Beam me up Scotti! Wouldn't it be nice to beam up a 100 million metric tons of coal, steel, wheat, copper or any other commodity from here to say China, or India, or Brazil? Well, technology is not there yet! The way this stuff is transported from producers to consumers overseas is mainly by huge ocean going vessels, marine tankers and they are busy these days carrying over huge amounts of every commodity to countries where demand is outstripping supply as every day goes by.
Only a decade ago Chinese were riding bicycles and wearing grey uniforms, happy to have a bowl of rice once a day. That time is gone forever! The communists have turned capitalists and they drive cars, build skyscrapers, eat better and want to enjoy every convenience that we have taken for granted for all of our lives. The same insatiable growth is propelling economies of Russia and its former satellites, as well as India, Brazil, Mexico and other.
They buy from us and other developed countries all the basic materials required to build a good life. Unfortunately the human kind did not yet developed a better way to deliver billions of tons of commodities across the oceans and tankers are the "only game in town"!
The tanker stocks that enjoyed a parabolic rise in 2006 and 2007 have sold off sharply with the rest of the market last November, but their profits are keep climbing higher and higher. Most of the stocks in that group are selling at single digit trailing and next year PE, while their "E" are growing at a double and triple digit rate. The Baltic Dry Bulk Index [BDI] that tracks daily charter rates for paid by commodities suppliers to ship their goods has climbed from the bottom reading of 5615 on January of this year to 8550 as of today indicating that daily charter rates are rising again fueled by strong demand.
Tankers stocks bounced up in the last couple of weeks from the bottom as well, but they are still cheap! ...and most of them pay very generous dividends, some yielding over 10%. The trend in shipping business will last as long as the BRIC countries will experience growth, which is for decades. This trend is there to stay and its irreversible! On the hand... there is no other hand, its supply and demand and demand is getting stronger!
For price appreciation consider the following stocks:
- TBS International LTD. (TBSI) $43.19 dividend yield 0%
- Aegean Marine Petroleum Network (ANW) $38.41 dividend yield 0.10%
- Dryships Inc. (DRYS) $84.54 dividend yield 0.95%
- Oveseas Shipholding Group (OSG) $75.36 dividend yield 1.66%
- Exel Maritime Carriers Ltd. (EXM) $43.85 dividend yield 1.83%
- Teekay Corp. (TK) $46.31 dividend yield 2.37%
- Navious Maritime Holdings Inc., (NM) $11.54 dividend yield 3.11%
For appreciation and high dividends consider the following stocks:
- Double Hull Tankers (DHT) $11.78 dividend yield 12.64%
- Arlington Tankers Ltd. (ATB) $22.90 dividend yield 10.13%
- Paragon Shipping Inc. (PRGM) $17.39 dividend yield 10.06%
- Knightsbridge Tankers (VLCCF) dividend yield 8.51%
- Navious Maritime Partners LP., (NMM) $16.72 dividend yield 8.44%
- Euroseas Ltd., (ESEA) $15.40 dividend yield 7.01%
There are multitude of stocks in the market that looks like a bargain, but some of them are. The real bargain is when a stock price is low relative to the future growth of the business. If business is fueled by irreversible global forces - that makes it a great investment! Buy tankers, I did!
Disclosure: Author is long stocks named in this article