Webinar: Sleeper Stocks To Profit From The Supply Chain Disruption

Nov. 08, 2021 5:45 AM ETEGLE, INSW, ZIM, TRTN, TGH, MATX, GSL, FLNG29 Comments22 Likes
SA Marketplace profile picture
SA Marketplace
17.11K Followers

Summary

  • Enjoy this free webinar with J Mintzmyer as he breaks down what's happening with the supply chain and the three picks he is focused on right now.
  • J Mintzmyer founded Value Investor's Edge, a top-ranked deep value research service in May 2015, with the goal of establishing a top-tier community of deep value investors and activists.
  • During his five years at Seeking Alpha, the trades, and curated model portfolios from J Mintzmyer have posted a remarkable 659% cumulative return.

Try Value Investor's Edge Now!

J Mintzmyer Seeking Alpha Author Profile

The following text is a transcript for our readers who would like to follow along:

Daniel Snyder

Hello everyone, thank you for joining us today for this "Seeking Alpha Webinar." Let's go ahead and just give everybody a few minutes before two o'clock, we all want to respect each other's time, but also we did say that this was going to start at two o'clock. So we're just gonna hold off a second. Why don't you guys go ahead and jump in the chat for us. Let us know, because this is all about supply chain disruption, and how to profit with that, let's have you, you know, let us know, have you seen any supply chain disruption in your life? Have you gone out and tried to buy a car, or have you tried to go to the grocery store and seen inflation prices completely take off, let us know down in the chat, get interactive here.

It's gonna be an interactive webinar so go ahead and get used to it. We'll see what you guys say. We have Mihai, says cannot get a Volkswagen car that you have ordered over in Europe, that's pretty crazy, right? Semiconductor shortage is real. Hey, Grilmo, thanks for joining us. Chris has seen inflation and missing products at the grocery store. They said the pretzels might be back in January. Toilet paper is still an issue. Good & Plenty, the stores out for weeks. Arnold says it's difficult to buy a new home, I sure believe that is true. Again, everyone, thanks for joining us.

Go ahead and drop down in the chat if you are seeing supply chain disruption in your life right now, we know it's a big issue, so go ahead and let us know if you're seeing it right now in your life, whether you're at the grocery store, whether you're going to the car mechanic trying to get parts, or it's a labor shortage, right, but supply chain is what we're focusing on here so let us know in the chat. We got paper products, I have not received, your company car, that's a big issue.

Wine bottle shortage, washer and dryer was ordered late, right, that goes with the home ownership and the home building sector. Grocery stores are missing a lot, yep, Jason, they sure are. Various products at Aldi, thank you, Beth, for chiming in. Brake parts for your MINI Cooper, Barbara, the part shortage is real that's for sure. Trader Joe's is out of so many things week after week. Lumber prices, Will is still focused on lumber prices, I see that, that's home-building, right, supply and demand shortage, supply chain issues, it's all added up.

Valuna says bathroom remodeling, my lead time is three months, holy cow. Furniture is back ordered until May of next year, wow, Barbara, that's really crazy. All right guys as I mentioned as we're still waiting for people to join it's 1:59 so we'll wait until a little after 2:00, maybe 2:01, just to get this thing started. So in the meantime let us know what shortages you're seeing within the supply chain of wherever you are, we're seeing Europe, America, everybody's in here.

Hello from Santa Monica, Robert, how are ya doing. Shipping containers that spent weeks aboard ship stuck at the ports are now being dumped in nearby neighborhoods, it's all over the local TV out in Los Angeles. How crazy is that? Steel is getting cheaper. Having lived through, let's see, no walk-in, order in lunch due to labor shortage at Chick-Fil-A, ah Robert. Let's see what else. Dorin says, I have a Mazda car in service after someone has crashed into the right side here in Romania, thanks for tuning in from Romania, and I was waiting for more than a month for a part to be delivered from Europe, oh wow.

It took nine months to get new windows for Pete's home. Crazy, all right guys, it's two o'clock we'll give it one more minute here. One more minute, having a house built in Alberta, Canada, and it's almost 1 1/2 years out, holy cow, talk about supply chain disruption.

