Frontline Shares Surged: 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 tanker operator Frontline (NYSE: FRO  ) jumped 14% today in a rebound from recent losses.

So what: Competitor Nordic American Tanker Shipping's (NYSE: NAT  ) CEO wrote a letter to shareholders indicating his bullish view of the industry. Despite a supply glut, the CEO thinks the company's dividend is safe for now and demand will pick up going forward.

Now what: This looks like a bit of a dead cat bounce for Frontline following some mildly bullish news from a competitor. Frontline's shares have been in a freefall for six months and investors are jumping back in hoping that Nordic American Tanker Shipping is right and a rebound in demand is around the corner.

I would be cautious buying here. A falling stock is almost impossible to catch at the bottom and with $2.4 billion in long-term liabilities and losses mounting, Frontline isn't exactly on solid footing right now.

Interested in more info on Frontline? Add it to your watchlist.

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.

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Read/Post Comments (3) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On August 30, 2011, at 5:45 PM, hjellum wrote:

    That isn't the reason Fro rallied today... you may want to spend some time looking over news about Fro before you release an inaccurate story about

    them.

    here is the news out of Oslo that moved Fro today.

    "John Fredriksen-controlled tanker owner’s shares catch alight in Oslo after CEO cools liquidity fears. "

    full article available...if you only look.

  • Report this Comment On August 31, 2011, at 11:56 AM, jordanalan wrote:

    hjellum is correct. Who wrote this article? First off, the news was based on Frontline's CEO pushing the entire industry to get rid of 15 years and older tankers! This is based on the timing of steel costs (scrap metal is millions per ship) and getting rid of excessive tankers which is not helping the industry. The Oil companies will have little choice but to pay higher day rates.

    It amazes me that Travis is being paid to write for Fool. Look, Frontline has been forty percent short for going on 6 months. The short players are also pushing down the stock below it's book value. The reality is, the company accumulated debt building new VLCCs . The orders were made during 2006-2007 and the construction and delivery was 2 years later into a recession. Bad timing and bad luck. But the fact remains, oil is here to stay and those tankers are designed to move liquid gold.

    It is hard to respect a financial journalist who does not really read daily news about what he is writing about. To say the stock is surging on something from NAT make Travis look like a fool.

  • Report this Comment On September 01, 2011, at 8:16 AM, unkownuser wrote:

    While the article may have been written & released prematurely (prior to the general availability of the news release), the analysis is spot on. Frontline is in no substantially different a position this week, than it was last week. The short term price surge was just short covering which exacerbated what should have been nothing more than a minor uptick based on the CEO's comments. The follow up news from Goldman analysts regarding shipping rates also provided short-term support for the price pop, but again nothing in the immediate term has changed substantially and the reality is FRO has had a dead-cat bounce and will remain dead money for the forseeable future. Sell now, make money elsewhere, and buy later when the economy starts to show improvement.

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