Money and Investing Thoughts

NORDIC AMERICAN TANKER SHIPPING LTD..

Nordic American Tanker (NAT: 14.59 0.00 0.00%) has released their 4th quarter results and declared a 46th consecutive dividend. The dividend will be 87¢, payable to shareholders of record on February 25. For 2008 NAT paid total per share dividends of $4.89 (the 4 dividends previous to this announcement). During 2008 NAT shares started the year at about $33.40, reached a high of just under $42 in May and traded in the $24.50 range during the lows of October before finishing the year at $33.75.

Nordic American Tanker currently owns 12 Suezmax tankers, one on long term charter, the rest are chartered in the spot market. The company has recently purchased another Suezmax tanker and plans to take possession this month. They have two new buildings on order with estimated delivery dates in the 4th quarter of 2009 and the 2nd quarter of 2010. The additions to the fleet are projected to increase distributable cash flow by 25%. NAT is debt free but recently raised about $107 million in capital by issuing stock and increasing the shares outstanding by 10%.

NAT earned an average of $40k per day per ship in the 4th quarter. Currently Suezmax spot rates are in the $34k per day range. Nordic American Tankers has a break even of about $10,000 per day per tanker. This is the main reason I like this stock. They can be profitable and pay a dividend in any market condition. Their 11.5 years of continued payouts speaks for itself.

Over the last 5 years the annual dividend payout for NAT has averaged $4.72, ranging from $3.81 to $5.85. Holders of the stock have consistently earned over 10%. An eyeball at the stock chart shows the shares averaging around $35 with buying opportunities when the cost falls below $30. I think NAT is an excellent long term holding for the income investor.

Note: I currently have a long position in NAT.

Retail sales uexpectedly jump 1%, first increase in 7 months – MarketWatch.

Don’t you just hate it when all of the pundits are wrong? February is the official 14th month of the recession. The post WWII record is 16 months. What happens if the economy is growing again by the 2nd quarter?

ReviewJournal.com – Business – LV home prices fall to level not seen since 2003.

The January housing sales figures for Las Vegas are not pretty. The number of sales fell 11% from December and the median price was 8.6% lower than the earlier month. Not good signs on both counts. The sales market is still much stronger than a year earlier with sales 126% higher than January of 2008.

The median price remains suspect when 88% of sales are either short sales or foreclosures. These sales are from sellers much more interested in just moving the property rather than maintaining any pricing level.

January was the month when many started to realize the affect of the recession on the 2008 economy in the 4th quarter. Also, the nation was waiting for President Obama to take office and start to reveal his plans for helping the economy. February seems to be more of the same so I do not expect much to change for the Vegas housing market.

Although the sales levels are encouraging, I do not see a housing turnaround in any market until the average sales prices stabilize.

Each week I recap the results of the WilderHill New Energy Global Innovation Index, symbol NEX, and published by New Energy Finance Ltd. The index consists of approximately 90 stocks from 22 countries. The NEX is the tracking index for the PowerShares Global Clean Energy Portfolio ETF (PBD: 9.70 0.00 0.00%). For reference, the NEX has a 52 week high of 436.21 and closed 2008 at 177.99.

For the week ending at market close on Monday the NEX gained 8.7%, finishing at 176.53. The NASDAQ and S&P 500 were up 6.5% and 5.4% for the same period. All sectors in the index were in positive territory for the week.

The solar energy sector was the top performer, jumping 14.9%. A big part of the surge came on the big returns from U.S. based GT Solar and German company Solon. Wind energy, the other largest sector in the index along with solar, was up 8.2%. ‘Renewable-other’, which is mostly micro-hydro and geothermal companies was the lagging sector, up only 1.8%. The decline of Swiss mini-hydro company BKW offset the gains of the rest of the sector.

Here are the top and bottom performing stocks from the NEX for the week:

NEX top gainers since 03 Feb 09
GT Solar International SOLR + 65.7%
Solon SOO1 + 29.8%
Epistar 2448 + 22.5%
Centrotherm Photovoltaics CTN + 20.6%
JA Solar Holdings JASO + 20.6%

NEX top losers since 03 Feb 09
Energy Developments ENE - 16.3%
Evergreen Solar ESLR - 14.5%
Climate Exchange CLE - 13.5%
Echelon ELON - 13.3%
BKW FMB Energie BKWN – 12.6%

Terra Industries – Terra Industries Inc. Investor Information.

Terra Industries Inc. (TRA: 0.00 N/A N/A) has reported 2008 4th quarter and full year results and the recent past was very good for the company. I will take a quick look at how they did and try to make a guess on what the future will bring.

First, for you income and Terra Nitrogen LP (TNH: 200.00 0.00 0.00%) fans, the company declared a distribution of $2.97 per unit. Shareholders for the entire 2008 earned $13.60 in distributions. Early in 2008 I recommended TRA vs. TNH when the net income distribution shifted in favor of the general partner (TRA). TNH shareholders are now getting $3.00 per share on the same income that a year ago would have earned them $4.50 (roughly). The current partnership agreement gives TRA about 40% of the net income off the top, then they pick up 75% of the distributions for the units they own.

For the 4th quarter TRA earned $1.65 per share, a 150% increase over the same quarter in 2007. The earnings were also in line with the $1.64 earned in the 3rd quarter of 2008. For the year TRA earned a record $6.20 per share, a 225% increase over 2007. According to Yahoo Finance the consensus estimate for the quarter and year were 92¢ and $5.52, pretty big misses. Revenue gains were made on higher selling prices as volumes for nitrogen, UAN and ammonia fell 12%, 16% and 30% respectively.

Going forward, this is what I see:

The biggest negative is that TRA’s product prices fell sharply at the end of the 4th quarter, forcing a $48 million write down in inventories. The combination of lower sales volumes and lower prices could have a significant effect on the bottom line.

The positives list is a little longer: TRA idled a couple of plants when the global slowdown started cratering prices, allowing the company to do some needed upkeep and keep inventories under control. Natural gas, which is the major expense for the company, is at a 5 year low. Farmers skipped a significant portion of fertilizer application in the fall as fear of falling commodity prices took effect. They will need to make up those applications in the spring. Corn prices have recovered to about $3.80 from near $3.00 in December, and historically $4.00 corn is a very good number.

The earnings estimate on TRA for 2009 is about $3.00 per share. I believe the current pessimistic environment has that number at least $1.00 low. But at this point I really see Terra Industries as a value play with long term positive fundamentals. TRA has a market cap of $2.4 billion while it sits on $1 billion in cash and their 75% stake in TNH has a current value of $1.8 billion. TNH generates about 30% of TRA’s earnings. Also, at the end of Q3, TRA had $680 million in cash.

Although TRA has doubled from its recent low, I think 2009 will be a year of positive surprises for the company.

Note: TRA is a component of this site’s hypothetical Opportunities Portfolio.

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