Cruise Along With OMI Insiders

It seems that the recent market strength is likely to continue for the near term, which has me looking at new longs so I can put more of my still-large cash position to work. Insiders have been throwing off some decent long ideas, even though their buying has been dwarfed by their sales. Recently, interesting insider action led me to a stock that proved to have very attractive fundamentals behind it, so it's now one of my new positions.

OMI (OMM - commentary - Cramer's Take) transports crude oil and refined products internationally via its fleet of 46 double-hulled ships, including 30 product carriers, which can carry refined products like jet fuel, gasoline and diesel.

The shipping industry has matured from one dominated by private firms to include many publicly traded companies operating under tighter fiscal discipline. At the same time, the surplus of vessels that existed in the late 1990s has been reduced markedly. These new realities should translate into steady and increasing cash generation by shipping firms as well as a higher multiple for the better-run firms in the industry.

The mix and relatively young age of OMI's petroleum transport vessels put the company in an excellent position to continue profiting from its industry's bullish supply/demand equation. The firm is also considered one of the better managed in the group, so if a higher multiple is offered to shipping stocks, OMI should be among the beneficiaries.

OMI also appears reasonably well protected if bearish scenarios of plunging oil futures or worldwide recession play out. The company trades now at a slight discount to its assets and a relatively low multiple to its expected cash flows. OMI further offers an indicated yield of 1.7%.

Insiders on Board

I started looking into OMI after seeing transactions several weeks ago by Director James Woods and CEO Craig Stevenson. I quickly saw that the overall insider history for OMI was not as straightforwardly bullish as I normally like for my recommendations, but I was eventually won over by the fact that at least some insiders are still willing to put money into this stock after its stunning rise of nearly 400% over the past four years.

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At the time of publication, Moreland was long OMI, although holdings can change at any time.

Jonathan Moreland is director of research and publisher of the weekly publication InsiderInsights, founder of the Web site InsiderInsights.com and the director of research at Insider Asset Management LLC. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. While he cannot provide investment advice or recommendations, Moreland appreciates your feedback; click here to send him an email.