The Consensus is a Liar


In early April, the price action in tanker equities reminded me of a favorite Bernard Baruch quote. He once said “Don’t try to buy at the bottom and sell at the top. It can’t be done except by liars.”  Tanker equities in April have been volatile ever since OPEC announced their production cuts for May on Sunday, April 2.  Investors sold crude tanker stocks the next day.  One of my crude tanker names was down 11.1% from the prior day’s close.  They even sold product tanker stocks, even though they weren’t impacted by OPEC’s actions. One of my product tanker names fell 7.4%.   I thought it was an overblown reaction and the equities have started recovering.  These two crude and clean tanker stocks are up 9.1% and 19.6% respectively off of their April lows.    

During this period, I sat on my hands and did nothing.  I was confident in my market analysis, because I had attended the Capital Link’s 17th Annual International Shipping Forum on March 20, 2023, in New York City.  I met with a number of companies 1:1 and sat in on a few panels. I was fairly certain the cuts wouldn’t change the reopening of China.  OPEC’s cuts would likely be offset by increased ton mile demand. As an investor, you have the flexibility to determine when to swing the bat. But the only way you can do it successfully is by being well-informed.

I don’t have a crystal ball, but today I see continued product tanker demand despite talk of a US recession. Current US gasoline inventories are down 4.7% compared to a year ago and 7% below the five-year average for this time of year.  Implied US gasoline demand is higher than the same time last year.  For PADD 1, the Colonial Pipeline is full and there is insufficient regional refining capacity. Gasoline and jet fuel will need to come by ship.  It can be lonely being a shipping investor, but the tools are there should one want to take advantage of them.  There is no substitute for conferences if your goal as an investor is to make thoughtful and sometimes difficult decisions.