrationality, I have seen it before in my 10 years of professional investing and I am fairly confident of taking the risk that I am wrong. You have to suck up and endure these moments to make any decent money at this game. Risky, yes, but very assymetrical in terms of risk/reward in my view. Good luck and hold on, all.
Sentiment: Strong Buy
An unrelated matter from the STNG board: This was posted regarding one of their newbilds:
"Additionally, we have entered into a profit and loss sharing arrangement whereby 50% of the profits and losses above or below the charter hire rate will be shared with a third party."
Why would they be sharing profits with a_third_party Would a broker on a purchase get a share of revenues? Perhaps he has agreed to take his commission at a later date. Odd. Are commissions even paid by a buyer on a newbuild purchase?
In my experience there's nothing like a deadline to get something finally done, and in a high stakes high visibility negotiation like this one neither side will want to leave their constituents able to complain that they didn't fight for their side down to the very last moment... so it'll be a last minute announcement. Now as for NNA at 2.30, geez, even my 2.41 limit order buy that hit the other day is now amking me look too anxious. Hat's off to anyone who swoops in at under 2 if we get there (assuming it then crawls back!). Sure hope the structural changes in clean trading patterns end up building the ton-mile equation but there's plenty of uncertainty there. Seems that's the key projection.
We are in silly territory. Clean tanker rates have had a nice run here since Sandy, MR values are up sharply. And NNA can be had for less than 1x this year's EBITDA. To a value-oriented contrarian, the recent stock action is a blessed development. To anyone else, especially relative to what it going on with STNG, NNA's action can only be considered a stunning failure of capital market strategy and investor relations.