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General: FRO......watch out below

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  1.  Report Post# 1
    This is a great stock technically. But the candlestick chart pattern is flashing a warning. The pattern on the daily chart is a head & shoulders top. If you draw a trendline from the low in January through the July 8 low you'll have a break point at about 62.00. Should the stock close at that price or lower there's about a 70% chance that it will correct into the 50.00 to 56.00 area, possibly to 45.00. On the P&F chart, a print at 62.00 would be a sell signal.

    So if you own this stock and the price goes into that area, you should: a) lock in profits with a tight stop; b) continue to hold the stock but purchase at-the-money puts; or c) if you came late to the party set a protective stop in the market that you can live with.

    This is the type of thing that newsletter writers should warn subscribers about but seldom do. They are great at telling you what hot stock to buy, not so great at telling you when to buy.......and terrible at telling you how and when to lock in profits or sell at a reasonable loss. Similar analysis could have been done on Mechel (MTL) potentially saving holders of that stock from a near 70% decline in 60 days. (See the Gumshoe's recent write-up).

    FRO is one of the "best" stocks in the dry bulk shipping group, so others may present similar risk. What's interesting is this group has just moved to "favored" status, but I have an idea the sector is being led by the railroads. Anyway, forewarned is forearmed.
    • CommentAuthorasafp
    • CommentTimeJul 30th 2008
     Report Post# 2
    Interesting. I got this in the mail the other day. I presume they are referring to FRO.
    http://www.moneyandmarkets.com/Issues.aspx?NewsletterEntryId=2029
    ------------------------------------
    Dividend Superstar #3
    15.4% Yield from Fleet of Profit-Gushing Oil Tankers
    That Generate Up to $4.4 Million Each Day

    Oil companies are geysers of cash. No secret there. But an even steadier business is the massive container ships that transport the oil. These companies churn out fat profits whether oil prices are up or down.

    If you own those ships, you stand to rake in a constant stream of cash, and that's especially true of my favorite dividend superstar in this sector.

    Take a guess at how much it charges to use one of its ships! In the first quarter of 2008, the average rate for one of its Very Large Crude Carriers (VLCCs) was $82,400. And according to early numbers, it was getting an average of $112,000 in the second quarter.

    Once you realize that the company boasts dozens of ships, you'll get a sense of just how much money it can make in a single day. Take the average daily rate from early 2008 and multiply it by 54 — that's $4.4 million in 24 hours.

    No wonder this firm can afford to pay out huge dividends year in and year out. Take a look at just how kind it's been to investors recently:

    * In 2005, it handed investors dividends of $8.10 per share.

    * In 2006, it paid out dividends worth $7.55 a share.

    * And in 2007, it paid dividends of $8.25 per share.

    Looking ahead, whether oil is up or down, I certainly don't see less oil being shipped anytime soon. And I should also note that this company is involved in transporting other hot commodities like coal and iron, too. If anything, rising worldwide demand for natural resources argues for even bigger profits ahead for this shipper.

    I tell you how many shares to buy, and how much to pay, in my free report, "15.4% Yield from Oil Tankers Generating $4.4 Million Each Day."
    • CommentAuthorfarley 5
    • CommentTimeJul 31st 2008
     Report Post# 3
    Spreadtrader says:" What's interesting is this group has just moved to "favored" status, but I have an idea the sector is being led by the railroads".
    If you look at the truckers, you will see that JBHT and ODFL are very strong. Don't tell me about the price of fuel. These folks have fuel surcharges plus that has been priced into the market. Simply DYODD, and use reasonable stop loss orders.
    My favorite railroad is CSX. Again, use stops.
    • CommentAuthordestry
    • CommentTimeJul 31st 2008
     Report Post# 4
    "asafp", if you transcribed that teaser for shipping, accurately...That fellow has no idea what he's talking about.
    There is a world of difference between, "Crude" carriers ( thin margin crude oil); Product tankers (High margin refined products; Naptha,
    diesel, solvents, AV-gas, gasoline, lubricants); Bulk carriers (Ores and grains,etc.); And Container ships (Electronics, machinery, timber etc)...
    Oh... And LNG tankers.
    Think of ships as floating real estate...Not all types of shipping are profitable at the same time...Aside from short-term trading opportunities;Which to me sometimes take on a whimsey all it's own...The only real trading opportunities I personaly would be drawn to...Would be the more volatile fleets like
    DryShips...I own Frontline, and Torm, as long-term holds...For income and growth, and currency play...Both are mainly "Product ships, and some "Bulk carriers.
    I don't favor "Container" ships now...Mainely because I feel a shift taking place in export traffic. Maybe that makes them good trading vehicles.
    Frontline owns a piece of a lot of other maritime companies, and aims to be the biggest fleet sailing...The feeling is that size can control (To an extent)
    prices and contracts, and expenses, during tanker "gluts", and weather economic downturns and hiccups...I can't see the comparrison to railroads.
  6.  Report Post# 5
    That's good stuff to know because those distinctions would escape most people......well, me anyway.

