Keep an Eye on Shipping ETFs

As the global recovery has surged, the shipping sector and related ETFs have clipped along at a slower but steadier pace. Some say that shipping may ultimately be a more reliable indicator of a recovery.

Activity in the shipping sector can send strong, indisputable signals about the state of the global economy. What’s the message it’s sending now? The signals seem to be mixed:

• Dry Ships (Nasdaq: DRYS) reported earnings on Monday, handily beating Wall Street’s estimates. The company said that increases in spot charter rates and higher revenues from drilling rigs helped the bottom line.

• The Baltic Dry Index last year shot up to a record high before collapsing. This year, the index has recovered, while still hovering below its 10-year average. Shipping prices also have remained flat, and could become more depressed as a new influx of ships come due for construction.

• Shipping demand is generally considered to be related to commodity demand, although commodities lately have struck out on their own, reports Mark Gongloff for The Wall Street Journal.

Once global demand resumes, shipping prices should recover and an increase in available ships will be moot. Monitor the trend lines as this sector finds a firm footing. As consumers begin to spend more and nations struggle to rebuild, this sector will ultimately reflect a shift in tides.

• Claymore/Delta global Shipping (NYSEArca: SEA): up 29.7% year-to-date



• PowerShares Global Progressive Transport (NYSEArca: PTRP): up 46.9% year-to-date

Comments

[Alan Young:]

SEA is directly related to shipping.
PTRP... I see a lot of railroads, no ships to speak of.

I see this as a sector for stock-picking; too many shippers are underwater (figuratively, at least) with too much commitment to capital investment and not enough cargo.

Oct 28 02:59 PM