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Dr. Kris has two degrees from MIT because one just wasn't enough. Her life goal was to figure out the universe and having done that (at least to her satisfaction), she decided to tackle something even more difficult—the stock market. Applying the scientific method along with an insatiably... More
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  • Full Steam Ahead For Marine Shippers -- December 26 2 comments
    Dec 26, 2013 5:16 PM | about stocks: SEA, DRYS, NM

    Market Notes (4:30pm ET): The Santa rally continues not only on light volume but on a wing and a prayer. Today, the volatility index (VIX) dipped below the bullish contrarian level of 12 showing a high level of investor complacency. This is a contrarian indication that the market is becoming overbought thus increasing the probability of a correction. Also, the fact that the P/E (price/earnings ratio) on the S&P is nearly 35% above its historical average shows that there are few bargains left.

    One of the few areas left where good value can still be found is in the shipping stocks. This industry group--a member of the transportation sector--has been staging a stealth rally for several months. A few days ago the Shipping etf (NYSEARCA:SEA) broke out of a four month consolidation pattern to jump to a new yearly high on heavy volume. Two major players in this space that are actively traded in the US are Dryships (DRYS, $4.70; +13% today; P/E = -5.5) and Navios Maritime (NM, $11.41; +11% today; P/E = 10). Both of these jumped to new yearly highs on very strong volume, an indication that investors are piling in. Of the two, only Navios pays a dividend--2.1% which is on par with its peers. If we are to believe that the global economy is on the mend, then it's reasonable to expect the performance of the marine shipping group to continue to improve.

    Full speed ahead!

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  • Christopher Schons
    , contributor
    Comments (27) | Send Message
     
    Interesting, Kris.

     

    Can you say a bit more about what you see driving the prospects for shipping stocks in 2014?

     

    Thank you!

     

    --Chris Schons
    27 Dec 2013, 02:24 AM Reply Like
  • Dr. Kris
    , contributor
    Comments (336) | Send Message
     
    Author’s reply » Hi Chris,

     

    The entire group has been badly beaten down for one thing. I think the other is a bet on the global recovery. Also, some of the ones based in Greece (SB, NM) are benefitting from the Greek recovery. SB has purchased new vessels at low prices and NM recently posted blow-out earnings with a continuing positive outlook.

     

    One big caveat in this space is the enormous amount of debt held by some companies. But, if they're well-run and the global economy continues to improve, then they should have the funds to begin paying down their debt (generally needed to acquire new vessels). So, if you're interested in investing in the shippers, it would behoove you to closely peruse their balance sheets, management efficiencies, and future revenue forecasts.

     

    I'm certainly not an expert in this space but them's my two dracmas.

     

    Thanks for your feedback!

     

    Kris

     

    27 Dec 2013, 03:26 PM Reply Like
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