Amid seemingly unending macroeconomic turbulence and market volatility, it could be wise to invest in Overseas Shipholding Group, Inc. (OSG), Adams Resources & Energy, Inc. (AE), and MV Oil Trust (MVO) with tailwinds to aid their momentum.
Aggressive interest-rate hikes by the Federal Reserve seem to be having their intended and unintended consequences. While the CPI for February increased by 6% annually, in line with Dow Jones estimates, followed by respective declines of 0.1% and 0.4% in PPI and retail sales, at least three regional banks have gone belly up with the potential of contagion risks for the economy and the markets.
In such a scenario, even a moderated interest rate hike of 25 bps by a justifiably cautious Federal Reserve may induce another bout of panic and volatility. Hence, it could be wise to capitalize on stocks likely to have momentum in their favor in the foreseeable future.
Let’s take a closer look at the featured stocks.
Overseas Shipholding Group, Inc. (OSG)
As an energy transporter, OSG owns and operates a fleet of oceangoing vessels engaged in transporting crude oil and petroleum products. The company charters its vessels to customers for voyages for specific periods at fixed daily amounts through time charters and for specific voyages at spot rates.
On December 8, 2022, OSG announced that it had exercised options to extend its six bareboat charter agreements with American Shipping Company ASA (AMSC) for an additional three-year term, beginning in December 2023. With these extensions, seven vessels will continue on lease from AMSC as key contributors to OSG’s steady and robust earnings.
On November 15, OSG announced that it had agreed to purchase five million shares of the company’s common stock from Cyrus Capital at $2.86 per share for a total of $14.30 million. The transaction, demonstrating the company’s confidence in its prospects, was supposed to be completed on the same day.
Sam Norton, the President and CEO of OSG, stated, “The price paid in this share purchase equates to an enterprise value of roughly 4.5 times expected 2022 adjusted EBITDA, an implied valuation which we consider to be very attractive.”
During the fourth quarter of the fiscal year that ended December 31, 2022, OSG’s shipping revenues increased 27.5% year-over-year to $121.76 million, while its operating income came in at $20.42 million, compared to an operating loss of $1.89 million during the previous-year quarter. Its adjusted EBITDA also increased 162.7% year-over-year to $46.3 million, driven primarily by the increase in TCE revenues.
During the same period, the company’s net income came in at $10.09 million or $0.11 per share, compared to a net loss of $3.68 million or $0.03 per share during the fourth quarter of the last fiscal year.
The stock has gained 6% over the past six months and 68.9% over the past year to close the last trading session at $3.53, around its 50-day moving average of $3.58 and above its 200-day moving average of $2.92.
OSG’s strong fundamentals are reflected in its overall A rating, which translates to a Strong Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree. OSG also has an A grade for Momentum and Quality and a B for Growth, Value, and Sentiment.
Unsurprisingly, OSG tops the list of 42 stocks in the A-rated Shipping industry. Click here for all ratings of OSG.
Adams Resources & Energy, Inc. (AE)
AE is primarily involved in the marketing, transportation, terminal ling, and storage of the various crude oil and natural gas basins in the United States. The company operates through three segments: Crude Oil Marketing, Transportation, and Storage; Tank truck Transportation of Liquid Chemicals, Pressurized Gases, Asphalt, and Dry Bulk; and Pipeline Transportation, Terminalling, and Storage of Crude Oil.
On February 21, AE announced its quarterly cash dividend of $0.24 per common share, payable on March 24, 2023, to shareholders of record as of the close of business on March 10, 2023. The company pays $0.96 annually as dividends, which translates to a yield of 1.98% at the current price. Dividend payouts have grown at 1.8% CAGR over the past five years.
AE has been paying dividends for 25 years, which exemplifies the management’s unwavering focus on ensuring the stability and strength of the business and its finances.
On November 1, 2022, AE announced the repurchase of all the shares of AE common stock owned by KSA Industries, Inc., the company’s largest stockholder, and members of the family of the late Kenneth Stanley Adams, Jr., the company’s founder, who are affiliated with KSA.
With this transaction, AE made a significant return of capital to its existing shareholders and increased the intrinsic value of their stake in the company.
For the fiscal year ended December 31, 2022, AE’s total revenues increased 66.3% year-over-year to $3.37 billion. However, the company’s operating earnings decreased 64.3% from the year-ago value to $5.77 million due to expenses related to the acquisition of the Firebird Bulk Carriers, Inc., Phoenix Oil, Inc. businesses, and KSA Industries, Inc. and related family.
AE’s adjusted net earnings for the fiscal year came in at $4.71 million and $1.02 per share, up 9.8% and 15.9% year-over-year, respectively.
AE’s stock has gained 63.3% over the past six months to close the last trading session at $48.37, above its 200-day moving average of $38.23.
AE’s overall rating of B translates to a Buy in our POWR Ratings system. It has an A grade for Momentum and Sentiment and a B for Quality and Value.
AE is ranked #16 of 90 stocks in the B-rated Energy - Oil & Gas industry. Get additional ratings for AE’s Growth and Stability here.
MV Oil Trust (MVO)
MVO is a statutory trust that acquires and holds net profits interests in the oil and natural gas properties of MV Partners, LLC, located in the Mid-Continent region in Kansas and Colorado.
On January 25, MVO distributed net profits of $4.72 million or $0.41 per unit for the quarterly payment period ended December 31, 2022, while withholding $263.54 thousand, from the proceeds otherwise available for distribution, as a reserve for the payment of future known, anticipated or contingent expenses or liabilities.
MVO distributes $1.64 per unit annually. This translates to a yield of 13.17% at the current price, comparable to the 4-year average dividend yield of 15.30%. Its dividend payouts have grown at a 22% CAGR over the past five years.
MVO’s distributable income increased 133.3% year-over-year to $8.05 million for the quarter that ended September 30, 2022. Its income from net profit interest rose 136% from the prior-year quarter to $8.67 million. Distributions per trust unit rose 133.3% year-over-year to $0.70 during the same period.
The stock has dipped 7.9% over the past year to close the last trading session at $8.95.
MVO has an overall B rating, equating to a Buy in our POWR Ratings system. It also has a B grade for Momentum, Growth, and Quality.
MVO is ranked #14 of 90 stocks in the B-rated Energy - Oil & Gas industry.
Click here for additional POWR Ratings for MVO’s Value, Stability, and Sentiment.
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OSG shares were trading at $3.43 per share on Thursday morning, down $0.10 (-2.83%). Year-to-date, OSG has gained 18.69%, versus a 2.08% rise in the benchmark S&P 500 index during the same period.
About the Author: Santanu Roy
Having been fascinated by the traditional and evolving factors that affect investment decisions, Santanu decided to pursue a career as an investment analyst. Prior to his switch to investment research, he was a process associate at Cognizant. With a master's degree in business administration and a fundamental approach to analyzing businesses, he aims to help retail investors identify the best long-term investment opportunities.
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