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Is it time to invest in shipping industry stocks

The shipping industry has seen its ups and downs and currently with Baltic Dry Index(BDI) around 800 points, I said it’s at the slump right now.  BDI is just an average price of shipping rate by sea taking in account of all the shipping routes on different ships including Handysize, Supramax, Panamax, and Capesize.  

Screen Shot 2014-08-15 at 2.34.40 PM.png

The BDI was at 11,000+ points in 2008, at that time the daily rate was astronomical and it seemed like an good idea at that time to expand the shipping fleet so almost all the shipping companies put in orders to build new ship, but with the economic downturn and influx of new ships being introduced to the routes, the index has since fallen, all the way down to around 650 points in Feb 2012.  Since many of the ships are still on credit, the fate of stock price of many shipping companies also went down with it.  Few have filed for bankruptcies, e.g. Excel Maritime(EXM), Genco shipping & Trading Ltd (GNK)  

The way I look at it, since there’s no trans-ocean train, the sea is the only way to get the product from one country to the next across oceans.  I don’t foresee BDI to get to 11,000 anytime soon, but I do think it has bottomed out.  With the world economy rebounding and consolidating of the shipping companies, I think the demand eventually will match the supply.   Here are few shipping companies for consideration:

Company

Ships/capacity

P/E

Market Cap

Dividends

Price(as of 8/15/2014)

Navios Maritime Holdings Inc (NM)

66 vessels/6.3 million ton

N/A (neg EPS of 0.98)

919 M

0.24 (2.3%)

8.8

Diana Shipping Inc (DSX)

38 vessels/NA

N/A (neg EPS of 0.30)

892 M

N/A

10.88

Frontline Ltd. (FRO)

33 vessels

N/A (neg EPS of 2.18)

268.45M

N/A

2.77

Eagle Bulk Shipping, Inc. (EGLE

43 vessels/2.45 million tons

N/A (neg EPS of 5.55)

24.17 M

N/A

1.45

Navios Maritime Partners L.P. (NMM)

30 vessels

26.03

1.58 B

1.77 (9.4%)

20.05

 

As you can see, most of the companies are not profitable recently, except few that have locked in their rate long term such as Navios Martime Partners L.P. (NMM).  On the same token, those companies might not be able to take immediate advantage of the increased rate when BDI is up.  

There’s no sure way of knowing when the shipping industry will see their heyday again, but there’s assurance that the market is stabling and on track for rebound.   If you not comfortable picking out individual stock security, you should look into shipping industry mutual fund to spread your risk.    

Hope this article helped you in your long term investment planning and researching.  If you have question or comment, don’t hesitate to contact us.  

 

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