Dampskibsselskabet Torm A/S (ADR) (TRMD)

sheycavin (92.75) Submitted: 12/09/07 11:29 PM : Start Price: $37.78 TRMD Score: -28.74

These guys have been around for 119 years. Excellent ROE and ROC. Their management team invented "pooling" which is the standard in shipping today. Pooling basically lumps a bunch of ships into one pool that is controlled logistically by a single firm to give the firm flexibility and diversification for their clients.

They control more than 120 ships, which makes them a very large player in the industry and when coupled with their pooling method gives them a competitive edge over smaller and less organized companies. Torm can have any type of ship you need ready to go from any port you like. So why use another carrier who may not be able to accommodate you?

This industry is brand new to public trading. With a few firms launching successful IPOs in the US it seems like everyone is piling on. Some worry about the incredibly high dividends these companies pay (Torm pays nearly 14%). Will they have the cash to make it through the lean times and to keep up with maintenance on aging fleets?

In Torm's case, I would trust their managers have the fiscal responsibility to not get themselves in trouble by luring investors with large dividends that they can't afford. They've been doing this a long, long time and I find it hard to believe they don't know how much cash they need for a rainy day. But at the same time, I wouldn't expect this level of dividend pay to remain indefinitely. Especially if we see a significant decrease in the demand for oil or dry minerals. Slim chance of that, but it has to be considered.

They recently acquired half of a US shipping firm (OSI). It'll be important to see how well they assimilate OSI since it was bought mostly with stockholder equity.

Management-A
Fundamentals-A
MOAT-B
Growth Opportunities-A
Current Price-A

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