Insights: Bullish Stocks
Shipping Stocks Set Sail -- BuyBelow we lay out what we believe is a compelling case to add exposure to dry-bulk and energy shipping stocks at current levels.
Sovereign 10-Year Yields Rising Globally. Sovereign 10-year yields are hitting multi-year highs in the US, UK, Germany, France, Japan, and India (among others). This is a positive for shipping stocks on two levels; (1) rates moving higher generally suggests robust GDP growth, and more economic activity means more need for shipping, and (2) value stocks historically outperform in rising rate environments, and most of the shipping stocks highlighted today have P/Es in the 4-6X range, putting them squarely in the value camp.
Shipping Rates. Dry bulk shipping rates have come down as supply chain bottlenecks have eased. Still, these companies can have revenues locked-in via leases of up to four years, insulating them somewhat from declining shipping rates. Additionally, it is possible that shipping rates will move higher again (new COVID variants causing supply chain bottlenecks, etc.). Additionally, the Dry Bulk Shipping ETF (BDRY-US), which tracks shipping rates, appears to be finding support at $19.
Shipping Stocks Breaking Out of Bases. Global dry-bulk and energy shipping stocks are starting to break out of bases, giving us a high degree of confidence that price and RS appreciation is likely to continue, and also providing us with low risk entry points.
In today's report we highlight the following actionable names: Danaos (DAC-US), Star Bulk Carriers (SBLK-US), ZIM Integrated Shipping Services (ZIM-US), Global Ship Lease (GSL-US), Genco Shipping & Trading Ltd (GNK-US), Golden Ocean Group (GOGL-US), Orient Overseas (International) Limited (316-HK), and A.P. Moller - Maersk A/S Class B (MAERSK.B-DK)... see pages 2-5.
Global Ship Lease is a holding company. Through its subsidiaries, the company is engaged in the business of owning and chartering out containerships under fixed rate charters to container liner companies.
Orient Overseas (International) is an investment holding company. The principal activities of Co. and its subsidiaries are container transport and logistics. Container transport and logistics include global containerised shipping services in primary trade lanes, covering Trans-Pacific, Trans-Atlantic, Asia/Europe, Asia/ Australia and Intra-Asia trades, and integrated services over the management and control of storage and flow of goods.
Star Bulk Carriers is an international company providing worldwide transportation solutions in the drybulk sector through its vessels-owning subsidiaries for a range of customers of major and minor bulk cargoes including iron ore, coal, grain, cement, fertilizer, along worldwide shipping routes. As of Dec 31 2016, Co. owned and operated a fleet of 73 vessels consisting primarily of Newcastlemax, Capesize as well as Kamsarmax, Ultramax and Supramax vessels with a carrying capacity between 52,055 dwt and 209,537 dwt. Co.'s vessels transport a range of major and minor bulk commodities, including ores, coal, grains and fertilizers, along worldwide shipping routes.
Vermilion Research delivers timely, actionable, and unique research inputs to professional investors. Our research strategists highlight securities which we believe are at major inflection points, based on our various proprietary technical indicators, and offer asymmetric risk/return profiles. We believe our research methodology, which is not limited by industry sector or market capitalization, enables us to deliver superior investment recommendations.
Our process begins by organizing all actively traded stocks into coherent sectors, then into logical industry groups. We then apply our proprietary relative strength tools to identify developing price trends. Once attractive trends are identified within a selected sectors or groups, we screen for individual stocks which we believe offer the best risk/reward profile. Vermilion offers U.S. and global equity market research products. Vermilion’s research team, which has received numerous awards and accolades, has a combined 70 year of experience in the analysis of investment securities.
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