Readers of this space know that one of the preferred sectors is oil/oil services. Given oil's importance in a growing global economy, oil and oil services companies are likely to continue to experience steady demand for their services/products. And with the above in mind, Frontline Ltd. is worth an evaluation.

Frontline Ltd. (NYSE: FRO) operates about 75 tankers, under primarily short-term contracts, with a total capacity of more than 18.5 million deadweight tons.

FRO's tankers are designed to transport oil, and, as a result of their size, transport the world's most vital commodity from the Middle East Gulf to the Far East, Northern Europe, the Caribbean, and the Louisiana Offshore Oil Port. FRO's Suezmax tankers operate primarily in the Atlantic basin. The company also transports coal and iron ore.


Analysts like the fact that Frontline is well-positioned to further benefit from strong conditions for very large crude carriers (VLCCs) and Suezmax tankers. Day rates have remained firm in 2008, despite a 60-90% price increase in 2007. Analysts also like Frontline's large spot market business (more than 60% of its fleet), which allows the company to benefit from dayrate fee increases.

Finally, after reviewing emerging market economic growth projections, there's a sense that the anticipated flattening of global oil demand will not occur as quickly as current models predict, a development that should lead to a F2009 upside revenue/earnings surprise for FRO.

The risks? A sustained, substantial decline in global oil consumption would hurt Frontline's results in a big way. (Don't look for that market condition, any time soon.)

The First Call mean rating for FRO is: Hold [22 firms]. Mean 2008 target: $57 [high: $66, low: $45].

Stock Analysis: Frontline Ltd. is a moderate-risk stock not suitable for low-risk investors. Investors with an investment horizon longer than 2 years should be rewarded from FRO's shares. Note: More-cautious investors may wish to wait for Frontline to pull-back to the $52-$54 level, but keep in mind that FRO may not retreat to that level. Sell/Stop Loss if you were to purchase shares in this company: $43.

Disclosure: Lazzaro has no positions in stocks. In addition to private real estate holdings, he owns corporate and municipal bonds, and cash certificates of deposit.