Not All Dry Bulk Shippers Are Created Equal

 |  Includes: DRYS, DSX, EGLE, GNK, NM, NMM, SB, SEA
by: MTF Investing


The past five years have separated the strong from the weak in the Dry Bulk sector.

The Baltic Dry Index is showing a heartbeat, and may have a short term upswing.

Shorts continue to be pessimistic about Genco Shipping and Eagle Bulk Shipping.

Diana, Navios Maritime, Safe Bulkers, and DryShips continue to be the companies with the brightest outlook.

Since the 2009 collapse of the Baltic Dry Index (BDI), and the subsequent slowdown of the global market, investors have seen the weakest of the Dry Bulk Shippers dry off. The massive run up of the BDI and subsequent collapse, along with contracts companies had put on new buildings, proved too much for some companies. In order to stay afloat, some companies issued more debt or equity, sold off assets, or canceled contracts in recent years. The past year showed the BDI still has a heartbeat, and may eventually recover, bringing some of the struggling back to their feet, but those that have been on solid ground offer the most safety and security for investors.

The Industry

It's helpful to compare companies from different snapshots in time. So starting off, with a five year comparison of the current pack of Dry Bulk Shippers, it's easy to see who has thrived over the past five years:

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Navios Maritime Holdings Inc. (NYSE:NM), Navios Maritime Partners L.P. (NYSE:NMM), and Safe Bulkers, Inc. (NYSE:SB) would have all been good investments over the past five years. Eagle Bulk Shipping, Inc. (NASDAQ:EGLE) and Genco Shipping & Trading Ltd. (NYSE:GNK) are both at the bottom of the barrel, and may soon join some of the recently deceased Dry Bulk Shippers. Both are facing significant liquidity issues, and problems paying the bills, which may lead to drastic restructuring that will hurt shareholders. In the middle are DryShips, Inc. (NASDAQ:DRYS) and Diana Shipping Inc. (NYSE:DSX), both of which I believe are speculative plays. While they have both had troubles, they will likely pull through, and could offer a big upside down the road.

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When looking at the one year chart, there is still an obvious separation between the companies. NM, SB, and DRYS are obviously on top. GNK is obviously on the bottom, and EGLE is heading lower to join it. NMM and DSX are sitting in the middle.

A rebound in the BDI?

The BDI has started to show a heartbeat over the past year:

(Source: Dryships web site)

While investors and industry would love to see it move higher instead of the spikes, the moving average over the past 50 days and 200 days are moving higher. From a purely technical point of view, the BDI should be rebounding soon:

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(Source: Ycharts)

While I don't recommend trading purely on technical analysis, the Williams %R and RSI have both been a good indicator over the past year for a rise in the BDI. At this point, the BDI has bottomed out in the Williams %R and is in oversold area for the RSI. However, since the BDI rises and falls based on Dry Bulk demand, and not the charts, it may be a while before it heads higher.

Shorts as an indicator

I often look at shorts as an indicator for market sentiment about a company:

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(Source: data compiled by author from

The two companies the market appears to be bearish on are GNK (43% of the float is short) and EGLE (33% of the float is short). Since I last compared the companies, there has been some minor movement in the rest of the companies, but the market is signaling a positive sentiment towards them.

Where to invest

The movement of the BDI continues to frustrate investors and operators in the Dry Bulk sentiment, but there are some that will likely not survive. DSX, NMM, NM, SB, and DRYS all should be strong considerations for any portfolio, after investors do their own due diligence. I would continue to stay away from GNK and EGLE, except for those that have money they are willing to lose and like to gamble. Over the past month GNK has been up over 30%, a nice pay off for those who are willing to play the swings, however for most, the restructuring of the company is too much of an unknown.

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Disclosure: I am long DRYS. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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