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Teekay Tankers Ltd. Message Board

  • coursonc coursonc Jun 10, 2011 10:06 PM Flag

    Sector and cycle ruminations

    Some of you guys may remember back (late Nov'09) when I went bullish on the extreme pessimistic and oversold refinery industry, providing reasoning and analysis to pick WNR as the pony of choice to ride an eventual recovery,
    Bear with me here, as I relate that cyclical industry trading pattern to the shipping cycle, and TNK.

    Increase the time range to two years on this chart for reference

    As the data and overall information was correct, (on refining) it was merely a matter of timing. I picked WNR, from all the refiners, as I concluded they would survive, with adequate debt servicement finances, geographic diversity away from GOM, and a small investor/trader could profit handsomely due to the low float, high beta, and high short interest, that precludes the big money. I made several 'buys' starting at about $4.50 level, buying down to $4.18 level,
    The next month, they amended their credit facilities, the President started buying, and Valero, (VLO) the largest refiner came out saying margins were improving, and I bought more at $4.18 and called 'bottom', on 05Feb.
    I got stopped out of all those shares, being 'trading shares', at about $5.35, for a profit of about 25%, and then had the opportunity in Aug to rebuy back at the previous 'bottom' that I had called, buying again at $4.20 level
    However, THIS time, I made a GROSS mistake. I played my cards too close to the vest, and got stopped out on (9th Sept) getting sold out of all shares at a low price (only 10% gain) of $4.74. If you go back to the chart, you can see how painful this was to become, as WNR took off like a rocket from there, and didn't look back until $18 level, as survivability and even return to profitability became more clear, and with asset revaluation reverting more to the 'norm'.
    The reason I am rehashing/revealing this trading lesson is because, just like the domestic refining industry, the global Crude oil shipping industry also goes thru cycles that can be played, and profited from successfully. The ships are leased out either on stable TCEs, or on less stable 'spot's, earning money for the owners. Oil that needs to be shipped is known fairly accurately well in advance, from where, to where, and ship supply metrics can be estimated based on known shipyard delivery/scrapping schedules. Of course, geopolitical 'hiccups' such as supply disruptions, or the fear of same, cause some volatility, and require a personal 'noise filter', and ability to discern what just is actually 'noise', or an event that will cause more long term effects.
    I think the Tanker industry is entering this bottoming cycle just now, as a whole, and we will begin to see the less capitalized players, the ones who have heavy debt/asset ratios, or who are not managing costs effectively, begin to 'blink'. This has a ripple affect on all the players, as it affects asset valuations, and the market responds to mergers, acquisitions, company breakups, and even BK's, or reorganizations.
    You must ask yourself well in advance, once the volatility becomes 'dicy', weather you are a trader, or an investor. I was a trader on WNR, instead of an investor, and I did it successfully more than once, but much more profit could have been realized, (albeit over a longer period) by the correct combination of each, lol.


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    • xx369 Feb 2, 2013 5:07 AM Flag

      TNK has been in a down trend for at least 4 years. They also got slammed to new lows in the previous quarter when they cut the dividend. As we all know the slow 3rd quarter is when they schedule their dry docking activities to prepare for the busy winter months ahead. In addition, on a technical note TNK's recent uptrend has been broken and a sell signal was given 9 days ago as TNK broke under the 20 and 50 moving averages. However, the average number of days in a typical distribution or shake out brings TNK near a solid support level. Also, the scholastic oscilator on a 30 minute intraday chart 2/2/2013 crossed over to comfirm a move up may occur next week in anticipation of a better winter booking. Looks like Nat will post earnings before TNK on the 11th and a few others. I hope they dont screw things up.

    • Getting out of TNK and into WNR sub $5 was definitely the correct move, without a doubt. I knew the recovery would pull WNR back from the $4 oversold panic lows.
      I really love to watch for these kind of smallcap plays to go from fear to euphoria. Now here at $35 level it is beyond 'toppy', and risk has returned in vogue.

    • Coursonc: Thanks for the links, excellent reading.
      I agree, opportunity will soon come knocking, but one must be extremely careful as well.
      TNK closed at $8.47 yesterday, I still have a limit order at $8.29 outstanding, but this block and the one I bought at $8.49 is for trading, if I get a small distribution along the way, fine.
      I just am nervous about the overall picture at the moment, but stop-loss orders are in effect for my main holdings, I won't let 2008 happen again, no sir.
      The main thing to watch in TNK for the next qtr is if any vessels coming off time charter are renewed or put on new charter. The Gemini Pool is shared with the mother company and they may not get the best ones.
      BTW, my letter to investor relations about the secondary has gone unanswered.....
      Best to all, comments and discussions encouraged.

2.52-0.01(-0.40%)Sep 23 4:02 PMEDT