PowerRatings Stock Spotlight: Teekay Tankers Ltd

There are a variety of unusual, niche, off the radar sectors and industries that slip by the average investor due to their simply not being main stream. The tanker business, as in ocean going transport ships, is one such not often mentioned sector that has recently peaked my interest. First, let's take a brief look at the sector and business of Tanker Ships.

The prime purpose of tankers is to transport oil and petroleum products from producer to oil terminals and pipelines internationally. Prices are set by short term spot market contracts and longer term charters. Tanker Charter Rates is the term used when referring to price. Due to environmental and business concerns, the sector has undergone recent major changes. Various regulations have required the firms to upgrade and better maintain their vessels. In fact, in 2010, only double hull ships will be permitted to transport oil and petroleum products. There are several companies operating in this space, and today I am going to focus on Teekay Tankers Ltd (TK | Quote | Chart | News | PowerRating).

Teekay Tankers Ltd is a relatively new public company being formed in December, 2007. They own a fleet of 11 ships. Nine double hulled Aframax tankers and 2 double hulled Suezmax tankers managed by an affiliate of Teekay. My first step in evaluating this company for potential investment was to take a look at the Long Term PowerRatings. They have only earned a 3 ranking which is the highest of the lowest section, but still suggests the company is a questionable, risky longer term investment at this time.  However, other factors make it clear that depending on your risk tolerance it deserves serious consideration.

For those of you not familiar with our PowerRatings stock ranking system, here is a brief overview. Long term investors need a tool to build a portfolio of the stocks most likely suited for gains over the next year. 13 years of extensive, statistically valid studies have proven our Long Term PowerRatings to be exactly what long term investors need to evaluate and choose stocks for their portfolios. The proprietary calculating engine behind the PowerRatings is constantly scanning the universe of stocks ranking them in a 1 to 10 rating system. Our studies have clearly proven that stocks with a 9 Long Term PowerRating have a 79.1 % chance of being higher one year later. Those that earned a 10 rating possess an 81% chance of being higher one year later. The low rated 1 and 2 ranked stocks have proven to simply be too volatile thus risky for prudent long term investment. Although, sometimes these jumpy stocks can produce stellar returns our studies have proven that they are far too dangerous as an addition to your prudent, conservative long term portfolio.

Teekay Tankers Ltd turned in strong fiscal fourth quarter and annual results for 2008. Cash flow increased from $141.7 million to $199.2 million in the fourth quarter. EPS minus specific major items, increased from 31 cents/share to 73 cents/share. Full fiscal 2008 cash flow increased from $627 million to $888 million over the prior year. Technically, shares have been uptrending since April 20th and are trading above both the 50 and 200-day Simple Moving Averages. However, resistance was recently hit at $24.00/share with price dropping back finding resistance at $19.00 before resuming the uptrend. A 50 and 200-day SMA crossover has just occurred and price has been channeling between $21.00 and $22.00/share over the last several days.

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David Goodboy is Vice President of Business Development for a New York City based multi-strategy fund.