All right, it's 2:01, let's go ahead and get this thing started. Thank you so much, everyone for joining us. Hey, my name is Daniel Snyder and on behalf of Seeking Alpha, I want to, excuse me one second, I wanna welcome you to this special webinar, Sleeper Stocks to Profit From the Supply Chain Disruption.

Let's face it, everywhere you turn you hear about a shortage of something, whether it's chicken wings, sorry, chicken wings, diapers, semiconductors, paint, it seems like we're running short on something else everyday or prices are creeping higher and higher every week. The Fed of course says that this inflation is transitory, but others are yelling hyperinflation. It's causing a lot of anxiety and companies are refining their quarterly guidance, which we just saw from Amazon (AMZN) and Apple (AAPL) and as the prices rocket higher, you can feel the strain on your wallet.

Behind these shortages is the global supply chain disruption from manufacturing to logistics, because how do companies generate revenue if they can't get their products to sell to consumers. But there's always an opportunity to make money if you know where to look, and this is no exception. There's a group of obscure stocks which have exploded higher this year to the tune of 130% while the S&P is only up about 23%. Now here's, excuse me, now here's a question, what if you could have spotted these stocks before they started to take off?

Joining me in just a few moments is J Mintzmyer. J is a value investor, but don't judge him on that title alone. While many value stocks have been suffering, in favor of high-flying tech and meme names, J has outperformed the S&P 500 by 106% this year alone, while also blowing away the Russell 2000 Small Cap index by 110%. Now as of November 1st, J's top pick portfolios have a blended return this year of 130%, but this isn't just one of those everyone does well while the fed prints so much money stories.

Since he started publishing his research on Seeking Alpha, over five years ago, J's trades, and curated model portfolios have posted a remarkable 659% cumulative return beating the Russell 2000 Small-Cap index by an incredible 535% and that's because, as you'll soon see, J uses his proprietary process to get into these stocks early and by the time the media catches on, J is already planning his exit strategy. This man really knows his stuff. And right now he's going to tell you where to turn for the most upside here, including three companies he likes for breakouts over the next three to six months, which have not received hardly any attention from the market yet.

Now, before I hand it over to J, there's just a few quick housekeeping items to go over. During the webinar we're gonna ask you a few questions and you'll see a pop-up window on your screen, please be sure to submit your answers, your feedback helps. And J's going to speak for about 20 to 25 minutes, and then we're going to have a Q&A session based on the questions you have. So go ahead and drop your questions into the Q&A box throughout the webinar and our team will get them ready for us to go through at the end. And lastly, nothing in this webinar is personal advice and any questions you may have should not be requests for personal advice in any way. Now, enough from me, let's get to the man you all came to see, J, take it away.

J Mintzmyer

All right, good afternoon, everybody, thank you so much for dialing in it's great to be here with you. I noticed in the chat, we got folks from all over Europe, different parts of the United States, welcome, again, we're glad to have you with us. So supply chain has been all over the news recently. I've been involved in the shipping sector for many years, and I'm excited to talk with you today about a sector that's really benefiting from this. Every time I turn on CNBC, I see folks talking about the log jam of ships, talking about Christmas might be late, might be canceled, you better order your gifts now and I hear a lot about how companies are struggling from the supply chain, how people are worried about it, but what we don't see a lot about is how to profit from this.

So we've had a really good year this year, being ahead of the curve on supply chains, but I'm excited to talk to you a little bit more about that today. Before we get started we're gonna talk a little bit about the shipping sector. So one question I had for you, again, this is anonymous, I'm just curious to see what the experience of folks here is, how many of you have experienced investing in shipping stocks? Either you've never owned any, or maybe you owned some in the past a few years ago, or you currently own some shipping stocks and you're following them.

