Should Investors Buy the Dip in Frontline (FRO) Stock?

Evermore Global Advisors recently released its Q2 2020 Investor Letter, a copy of which you can download here. The Evermore Global Value Fund posted a return of 10.35% for the quarter, underperforming its benchmarks, the MSCI All Country World Index ex USA (MSCI ACWI ex USA), the MSCI All Country World Index (MSCI ACWI), and the Morningstar World Small/Mid Stock Category Average. You should check out Evermore Global Advisors’ top 5 stock picks for investors to buy right now, which could be the biggest winners of the stock market crash.

In the said letter, Evermore Global Advisors’ highlighted a few stocks and Frontline Ltd (NYSE:FRO) is one of them. Frontline Ltd (NYSE:FRO) is a shipping company. Year-to-date, Frontline Ltd (NYSE:FRO) stock lost 37.9% and on July 31st it had a closing price of $8.0. Here is what Evermore Global Advisors’ said:

“Frontline (FRO US), one of the largest crude tanker vessel operators led John Fredriksen, was the second largest detractor to Fund performance during the second quarter. Despite the limited company-specific news flow, the aggressive production cuts by Saudi Arabia, Russia and OPEC+ have put pressure on Frontline’s share price. Short-term traders and retail investors have interpreted this development as an immediate destocking of inventories that will reduce the absolute demand for seaborne transportation of crude. While frustrating, it is important to note that there have been several port disruptions and logistical dislocations related to COVID-19 that we believe will take more time than anticipated to destock the oil that was stored on floating storage (tankers) from the recent contango and demand. History shows that it did take longer than one expected when the destocking kicked off during the last time when there was a prevalence of floating storage on the water. In the end, the longer wait time to load/unload cargoes will maintain the reduced effective crude tanker fleet supply in the market. In addition, we believe Frontline has secured attractive rates during the second quarter which imputes strong free cash flow generation. Frontline paid a quarterly dividend of $0.70 per share in June, implying an annualized dividend yield in excess of 35%. We believe the company will continue to pay out excess cash flow as dividends as it has done historically.”

Dale Stagg/

In Q1 2020, the number of bullish hedge fund positions on Frontline Ltd (NYSE:FRO)  stock increased by about 41% from the previous quarter (see the chart here), so a number of other hedge fund managers seem to agree with Frontline’s growth potential. Our calculations showed that Frontline Ltd (NYSE:FRO)  isn’t ranked among the 30 most popular stocks among hedge funds.

The top 10 stocks among hedge funds returned 185% since the end of 2014 and outperformed the S&P 500 Index ETFs by more than 109 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds’ poor performance. You could have doubled the size of your nest egg by investing in the top hedge fund stocks instead of dumb S&P 500 ETFs. Below you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.

Video: Top 5 Stocks Among Hedge Funds

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Disclosure: None. This article is originally published at Insider Monkey.