4.) Tanker stocks may rise in 2012
Jonathan Chappell, transportation and shipping analyst at Evercore Partners, says that tankers stocks may have bottomed, although investors looking to buy these stocks in 2012 should still proceed with caution. "We continue to recommend the stocks of those companies with strong balance sheets and robust cash flow (and dividend) visibility... deflated stock prices couple with robust dividends have resulted in some sustainable double-digit yields that add to the total return equation," he writes in note.
Evercore's top pick for 2012 is Teekay Tankers (TNK - Get Report), a small $230 million market cap firm. "TNK has more than 50% fixed-rate coverage on its fleet through the first half of 2012, which should enable it to continue to pay strong dividend, while its fleet gains more spot exposure in the period in which we expect rates to begin to recover, potentially adding upside to the second half of 2012 and 2013 earnings per share and dividend estimates," writes the firm.
Evercore's least favorite tanker stocks is Frontline (FRO - Get Report). The firm restructured itself in late 2011 to survive a bad market, a move that left it will less leverage as the economy recovers. Citigroup is expecting earnings losses in the second and third quarters.