Feel free to vote, we'll leave that up for about 15, 20 seconds for you. So my name is J Mintzmyer, my first name is just the letter J, in case you're wondering, I've been involved in maritime shipping sector for over 10 years and my formal education background is in economics, I've studied public policy. I'm currently working towards a PhD that's focused on trade flows, and national security policies. As far as my investing background, I have over 10 years of experience in shipping. I have published my research exclusively on Seeking Alpha. We have over 10 million pages of our research, we have 16,000 followers. We also run a private research group called, Value Investors Edge.

We are very activist investors, we work with the companies that we invest in, we provide consulting for family offices, hedge funds, all sorts of investors who wanna know more about this segment. So, when I first started in shipping, I made a lot of mistakes way back when, in the mid 2009, 2010, '11, when I started investing, I wanna share a little bit about that with you today, before we get into the segments, and before we talk about the stocks, just to set the table a little bit. You know shipping's an interesting industry and it's easy to focus on some of the wrong ratios. A lot of people look at price-to-earnings, or price-to-book, and those are good ratios, there's nothing wrong with those, but they're trailing, right, they're looking at what's already happened.

With shipping you have to look at the current rates, the current markets, and where we're going. So when you're looking at price-to-earnings, or price-to-book, just remember that's what already happened. Dividend yields can also be misleading because some companies might have had earnings, strong earnings in the past, but their forward prospects are risky and yet they have a large dividend. Folks say, "Oh, this is a good stock, it has a big dividend yield." Or the opposite might be true, the company might be doing really well in the future, but they don't have big dividends yet. So be careful some of those generic ratios like price-to-earnings, or price-to-book, or dividends.

We subscribe to the best data in the sector which gives us the current valuations in these companies net asset value, and we use other metrics, such as free cashflow, to determine which companies are good and which ones should be avoided. It's also important to think about the difference between the current rates versus where you are in the cycle. You don't always wanna just buy when the rates are good, because maybe you're at the top of the cycle and maybe you're in the eighth or ninth ending of something. It's also important to understand seasonality. Think about flowers, right? The flower peak season for sales is between Valentine's Day and Mother's Day, February to May. Well, shipping is kinda like that too.

For example, liquified natural gas, the LNG trade, is really, really strong in the winter, so November, December, January, because most of the importers live in Asia and that's when they're using it for heating, in the summer it's kinda weak. So it's important when someone tells you rate, or you're looking at a chart, to understand some of the seasonality. Finally, we really need to focus on quality corporate governance. This means the management teams that will take care of your money will be good stewards and be good allocators with that capital. They're not gonna waste it, they're not gonna have conflicts of interest, those sorts of things, so it's very important to consider before we even get started.

A lot of people always ask me, they say, "Why do you spend all your time in shipping, why don't you do technology stocks, or why don't you look at electric vehicles, or something like that?" Well, first of all, it's my personal interest. I mentioned I have a background in economics and in trade policy, so I find it very fascinating. But more importantly for making money we like shipping 'cause it's a niche sector and there's not a lot of publicly available research. The big companies like Morgan Stanley and Goldman Sachs, they can't afford to put a team of analysts on this stuff, the market caps aren't quite big enough for them. That gives us an opportunity to come in with the best data, and the best research, and to profit from mispricing in the market.

We couldn't do that with stocks like Microsoft (MSFT), or Tesla (TSLA), there's already 30 or 40 very, very smart analysts and teams on that, shipping gives us the opportunity. Finally, there's, it's a cyclical sector, and it's leveraged to market conditions, the timing does matter. Doing your research, and your due diligence, and having that fundamental approach really makes a difference in this segment. The best part about shipping is that the news reports are always about three to six months, sometimes even further behind the curve. An example of that is containerships. A lot of you were mentioning in the chat that you're seeing the backup of ships, you're hearing all this stuff on CNBC, you're witnessing it yourself, that the supply chain is delayed.

Every time I turn on CNBC I'm seeing a new story about it, but they didn't really start covering this stuff on the news until this summer. Maybe there was a sporadic report here or there in March or April, if you're an importer and your business depends on it I'm sure you noticed a little bit earlier, but they weren't talking about it on TV. We at Value Investors Edge had actually flagged this opportunity for our members last fall. Back last September we flagged a bunch of stocks that were exposed to this supply chain crisis and many of those picks returned between three and 15 times in a year. Now a 15-bagger, that's not a normal return. Normally we're looking for doubles, or maybe triples, but here's an example of the report that we put out last year.

