Golden Ocean Group - Recent plunge in stock prices offers opportunity to accumulate

The dry bulk shipping market recovered at a fast pace in 2021 on the back of robust global demand, coupled with limited fleet growth. Although TCE rates of dry bulk carriers are expected to ease slightly in 2022, before improving in 2023, overall vessel earnings will remain substantially above operating expenses across vessel classes for GOGL because of favourable market dynamics - implying a healthy topline and profitability over the next three years. We believe a healthy profit margin will support the uptrend in GOGL’s stock prices and will create shareholder value. The company’s stock price in the past five weeks has fallen by 35.1% in line with the broader Drewry dry bulk equity index as restrictions in China coupled with fears of a potential recession encouraged the bearish sentiment. Prior to the recent slump, the stock was on an uptrend, benefitting from the robust consumer demand. However, with the steep fall in the company’s stock price the upside potential is substantial vs the downside risk. As a result, we remain bullish on the company’s prospects and recommend accumulating on dips.