Horos Asset Management recently released its Q1 2020 Investor Letter, a copy of which you can download here. Horos Value Iberia fell by -35.1% compared to -27.6% of its benchmark index. On the other hand, Horos Value Internacional was down by -30.2% compared to -19.6% of its benchmark index. You should check out Horos Asset Management’s 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, Horos Asset Management highlighted a few stocks and Teekay Corp (NYSE:TK) is one of them. Teekay is one of the largest shipowners in the world. Year-to-date, Teekay Corp (NYSE:TK) stock lost 57.6% and on June 24th it had a closing price of $2.34. Here is what Horos Asset Management said:
“As for Teekay Corp., let us remember that the company owns c.34% of Teekay LNG. Additionally, it controls c.29% of Teekay Tankers, a crude oil shipping business, and owns three FPSOs (Floating Production, Storage and Offloading of oil and gas) units. Interestingly, in addition to the positive dynamics of Teekay LNG that we have just mentioned, Teekay Corp. is also benefitting from the positive impact for Teekay Tankers of the prevailing depressed oil prices, as the demand for transport and storage of this commodity —and consequently, the freight rates of this type of vessels— has soared. In fact, since the end of February, Teekay Tankers share price has risen by nearly 100% at the time of writing.
Finally, one of Teekay Corp.’s biggest weaknesses was the past cash burn of its FPSOs. However, the company has been addressing the issue recently and at the end of March announced a new contract for its FPSO Foinaven, which caused the most headaches for the company in terms of cash burn. This contract is for ten years and involves an advance payment of $67 million, which is significantly higher than our estimates. As for the other two FPSOs, Hummingbird was granted a contract extension to 2023 in 2019 and Banff —the third FPSO— will end its contract and operations in 2020, when it will be scrapped.
All in all, Teekay Corp. is possibly in one of the best spots of the last few years in terms of business performance and financial risks. In spite of this, this year its share price fell by about 60% from peak —at the beginning of 2020— to trough. It has been a long time since we found such a clear discrepancy between the performance of a business’ fundamentals and its share price. This explains the increase in our exposure to the company.”
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Video: Top 5 Stocks Among Hedge Funds
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