Shipping Sector Stock Picks

On October 1, The Wall Street Transcript interviewed Urs Dur, Vice President and Shipping and Logistics Analyst at Lazard Capital Markets. Key excerpts, including his sector picks, follow:

TWST: Who should investors look at in the dry side?

Mr. Dur: We cover only four dry bulk companies. We have buys on all of them. Since I don't cover the others, I'm not going to recommend the others. We have Navios (NM); that's a buy with a $17 target. Genco (GNK) is a buy with $63 target. Eagle (EGLE) is a buy with $32 target. Diana (DSX) is a buy with $32 target. The companies are all well placed. I like Navios a lot because it has nice built-in growth. It is a growth company. It is not a yield-based stock. It's focused on the EPS growth. We have EPS growth forecasts for end 2006 to end 2009 at over 65% CAGR and that's exquisite. It also has a very attractive balance sheet and a nice young fleet, as well as a nice diverse business operation - everything from a port. They own a port in Uruguay, but they also own ships. They charter ships. They work in the freight forward agreement market, which is a freight derivative market and they're generally successful there. I like their diverse business model and plan.

I like Genco. They just have a tremendous amount of built-in growth. They will be taking on, I believe, some debt to finance the built-in growth, but they also have a lot of long-term contracts to help finance the growth. They have the debt facilities in place right now to finance everything that they have agreed to buy, so that is no problem. They have a nice dividend, which is not a full dividend payout. It's about 60% of operating cash flow. As the fleet grows, I expect the dividend to grow. It's yielding around 6% today, and I would expect that to keep going.

Eagle and Diana are similarly structured companies. Eagle also has a very big growth program in place and a number of ships on order. What's very interesting about Eagle and sets them apart is that they have particularly long charter maturities coming up, which is very good for cash flow. They also have ensured the existing charters that they have. Those cash flows are ensured through 2010. This has never been done before. They have the debt in place to do it. They have a built-in growth system. They have good chartering relationships, a very young fleet, and a very attractive dividend. I find them extremely attractive. You're going to buy that stock, it's going to move up into the $30s and you're going to get a very attractive yield coming up.

Diana is similar, although they don't have the same amount of built-in growth. I like that they have more exposure to a very strong 2008 market than most of their competitors. That leads to their being able to increase their dividend over time too. They are very attractive.

Comments

[mbaglio100:]

With the exception of GNK, I wouldn't own one of these. Regardless of all the parameters Mr. Dur is so excited about-- "new ships" "diverse business plans" "built-in growth"-- the only metrics that should matter to my retirement are _price_ and _acceleration_.

Global shipping has been smokin' hot sector for two years. While Mr. Durs recommendations have perhaps doubled in the past two years, paying a 5 or 6 percent _taxable_ dividend, Dryships (DRYS) has risen 900 (yes 900) percent.

And even if you were sleeping and missed the first 18 months of this move you could still have gotten a triple _since MAY_!

In a smokin' hot sector, one simply must own the smokin' hot stocks. Otherwise you are holding _losers_. Period. Regardless of what any "expert" says. _Making_ money, (as opposed to _hoping_ you make it sometime in the future because of all the good "business plans", "built-in" growth", etc.), is about owning rising stocks _now_. Get on board. ;>

Disclaimer: I own a boatload (pun intended) of Dryships. I hope you do, too. :)

2007 Oct 02 04:59 PM

[wonderific:]

kicking myself for trading Dryships for Diana Shipping as Cramer touted Diana

2007 Oct 22 06:51 PM

[wonderific:]

Enter your comment

The best play here is NM Navios Maritime A lot of institutional support of late it is up huge today

2007 Oct 23 01:20 PM

[voidoid99:]

I called this one eh!!!!! Now they have offered common shares. What a cash cow this will be! Navaos goes to $31 by years end!

2007 Oct 27 03:46 PM

[voidoid99:]

wonderific you called this one!!!!!

2007 Oct 30 08:22 AM

[voidoid99:]

Wonderific you made the right play to transition to DSX from DRYS

2007 Oct 30 08:26 AM