Tsakos: An undervalued shipping giant

The maritime sector is hot. It's been hot for a couple of years now, but as world trade continues to grow, profits continue to grow. Greek shipping giant Tsakos Energy Navigation Ltd (NYSE:TNP) now has 53 tankers, out of which 23 ice-class tankers. True, there might not be much ice in Greek waters, but there certainly is a growing demand for ice-class tankers in Northern waters. Especially North and East of Russia at least for the coming ten years the demand for ships to transport oil & oil products will grow substantially. With an average vessel age of five years and a bit, Tsakos Energy Navigation (TEN) certainly is well-equipped for this period of growth. With a fleet that's more than doubled in five years and with net income having increased fifty times, one might argue that TEN is already too far in its growth cycle. But the opposite is true. Let's have a look at the stock's valuation. At a current share price of USD 63.50, TEN trades at a little over six times last year's earnings. This is already very low compared to the industry average of 16, but especially when considering that its 5-year EPS growth rate is almost double that of the industry, one has to come to the conclusion that this is a chance of a lifetime. Critics are sceptical as ice class tonnage has increased rapidly during the past five years and some are afraid of overtonnage. Charter rates are therefore expected to be somewhat lower in the coming years until supply and demand are in balance again. It must be said though that TEN has built up a reputation of being one of the leaders in ice-class and also of knowing how to keep costs under control. I think that the fears are overrated and that at the current valuation, the potential rewards outweigh the company's risk profile and I therefore consider this stock a very attractive one. I add Tsakos Energy Navigation to my list of stock picks at a price of USD 63.50 with a one-year price target of USD 90.
At the time of writing, the author did not have a position in the above-mentioned stock.

Target price reached for Banco Pastor

As mentioned in one of my earlier postings, Spanish banking group Banco Pastor is a small yet ambitious one. In November 2006, I decided to add Banco Pastor to my list of stock picks at the price of EUR 14.15, with a target price of EUR 18. This target has now been reached less than six months later, though I continue to be impressed with the bank's results. In the first quarter of 2007, the group's earnings went up 31% whilst the amount of new clients went up 20%. The company's progress has to be admired and even though I still consider Banco Pastor a takeover target amidst the European banking consolidation, I must admit that the Spanish banking group is everything but cheap. After all, ABN Amro is currently for sale at 14x earnings, whereas Banco Pastor is valued at 30x earnings. Hence, I think it is wise to close this position at exactly the price targeted, leaving us with a gross ROI of some 27%.
The author had no position in Banco Pastor at the time of writing.

An early May update...

It's really going somewhere now. I must admit that I am quite pleased with my stock pick performance so far this year. Obviously a record high for many stock exchanges helps, so we have to wait and see how these stocks perform during worse times. For the time being, I plan to hold Fiat as mentioned in my April posting, but I consider NGA 'sold' at 12.06.

Date	Fund	Purchase	Current	ROI%	Target
18Dec2006	Aareal Bank	35.50	39.01	+9.9%	44.40
13Dec2006	ABN Amro	24.10	28.00	+16.2%	28.00
16Feb2007	Ahold	7.97	9.88	+24.0%	10.00
16Nov2006	Banco Pastor	14.15	17.54	+24.0%	18.00
27Nov2006	Capitalia	7.00	6.94	-0.9%	8.50
19Feb2007	Companhia Vale	$35.90	$42.61	+18.7%	$55.00
12Jan2007	Crystallex	$3.12	$3.98	+27.6%	$6.00
24Jan2007	DRDGold	$0.83	$0.86	+3.6%	$1.10
21Dec2006	Fiat Group	14.50	21.77	+50.1%	19.33
12Jan2007	Gold Reserve	$3.94	$7.25	+84.0%	$12.00
10Dec2006	Hagemeyer	3.64	3.49	-4.1%	5.00
16Dec2006	Iberia	2.81	3.30	+17.4%	3.30
10Mar2007	North Am. Galvanising	5.18	12.06	+132.8%	8.00
28Nov2006	Ormonde Mining	0.24	0.16	-33.3%	0.40
7Dec2006	Rhodia	2.60	3.00	+15.4%	3.20
30Nov2006	SolarWorld	46.10	58.65	+27.2%	69.12
2Dec2006	Vallourec	204.00	204.28	+0.1%	250.00
				+24.3%

All stocks in euro unless mentioned otherwise. Stocks in bold have been sold as target price has been reached.

Something not so financial, or is it?

It's been a while again, but I hope these long periods of absence won't happen too often anymore this year. I had a three-week holiday in Indonesia, which ended up being everything but a holiday. It was a period of family visits, my fiancee being from Indonesia, and a period of preparations for our wedding due early 2008 on Java. Usually, this site is a place for financial blogs and everything linked to the financial world, but there really is more in life than finance. Hence, I am sharing with you our findings in earthquake stricken Yogyakarta. The quake took place in May 2006, almost a year ago as we took our handycam and some money from ourselves, my family and some really great friends to the epicentre in Bantul. This was one of the villages around Yogyakarta where many of my fiancee's relatives live or lived. Upon arrival, we were shocked to see in what state the houses where. Most houses had not been rebuilt or only partly. The people living in these villages are generally humble people with little materialistic desire. All they need is a house, food and clothing to be happy. All home owners were informed by their Local Government that they were entitled to 45 mio rupiah (EUR 3,600). Yet most people haven't received a penny up until this day. That by itself is quite shocking, having to live without a roof or without any help of your Government, even medical help, for eleven months. But what is more shocking was that there were actually beautiful houses rebuilt in those villages. More beautiful than ever before. We couldn't help but ask around who these people were that built those beautiful houses there. The answer shocked us even more than the sights when we arrived that day. We were told that these houses were owned by Muslim villagers who lost their houses as well. These houses had apparently been funded by local Government aid and by donations from certain Muslim countries. Unfortunately, my fiancee's family happens to be Catholic. May I just say that when we in the Netherlands donate money, we do not discriminate on religion, skin colour, age or gender. We give money to victims in general. Shocking, but certainly an eye opener.