Frontline Shares Plunged: What You Need to Know
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of oil tanker owner Frontline (NYS: FRO) fell 10% today in a relatively quiet day at the company.
So what: There wasn't any direct news out about Frontline today, but competitor Overseas Shipholding Group reduced its dividend, which sent a shock to investors. Bloomberg also released an article today highlighting the tanker industry's slow demolition rates, which are hurting owners' revenues.
Now what: Not only are tankers not being demolished, the overall fleet is growing faster than demand can keep up. That leaves tanker owners between a rock and a hard place when trying to negotiate rates. They can either take a loss on each voyage or have an idle tanker, neither of which is desirable. I'm going to stay away from oil tanker stocks for right now, as it will take a long time for the oversupply to shake itself out.
Interested in more info on Frontline? Add it to your watchlist.
At the time this article was published Fool contributor Travis Hoium does not have a position in any company mentioned. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw.Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
Copyright © 1995 - 2011 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.