Frontline Ltd. (USA) (NYSE:FRO)

My CAPScall on FRO:

http://www.fool.com/investing/general/2011/11/23/supertankers-take-on-water.aspx

Supertankers Take on Water

Companies that operated supertankers certainly had a rough day yesterday as management at Frontline (NYSE: FRO) said they would need cash to stay in operation through next year. The company swung to a $136 million third quarter loss, from $48.4 million in profit last year, the market took that news and ran with it.
Ship Finance International (NYSE: SFL), Overseas Shipholding Group (NYSE: OSG), and Nordic American Tankers (NYSE: NAT) all fell yesterday compounding big losses for the year. In the short term pressure is being put on these companies because day rates aren’t paying enough for them to break even on their vessels. Heavy debt burdens at these companies make short-term problems worse and with stocks falling, borrowing costs will rise and the companies could become insolvent.
The big picture doesn’t get better
Financial problems may look bad now but there doesn’t appear to be any light at the end of the tunnel for tanker owners. The biggest oil market in the world, the U.S., is finding more and more of its oil domestically reducing the need for oil tankers to ship oil from the Middle East.
There’s also the problem of a growing supply of tankers coming onto the market. The overall oil tanker fleet is expected to grow 11.2% in 2011 and another 8.7% in 2012 according to Fernresearch.
Foolish bottom line
Yesterday fellow Fool David Williamson said he thought Frontline could survive mostly because John Fredricksen owns a large stake in the company and wouldn’t let it sink. But I think the problems in the tanker market are too big for Fredricksen to fix himself and investors should run as fast as they can from these stocks.