This is from last September, September 13th, 2020. At the bottom you can see some of the trades, we had the NAUS Corp. at 5.05, that stock is in the 70s today, 14, 15 times up. A CPLP at 6.00, it's like 14 bucks today. NMCI at 80 cents, that got bought out at a 12-time multiple. NMM, about $6, it's around 30 today. So you can see the significant potential upside by getting into these things early. Now we're not gonna spend a lot of time talking about that part of the market already, there's some great stocks there. I'm still in some of them, I've put out articles on some of them, but they're probably, I would say, 6th or 7th inning, there's nothing wrong with them, but we wanna talk about stocks that haven't quite moved yet that folks aren't looking at.

Our secret to outperforming this market is that we have a fully dedicated team, we have four analysts, and we're only focused on shipping and related energy markets. We subscribe to the top-tier data services in the industry, we sign up for all the broker reports, we get all the latest data, and we're very focused on that fundamental aspect of the market. We don't get married to our positions, we're not always gonna be correct, but when we are incorrect, we realize that and we move on, we try to build a margin of safety in our positions. When we're correct, and we get ahead of things, I just showed you an example of containerships, we can make multibagger returns. Now 15 times, that was pretty fantastic, we're very happy about that, I wouldn't expect to do 15-bagger returns every year.

Normally we're looking like, I said, for doubles, maybe triples, but the important part of that is that when we're wrong, or when the market doesn't perform like we think it will, we buy these stocks cheap and at the bottom of the cycle so we limit our losses. Normally, if a position doesn't work for us, maybe it's stagnant for, you know, a few months, it's kinda like dead money, and we're like, well, that was kind of an opportunity cost we'll move on, or maybe something drops 10, 15%, but we limit our losses to 10, 15%, and yet when things run, like I mentioned, they can be multibagger. So you imagine doing that over the course of time, your performance really starts to stick out. I don't wanna spend a lot of time on this slide, this is historical data from our service, but you can see over the past six years, on the left side here, you have our Value Investors Edge model portfolio returns.

We have a 41.6% annualized return through our model portfolios, this is only focusing on shipping. The S&P 500 over the same time is about 17%, Russell 2000 Small Caps, about 14.9%, and then finally the shipping industry, remember we only focus on shipping, it's been basically flat over the last six years. So that's a pretty stark example of why timing and research really does matter. So just real quick, so you can see what that looks like, I know the numbers kinda blend together, over a hypothetical return, again, this is just hypothetical, but a $10,000 return over those six years. Shipping average, if you just bought a bunch of shipping stocks, like if you came here today thinking, shipping, like that's not very good, that's a dangerous space in the market, yeah, if folks just buy a bunch of shipping stocks and don't do anything with it, don't do any research, that return wasn't very good.

Russell 2000 Small Caps, you would've doubled your money in six years, that's a pretty good return. S&P 500, 2 1/2 times, but with our model portfolios, hypothetically about a 7.5, 7.6 times return. Now I don't wanna spend a lot of time on that, I know y'all wanna get to the sectors and segments of the market. I do have one more question though, one more poll. How many of you have researched the supply chain of your favorite investments? Maybe you're invested in Apple, or Microsoft, or Ford Motor (F), or General Motors (GM), or something like that, and you were curious where do these parts come from, how does the underlying parts of the market work? How many of you have researched that? Just a quick yes or no question.

As we're answering that I wanna dive into the market's a little bit more. Shipping a lot of folks think is monolithic, they're like, oh, that's just one big cycle, it goes up and down. Well, there's actually six segments, there's more than six, but there's six that we focus on. There's dry bulk, which is like iron ore, and coal, grain, and that sort of thing. There's the containerships, which are the, mostly the products we're talking about today, retail goods, those things are on those 20-foot, 40-foot boxes, anything you see at Target (TGT) or Walmart (WMT). We have product tankers that are carrying gasoline and jet fuel around the world. Crude tankers going from the Middle East to Asia, or Middle East to the United States.