    I have been looking at a company called TAL International (containers). The charts (both P&F and candlesticks) look very good. The P&F shows a bearish signal reversal. I've been debating whether to enter with a limit order at 24.00+ and use a tight stop or wait for the breakout at 26.40 above the bull flag on the candlestick chart. The dividend yield is a healthy 6% and I'd want to hold it for a year or more. My trouble is my short term orientation to futures. Makes me itchy. Anyway, what do you think of TAL?

    I'm also looking at GNK. But it has the same dangerous pattern as FRO......a head and shoulders after an all-time high with the top of the right shoulder forming. Again, I love the dividend (almost 6%). If I'm going to hold stock I want to get paid to do it. The potentially bearish chart formation makes me nervous, but it posted good earnings today, at least that's how it's being spun.

    The comparison to railroads (I gather) is because they are in the same "transport/non-air" sector. Presently the railroads are doing well. But as farley 5 pointed out, so are some of the truckers. They all move stuff, eh? But perhaps they should be treated separately within the sector. Your comments would suggest that. I wish that WWP would get in here and give us her two or three cents on the shippers....
    • CommentAuthordestry
    • CommentTimeAug 1st 2008
     Report Post# 6
    I googled TAL...They buy and re-sell, and/or lease shipping containers....Genesis leasing (GSL), is listed as a competitor, among others.
    I owned (GSL), for a while...I decided I didn't understand enough about aircraft leasing to have any business owning it....
    There were buys, and neutrals on (TAL). And it appears $25 range, or so is a bottoming....China is a big exporter, and I think Chinas'
    economy has gotten way ahead of itself...They may roll over the top into a sharp downturn after the olympics...Maybe even because of the
    Olympics as they shut down polluting factories for the duration for a prettier town. Tsakos , is the only container fleet I feel I know...
    They have some hefty contracts with China...And I'm thinking it over about them.....Containers equal consumer goods....
    Both cyclical and non-cyclical....Tankers,LNG's, Bulk carriers, Specialty carriers, are all necessities...
    The higher oil goes...The higher tanker profits go, until demand begins to drop off...Then tankers start coming down in price, until demand starts to pick up again. Tankers are almost a hedge against falling oil prices....Same thing with the Bulk carriers....
    I like GNK. Adding GNK, plus the bulk carriers from Torm, and Frontline equals "DryShips" with a dividend. (Goofy way to look at it I guess).
    I like "DryShips" just fine....Miffed I looked at it at $16 and "passed"(What a goober!). It makes a better trading vehicle, because of investor attention.
    And not having a dividend, eliminates the sort of buy and hold investor I represent.
    With GNK...You know what you've got...And food prices and scarcity problems aren't going away (Thank you corn ethanol); And if you're wrong the dividend won't
    hurt your feelings, if you decide to wait it out.
    TAL, a different thing...If a global pullback in consumer spending spreads, container businesses will suffer. So TAL might not be bottoming at $25.
    The real low could suddenly be $20,or $16....
    Finally, Railroads are a different deal...They can go 70 miles/gal. of diesel...Maybe more...Ships make the shipper pay the fuel bill...Railroads don't really have
    much of a fuel bill...I like Burlington Northern Santa Fe; And CSX. I used to know a lot more about charting, before I became a fundamentalist, and
    decided I lost a lot more listening to analysts than trusting my own judgement. Trucking cuts a lot closser to the margin of profitability...
    Fuel prices won't go away for long...
    • CommentAuthordestry
    • CommentTimeAug 1st 2008
     Report Post# 7
    "spreadtrader", I really didn't give you a complete answer on (TAL). This may be a "Buy half at $24, or $25...If it looks shaky, wait for a lower move...'Buy the
    other half.
    If it firms up, complete around $25 or $26...And yes, if your off a little on timing...The dividend will be nice. I really think, though, we have
    a world-wide recession heading our way...In a year container cargos, and shipping could be really squeezed. I think my feelings have been coelessing
    into a decision to avoid container shipping altogether....Stick with the bulk, and special shippers (GNK), DryShips, Maybe Diana, Etc. Frontline, etc.
    DrillShips (Gumshoe owns this...I wish I did...It's done him proud). Energy, and food...That, I fear, is what it's all going to boil down to.
  10.  Report Post# 8
    Thanks for all the great comments and ideas. I tend to agree with you about the prospects for "recession" or whatever label the economists want to put on it. Like the markets themselves, expletives like "recession" and "inflation" are relative terms. Many people are asking "is this it, are we going to turn the corner now?" Unfortunately, I don't think so, but who knows. There should be money to be made either way. Do you protect any of your long term positions with puts?

