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Why Yesterday's Massive Selloff In Shipping Stocks Presents An Excellent Buying Opportunity

Sunrise Analysis profile picture
Sunrise Analysis


  • October 4th saw a massive selloff in the shipping industry.
  • This seems to have primarily been in line with broader market trends and short term fluctuations in container rates.
  • Given the season nature of the rate selloff and insulation of many companies from these fluctuations, this steep drop in share prices presents a great buying opportunity.

Aerial view of cargo ship in transit.

bfk92/E+ via Getty Images

Overview of the Market Selloff in Shipping

Monday saw a steep selloff in the shipping sector, amidst a broader drop in the market, with shipping names dropping even harder-some in excess of 10% for the day. This comes amidst a

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Sunrise Analysis profile picture
I'm an individual investor. I generally invest for the long term and look for companies at an attractive price that have the ability to grow naturally and who stand to benefit from large trends in the economy. I try to provide insight into how new developments at certain companies will affect their long-term prospects. I also try to share other interesting investment ideas with investors where I think there is significant mispricing or potential for growth.

Analyst’s Disclosure: I/we have a beneficial long position in the shares of DAC either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Comments (23)

nightfLight7 profile picture
I have consistently made money trading shipping stocks - however, I usually miss the top and bottom by an embarassingly wide margin - so probably just do the complete opposite 😅 FWIW am intending to sell my entire DHT position soon, and will short Euronav if it moves much higher..
Sunrise Analysis profile picture
@nightfLight7 Better than consistently losing money to be sure. I got in close to the bottom for DAC (back in Dec 2019) but at the time it felt like I should have gotten much lower.
@nightfLight7 I think that u r very smart. I chased the tankers after Covid hit and lost money. and now like a fool I am looking at container shipping!

Thank you for your post.

If a company makes rosy predictions for the next two quarters, and no longer, it means that the market will begin factoring in cheaper prices!!!
@Apple Juice the covid tanker surge vs current container surge have VERY different fundamentals attach to them. Congestion / high rates for containers very likely to remain for all of 2022. Lessors like DAC and GSL are signing 3-5yrs leases. Conterparty like ZIM are making Bilions so a lot less counterparty risks. Ithink tanker 2020 vs container 2021 is apple vs oranges
nightfLight7 profile picture
I recently sold out of Euronav. Always seems to be the laggard but now it keeps climbing. Does it transport lng or something that the others don't?
Sunrise Analysis profile picture
@nightfLight7 I'm afraid I'm not the most well acquainted with that company in particular, but I imagine it has something to do with the company's profitability.
@nightfLight7 You recently sold out and Friedricksen recently initiated a 5+% position. Who should readers follow? 😉
The market needs its head examined on the disconnect between rates and equities. It’s a twilight zone moment
This is in line with the other analysis I have heard. Well done and great timing. I am also Long DAC, GSL, and started a baby position in ZIM today. Hard to imagine that the stock has stayed flat while they are signing multi-year contracts at record levels. Hopefully Mr.market wakes up but there seems to be a serious misunderstanding about this sector overall.
DerekCheung profile picture
@Sunset Analysis very timely and insightful analysis! Thank you. I really like your work. Keep going :-)
Sunrise Analysis profile picture
@DerekCheung Thank you for your kind words, I'm glad you appreciate my pieces.
This might be an opportunity to get it but in 25+ years of trading I have rarely seen a 13%+ drop ( as in the case of GSL in which I had a position that got stopped out) that is recovered going back straight up and the few times it happened it was in an underlying very settled bullish market… although the vessel charter industry has bullish perspectives ahead, the shares trade in the stock market and the stock market is far from bullish at the moment… I’d say I’m not so sure these shares won’t go lower in mid term together with the whole market, to the rebound strongly once the overall correction is finished. We’ll see…
@zelig.info has your opinion changed?
@A74lion sorry for late reply, I just noticed your query... of course after my previous comment it went up and quarterly results' report were supportive, so I was wrong, but then came out that container freight rates had started to ease and the whole Shipping sector came tumbling down and there was a steep profit take in GSL so I thought that after all maybe I was right ... but today it's bouncing back strongly with almost +5% at the open... so is the dip over ? ... my feeling is that if market goes up, GSL will go along, but if the market becomes shaky again before it has moved above the previous high, it will go and test support at 21,5 $ which is where I'd like to add to my position
SamsSuperCereal profile picture
I saw an interesting comment yesterday that it seemed a lot like the "algorithms" were doing some selling.
Sunrise Analysis profile picture
@Sam Matthews Quite possible. I wouldn't be surprised if some risk-off trading pattern triggered selling in this sector, especially given the growing global debt concerns and the high leverage frequently found within shipping.
Damon Judd profile picture
Good article and good comments. Long ZIM and GSL and added more yesterday. Might add more today too.
Sunrise Analysis profile picture
@EnigmaDude Thank you, I'm glad you appreciated the article. I considered adding ZIM, but I already am so terribly overweight DAC it seemed perhaps unwise.
Sandy Singh Siwach profile picture
I think the gist of this article is clear and correct. As one of my fave commentators on this site said yesterday, "Fake news".

A lot of friends of this space aped into these shares yesterday. I am going to add some GSL at these levels today.

NM has jumped hard today, in my opinion this represents a possible double or more from today's depressed levels as the BK fears subside.
@Sunset Analysis I agree. Some of these stocks had gotten ahead of themselves with 100%+ gains over the past year. So a short term selloff along the way is not too surprising. But, the set up for this cyclical industry is extremely strong. Strong demand for bulk and containers will last for at least another 6-12 months. Shipyards are completely booked through 2023 at least. Most of the better run shipping firms believe in a shareholder friendly capital return program. I would be careful about having 100% spot exposure as that is the market that will turn first but companies with a decent forward book should be just fine for a good long time.
Sunrise Analysis profile picture
@Sound Investor It's been a great run so far, but I think you are right we have more to go. I also don't know of any company with 100% spot exposure which is part of why I think this selloff was overdone.
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