We have L energy, natural gas, we got propane, so six different segments and this gives us more opportunity in this market. We follow over 60 firms, across shipping and energy infrastructure. There's almost always a hot segment when it's doing really, really well, and a cold segment that maybe we wanna avoid, maybe even put on a pair trade, or something like that, and we flag the segments that we wanna watch and we wanna avoid. But the good part of this is that almost any market gives us attractive long ideas, it's not just always cyclical, you know, this year's good, this year's bad, this year's good, there's almost always attractive long opportunities in this market.

So some misnomers I hear a lot and I wanted to address these 'cause I know probably some of 'em are gonna come up in the Q&A, and hopefully this'll help out a little bit. I hear people say, everybody loses money in shipping. Well, I showed you the six-year chart and you see that it was kind of breaking over six years. The reality is that people who don't have a strategy, or don't do any research, yeah, they're likely gonna lose, or not do well in this market, you have to pay attention in shipping. I hear folks say a lot of times, corporate governance is terrible I can't trust the management teams. Well, the reality is there's about 10 companies out there where the governance and management is bad and we avoid those and on our service we don't even cover them, it just says, coverage not available, we don't even mention those, I won't even mention the tickers.

However, there's dozens of excellent companies, strong management, trustworthy, good returns, and we focus on those companies. A lot of folks say, maybe these are only trading stocks, I gotta get in today, out tomorrow. The reality, that we've seen, is that trading can be helpful, we do a little bit of trading, but investing definitely works with the right entry timing. We're usually looking for holding periods of between six months and about 18 months, so about a half a year to maybe a year and a half, two years. So we're not buy and hold forever type investors, but we're also not day traders, right? You don't have to log on every day and change your position.

You know, maybe once a quarter you update yourself, maybe once a month if you really wanna be more intuitive, so it's not super, super active, but it's not a buy and hold forever either. And finally, I think this is the biggest misnomer, is that fundamentals don't matter in shipping and I can understand that in today's market with crypto and all these crazy stocks going up, it seems like indefinitely, folks are wondering like why do I even look at fundamentals? Well, the truth is the fundamentals are the key to our long-term success and you saw the chart earlier about how we've grown over the years.

So with that, I thank you for your patience, we're now gonna dive into the segment overviews and some of the top picks, some of the names that I think are really, you know, a second, a third inning year, a good opportunity to get in and names that haven't been covered in the media yet. So the first thing that I wanna talk about is dry bulk, remember that's the iron ore, the coal, the grains, that sort of thing. We like dry bulk because they'll orderbook which is a future supply, that's how many ships are gonna hit the water in the next two, three, four years. It has the lowest orderbook in modern history, there's not a lot of new ships coming to the market.

Meanwhile, the ships on the water are getting older and older and yet the demand is going up, so think about that, supply is fixed and demand is going slowly up and up and up, that's gonna contract and give us higher rates as we go forward. The global reopening and infrastructure spending is also a bonus, and finally, kind of a missed point I think by a lot of folks, is the future climate initiatives. A lot of people think that's a negative for shipping, but the reality is that that's gonna lead to higher demand for iron, copper cement, oxide, all those products. Think of all the new solar farms, the wind farms, and electric vehicle infrastructure they're gonna be building across the world, that stuff takes a lot of cement, a lot of steel, a lot of iron.

We're gonna see a lot of trade flows benefiting over the next decade from this. And then right now, we're also seeing a benefit into the fall and winter from a surge in the trade flows related to coal. Now coal long term is gonna be going away, but in the short term, we have a lot of tailwinds because that winter in Asia is looking very cold. India is disastrously short on coal, China is short on coal and desperately trying to change their market, so these countries are importing as fast as they can and we think that's gonna give us a little bit more tailwind into the fall and winter. So our top pick in dry bulk, this is a company that doesn't get as much attention, they only own mid size, medium-sized ships.