    Great point about "investor attention" relative to dividends. There are many subtleties to buying stock and lots to learn. Have a great weekend.
  11.  Report Post# 9
    Here's a very interesting technical development (and I'm looking for a comment from farley 5).

    On Friday, FRO flashed a SELL signal. (This is what worried me when I looked at the chart a few days ago; so holders of the stock may want to consider protecting their positions.)

    Also on Friday, GNK not only flashed a BUY signal, It entered a positive trend (where FRO already resides). HOWEVER, at the close it reversed into what would have been a column of O's had it not printed the next box of X's. (Monday it will probably go to O's.)

    I'm not saying to buy one or sell the other, but the possibilities for a "spreadtrader" get me all excited.

    FRO is a "5 for 5"; and GNK is a "4 for 5". If you didn't yet own these stocks (which I don't) how would you read their relative potential in a "favored" sector?
    • CommentAuthormysubs
    • CommentTimeAug 5th 2008
     Report Post# 10
    Spread,

    Great call on FRO ! GNK still holding 200 ma.
    • CommentAuthorfarley 5
    • CommentTimeAug 5th 2008
     Report Post# 11
    Agree, great call on FRO. I've been so busy getting stopped out in this market that I have not had much time to play here.
    FRO - Second sell signal was $61 so you would have been out there. The spread tripple bottom at $58 was the kiss of death. Next stop T/L at $50 - then ?? $39??

    GNK is busted here and would not use it as a pairs trade.

    I've mentioned CSX several times on this site for a transport non-air sector. You could use the trucker JBHT mentioned before.

    Since most of the stock return comes from the sector, you may just want to use an ETF. The IYT is close to a double bottom break at $87 so you may want to buy half here and set your stop at $87. Be sure to read the prospectus. I received an E-Mail that said: "I didn't know that XYZ was in that ETF. I HATE XYZ". Caveat emptor. Prospectus here:
    http://us.ishares.com/product_info/fund/overview/IYT.htm
  14.  Report Post# 12
    Thank you. I may be looking to buy this at 49.00 - 51.00 if it goes there....very tight stop though.
    • CommentAuthorfarley 5
    • CommentTimeAug 15th 2008
     Report Post# 13
    One of the best indicators for shipping is the Baltic Exchange Dry Index:

    http://www.investmenttools.com/futures/bdi_baltic_dry_index.htm

    Does not look good. Our economist, Scott Brown, PHD says:, “Real GDP fell 0.2% q/q in the Euro area in 2Q08... Growth was negative in France (-0.3% q/q), Germany (-0.5% q/q), and Italy (-0.3% y/y). Earlier this week, Japan’s real GDP was reported to have fallen 0.6% q/q in 2Q08, up 1.0% y/y. On Wednesday, the Bank of England
    issued a cautious outlook.”

    Let's let the shipping companies correct and we will watch for some stability. (BTW, be sure to scroll down to the 1 year chart for the URL above. Have a great weekend!
  16.  Report Post# 14
    If Frontline doesn't hold support at 45.75 it's headed to 37.00 and possibly 28.00.

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