), which carries crude from drilling sources to refineries. Like most energy-related stocks, OSG has had a good run, peaking at 67.60 in August, up from 32 in May, 2004. But Hurricane Katrina and sky-high oil prices took a toll on shipping volumes, and the stock plunged 31%, to 47, on Nov. 1. It's now at 50, but Chun says it could "easily head north of 70."
The stock trades below the resale value of the company's fleet of 61 vessels, says Philippe Lanier at Banc of America Securities (BAC
). Investors are also overlooking OSG's free-cash flow of $10 a share and profit margins above 50%. Wall Street consensus earnings estimate is $11.64 a share for 2005 and, as shipping rates soften, $8.71 for 2006. New CEO Morten Arntzen is expanding OSG -- hauling heating oil, too. Says Lanier, who has a 12-month target of 80: "Now is a good entrance point: This is the most undervalued of the [10 shipping and refining stocks] we cover."Note: Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them. Gene Marcial is on vacation.