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Full Speed Ahead at Stelmar

Despite depressed freight rates, volatile oil prices, and the Middle East imbroglio, tankers could be attractive value plays. So argue some pros who have been buying shares of Stelmar Shipping (SJH) of Athens, a Big Board-listed operator of vessels for crude and refined petroleum. Stelmar's stock has stayed afloat, rising from 12 in mid-November to 15.56 on June 5.

James Winchester of Lazard, which co-managed Stelmar's secondary stock offering in April, rates this "high-quality, small-cap value play" a buy. It's positioned to build value in the next 18 to 24 months, says Winchester, who does not own stock. "The geopolitical conflicts favor Stelmar," says CEO Peter Goodfellow. Future growth, he says, will come from Asia, where more refineries are being built.

And growing U.S. demand for oil means more charter business for tankers and longer hauls. Stelmar has 26 ships--only 7 years old, on average, vs. 16 years for tankers in general. Winchester says tough competition will pare 2002's estimated earnings of 2.70 a share to $1.78 in 2003. But he sees more demand by 2004, as old tankers get scrapped. By Gene G. Marcial

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