Eagle, Navios, China Cosco: Welcome to the Bulk Shipping Boom

Eagle Bulk Shipping Inc. (EGLE) closed at $29.40, after a fall of almost -10% on Tuesday. On what news exactly? I can’t seem to find anything real. In fact, based on Tuesday’s trade data, both imports and exports to the United States are at record highs. Which means shipping.

Also on Tuesday, Navios Maritime Holdings Inc. (NM) dropped 5%. Our March 8 Hot Stock of the Week, dry goods shipper China Cosco Holdings (CICOF.PK), is also still trading in our buying range at $2.80. All these companies are not just profitable… expanding… and fully equipped to turn global commerce into their own personal goldmines. Madness, if you ask me…

Now, in the case of EGLE, a cursory review of news brought up the following:

• Analyst Urs Dur of Lazard Capital reiterates a “buy” rating on Eagle, raising his target price from $40 to $41.
• Jefferies raised their EGLE target to $43 after the acquisition of two Supramax dry bulk vessels.
• Rise in the demand for the fleet is expected to exceed supply in the next 12 months, according to Lazard Capital. The EPS estimates for 2008 and 2009 have been raised from $1.96 to $2.12 and from $2.61 to $3.11, respectively.
• Income from vessel operations of $16.9 million or $0.36 per share, up 44% from $11.7 million or $0.31 per share in the first quarter of 2007.
• Net Income of $14.3 million or $0.31 per share (based on a weighted average of 46,925,494 diluted shares outstanding for the quarter), up 69% from net income of $8.5 million or $0.23 per share (based on a weighted average of 37,480,914 diluted shares outstanding for the quarter) in the first quarter of 2007.
• Gross time charter revenue increased by $9.1 million, or 31%, to $38.6 million for the first quarter of 2008, from $29.5 million for the first quarter of 2007. Net time charter revenue increased by $9.8 million, or 36%, to $36.7 million for the first quarter of 2008, from $26.9 million for the first quarter of 2007
• Based on the first quarter results, EGLE declared a cash dividend of $0.50 per share payable on or about May 23, 2008, to shareholders of record as of May 20, 2008.

And yet, the stock has retraced 18.9% from its recent high of $36.24 on May 19, 2008.

These stocks look like perfect turnaround picks to me:

Buy EGLE below $30

Buy CICOF at or below $2.80.

Comments

[Eric in IL:]

There will be a time for these, but picking a bottom can cost you 30% in these. I would look at the Baltic Shipping Indices to keep track of the trend. Look at the $BDI on stockcharts.com, way oversold, definitely not looking bullish near term. I would buy at end of July.

2008 Jun 12 03:29 AM

[Eric in IL:]

One correction, I meant buy at end of June.

2008 Jun 12 03:30 AM

[Eric in IL:]

Man, I must be tired, I also meant the BDI is overbought. RSI @ 90+ right now, trending downward.

2008 Jun 12 03:41 AM

[russglo:]

You cannot react to the volatility of this market. The only way is of course if you buy and sell by the second. Egle is a great stock, gnerous dividend and from all signs continuing profits.

2008 Jun 12 05:58 AM

[hannah007:]

I have seen many arguments for these stocks going up. There mostly the same. A quote from an analyst. PE/E/Sales/Expenses/Fo... Power/China/India/BDI/Ship Builds/Iron/AG. I think its time to face the facts which I read somewhere else.
Institutional Investors, Market Cap, Financial Transparency, Stability will move these stocks up. Nothing else. These stocks are not good investments for most. These articles get pasted into the weblogs to make people feel better/buy while they continue to loose money.

Long and underwater

2008 Jun 12 08:25 AM

[longsns:]

Many shippers are down big the past few days on no real news. It's far too simplistic to say rates or oil prices or profit taking. Wish the "blog experts" could find out. Perhaps the news search engines are missing the news.

2008 Jun 12 09:16 AM

[mariposa:]

Shippers have been excellent for me. Yes, volatile, and unless you want to trade a little, don't pay too much attention to short-term moves, aside from significant news. The BDI was way up so some correction inevitable, and esp. when some commodities were in a bit of pressure. Eagle looks very good to me, medium term. Until the world decides it it moving too many things around too far. Not likely soon.

2008 Jun 12 09:29 AM

[Eric in IL:]

Well, I think it is dangerous to jump in when the rates have come so far, so fast. These rates make oil look stable/cheap. That is reflected with the low P/E. I would not be a buyer until I see the rates trend back up, because this could be a huge correction to the downside. I have concerns about how much upside there is on rates.

2008 Jun 12 11:47 AM

[Magnus:]

Can you say Fuel Oil Price?- it seems the only thing that could keep driving EGLE down on continuous good news. I am personally hanging on to it.

2008 Jun 12 02:25 PM

[Eric in IL:]

I read that China is churning through existing inventories and slowing imports on iron ore. The analyst thought this would last a few weeks, so I think the Baltic Indices should start to rebound in a month. The capesize index fell 15% today causing DRYS to fall 8%. If this continues, DRYS could see $50 soon.

2008 Jun 12 04:06 PM

[ritr54:]

Why did you throw Navios in there with no commentary? They seriously and suspiciously under-performed last quarter!

2008 Jun 13 12:24 PM