Zachary Scheidt

Excel Maritime Carriers: Set Up To Excel

China has actually already begun importing iron ore. This is part of the catalyst that is driving dry bulk rates higher.

While book value may not be exact, for many of these companies, book value is actually very conservative. That is because they purchased ships and carry the ships at cost less depreciated value. Since many of the ships have been depreciated to a much lower level (accounting) the book value is likely very close to economic value.

Thanks for the good article - best of luck with these names.
Zach
zachstocks.com

2009: Watch the Baltic Dry Index

The severe weakness in the BDI may offer strong opportunities in shipping names. But not every shipper is created equally. Some leveraged and aggressive companies have gotten hit much harder than competitors with long-term contracts and manageable debt levels.

Ironically, the aggressive players that survive (I think we will see a handfull of bankruptcies in this sector) will actually be the fastest to rebound. This is because of A) their lower current prices, and B) a more drastic change in analyst assumptions due to the business model - or leverage.

The temptation is to chase dividend yield and quite honestly dividends are an important part of owning shippers. However, due diligence is in order because many will not be able to maintain current dividend policies.

In short - the area is ripe for significant profits in 2009. However, there are a few land mines that must be avoided.

Happy New Year and best of luck to all in 2009.
Zach
zachstocks.com

Staying Afloat: A Primer on the Shipping Industry

Hey guys, thanks for all the comments.

As everyone above is rightfully pointing out, there are many issues which play into the prices of these shipping companies - much more than can be covered in one article.

The fact remains that many opportunities in the next six to twelve months will come out of this sector, so it bears close watch.

Lively discussion and analytical debate certainly make us all sharper and better investors so I appreciate each of your insights and questions.

Zach
zachstocks.com

Staying Afloat: A Primer on the Shipping Industry

WACG - I'm truly sorry you feel that way. I tried very hard to make sure that the content of this article offered true value to readers whether they pursued other articles or not. There is some specific information regarding Diana Shipping, Genco Shipping, and Eagle Bulk Shipping. Furthermore, information about the industry should be very helpful to investors.

I have a family that I need to provide for and I'm sure you have financial responsibilities as well. It is my firm belief that ZachStocks will never thrive if it does not provide helpful and relevant information to readers and so I try to make sure content is of the highest quality. But I will keep your thoughts in mind as I seek ways to make this (and my other ventures) worthwhile to every reader.

Thanks for your opinion - I truly do appreciate both positive and negative feedback.

Zach
zachstocks.com

Staying Afloat: A Primer on the Shipping Industry

DSX is a name that I think will weather the difficulty and pull through. They will likely have to cut their dividend, but should still have the cash flow to pay an attractive rate given the share price. Currently the yield is near 40. If they paid out half of their earnings for next year (a historically low metric) that would still give them a yield of near 10%

TBSI is a true wildcard. The company has very few long-term contracts with customers and as such will see earnings decline sharply next year. The debt level is high enough to cause concern. However, the stock price is already so low that it would be very risky to short. In fact, I believe the stock represents a "call option" in that you have a good chance of losing your entire investment, but if rates pick up or the company pulls through, you would likely earn a geometric return on capital.

Hope this helps,
Zach
zachstocks.com

Staying Afloat: A Primer on the Shipping Industry

I think the dry bulk shippers have much less exposure to "toys" as cargo is more typically agricultural products or iron ore.

But your point is good in that as the world economy suffers, countries like China will be less likely to import as much in the way of resources. This is what has driven these stocks so much lower. However, my contention is that the stocks fully (and some more than fully) account for the softening environment and will offer great investments during the next 12 to 18 months.

Thanks much for your comment!
Zach
zachstocks.com

Diana Shipping: Prime Rebound Candidate

Hey all,

Thanks for the comments - a lot of very astute followers of Diana and the other shippers out there. I obviously haven't published the pages and pages of analytics necessary to fully cover this industry, but hopefully my comments give a basis from which to launch a more thorough analytical process. You may be interested in looking at my previous article on DSX from January.

Jim-Bob,

I have to respectfully disagree with you in that the smaller investor actually can have an advantage in this market. With the volatility increasing and the swings occurring quickly, smaller investors can sweep in and take a meaningful position (long or short) when fear or greed push prices out of balance where it takes larger institutions much longer to build their positions to a meaningful size.

All - good luck trading this market and thanks for the good spirited discussion!

Keep An Eye On Diana Shipping

The price action on Friday (1/11) was impressive given the markets decline. This may point towards an attractive place to begin building positions

(Author still has no position in DSX)