Nordic American Tankers Plunges As Wal-Mart Looks to India for Growth

Dow halts losing streak at 3, and DryShips has strategic advantages over some of its competition.

Apr 8, 2014 at 6:43PM
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The Dow Jones Industrial Average (DJINDICES:^DJI) broke a three-day losing streak today...in rather unremarkable fashion. 16 of its 30 components advanced, as the blue chip index tacked on all of 10 points, or 0.1%, to finish at 16,256. But lest we get spoiled, we should remember that small gains are better than no gains at all, and many companies that grow quickly go quickly as well. One stock that won't be exploding higher or going to zero anytime soon is Wal-Mart (NYSE:WMT), a Dow component that helped to steady the index Tuesday.

As one of the 10 largest public companies in the world, Wal-Mart's worth a quarter of a trillion dollars, wielding more economic power than some small countries. Wal-Mart is in fact so large and ubiquitous that it must now think in terms of countries if it wants to fuel growth. The stock tacked on 1.1% today after the company vowed to focus on expansion efforts in India, a country of 1.2 billion where local small businesses are a touchstone of the culture. Wal-Mart, because of governmental regulations, has a very limited presence in the subcontinent, boasting only 20 wholesale stores nationwide. The company said today that it planned to more than triple that number in the next four or five years, a move that will "reduce (the Indian people's) cost of living," according to Scott Price, the CEO of Walmart Asia.

Also in the spotlight today -- but for a very different reason -- shares of Nordic American Tankers Ltd. (NYSE:NAT) plummeted 10.2%. With a market cap of $640 million, this tanker-chartering company is the size of a bug on Wal-Mart's windshield. It doesn't have the luxury of financing growth through low-interest offerings in the corporate bond market as Wal-Mart does, so instead it's taking to the stock market. Nordic American Tankers announced yesterday the issuance of 10 million additional shares of stock in a secondary offering. Current shareholders, freshly diluted, then heard the dreadful news that the company would be issuing another 2 million shares because of "strong demand." The 12 million shares will be offered at $8.62 apiece; the stock had no choice but to plummet, ending at $8.50 on Tuesday, the lower price likely reflecting the effect of stock options it granted to the underwriters. 

Dryships

Source: DryShips website,

The Greek shipping company DryShips (NASDAQ:DRYS) is one of the few publicly traded peers of Nordic American, though DryShips enjoys a more diversified business, leasing out not only crude oil tankers but drillships and drybulk carriers. Although up to its eyeballs in debt (and therefore an inherently risky investment), DryShips has a much larger vehicle fleet than Nordic, and its ability to hedge by shipping commodities other than oil in times of weak demand gives it an important advantage over its peer. The stock was up 1.9% today.

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John Divine has no position in any stocks mentioned. You can follow him on Twitter, @divinebizkid, and on Motley Fool CAPS, @TMFDivine.

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