D5 Advisors shorted oil shipper Frontline Ltd. (NYSE: FRO) on Friday, April 1, for their Covestor Oil and Gas Producers model. Here’s how Bloomberg described FRO’s latest earnings report, on February 22:
Frontline Ltd., the world’s largest operator of supertankers, posted a bigger-than-expected fourth- quarter loss and declared a dividend that missed estimates after charter costs plunged on a glut of vessels.
The net loss was $11.8 million, or 15 cents a share, compared with profit of $3.92 million, or 5 cents, a year earlier, the Hamilton, Bermuda-based company said today in a statement. Frontline was expected to post a 13.4-cent loss, based on the mean estimate of 10 analysts surveyed by Bloomberg. The 10-cent dividend missed an anticipated payout of 23.5 cents.
“The surprising thing for me is the low dividend and what it means for future dividends, since we expect loss-making quarters through 2011 and 2012,” said Erik Nikolai Stavseth, an analyst at Arctic Securities ASA in Oslo. The company “will not be appealing to yield-based investors.”
D5 Advisors, based in Stamford, Connecticut , is an investment management firm specializing in low volatility, hedged trading strategies. The firm evolved from its predecessor, Trident Advisors, which launched its first fund in July 1995 with a focus on relative value strategies. The firm is registered as an investment advisor with the State of Connecticut.
D5’s Covestor model launched on January 11 of this year. The strategy takes aim at high dividend stocks that can cause mispricing:
This is a long/short absolute return strategy that trades high yielding equity securities of companies involved in the production of oil and gas. The model exploits the widespread but often misplaced emphasis on dividends, utilizing a fundamentally-driven investment process to identify market inefficiencies. The model uses a proprietary, intrinsic relative value methodology to construct a market neutral portfolio that aims to produce low volatility with healthy returns uncorrelated to the broad markets.
Source:
“Frontline Reports Bigger-Than-Expected Loss on Ship Glut” Alaric Nightingale, Bloomberg 2/22/11
https://www.bloomberg.com/news/2011-02-22/frontline-reports-bigger-than-expected-loss-on-glut-of-vessels.html