Now the large ships in dry bulk are very volatile, their rates are kinda all over the place. Mid-size rates are nice and stable, nice and slow. This is a U.S. management team, U.S. headquartered, I know the CEO personally, Gary Vogle, trustworthy guy, this pick is Eagle Bulk (EGLE), and I wanna show you a chart of EGLE and why we like it. This is a year-to-date chart, and you can see here the company is trading around $40, it's flat since March and now this might not look like a great chart from a technical perspective, but from what we're looking at, as fundamental investors, we love a chart like this because it shows that the market isn't onto this thing yet, it's treading water, and yet the rates have gotten better and better all summer, the company's paid down almost all its debt, they've launched a new dividend program, they have a new buyback program in place, and they're gonna report earnings later this week, so we're really excited about Eagle Bulk.

This is the overall dry bulk index, you might've heard of this, it's called a BDI. You can see it's a little bit, it's volatile, this is a five-year chart, you can see kinda deep peaks and troughs here. There's a pullback recently, as China's been trying to regulate its steel industry, that's caused the large ships, they're called capesizes, those rates have pulled back a lot over the last month. This index is heavily influenced by the capesizes. What I wanna you is the mid-sized ships 'cause that's what's relevant to Eagle Bulk. Here's the medium-sized rates over the last 18 months. The first part is Panamax's, these are kinda the upper-middle sized ships. You can see right here, this chart goes from 10,000 to 40,000. The under 10,000 is a tough rate.

During COVID these companies were losing money, it was a tough market for them, under 10,000. Around March or April of this year we passed 20,000 a day, which is in my opinion is a good rate. If rates are $20,000 all year long on average, I would be very happy as a shipping investor. Anything over 30,000 is a great rate, I mean a phenomenal rate, and you can see those rates have been above 30,000 since June. A little bit of ups and downs, but within a fairly tight knit, I mean we're talking about $5,000 or so of these spans, this is very, very, very healthy rates. And remember, Eagle Balk has been flat since March, so this entire gain has not yet been reflected in the stock price, we really like that.

Supramax's are kind of the medium to smaller ships, almost the exact same chart, same kinda thing, above 30,000 is a phenomenal rate and it's been above 30,000 since June and still holding out in that area. Again, Eagle Bulk is flat since March when rates were only 20,000 giving you all that benefit the stock has not moved yet. The next segment I wanna talk about is tankers. Now oil tankers have been devalued, they got hit by COVID, this is a tough sector. This is the kinda sector that's been cold initially, we haven't wanted to get into it until very recently. COVID knocked out the well demand, right, you're all familiar with that, you saw gas prices fall, but OPEC also restrained their supply, they limited their exports.

Well, if you think about it there's a lot less oil coming out of Middle East to Asia, or to the United States, that's gonna hurt tankers, right, less oil you don't need the boats, however, that market's starting to recover. Just this morning there was an announcement saying we're back over 100 million barrels per day of demand, that's almost a full recovery back to 2019 levels. That markets on the way up, the tanker rates are starting to move, they've moved remarkably fast over the last two to three weeks. We expect a full recovery and normalization by mid-to-late next year. So this is, remember, we talked about getting ahead of the cycle, getting in six months before folks are talking about it, or they're paying attention, that's oil tankers right now.

We have the oldest global fleet on the water in modern history and we have a lot of regulations coming up. Those regulations are gonna knock out a lot of those old ships so we wanna invest in the companies that have middle-aged or newer tonnage. Our top pick in tankers is a company called, International Seaways (INSW). They're also U.S. headquartered, I know they're a CEO, Lois, and their CFO, Jeff, I've known 'em for five years, trustworthy, solid management team, their stock trades at about 55 to 60% of its net asset value. That means they could sell their entire fleet today, close up shop, markets aren't even strong, they could get about $30 a share for their company, just closing up shop tomorrow.

It trades at like $18 and this chart is even more. I love this chart, again, technicians might not agree with me, but you look at this chart, this company trades around $18, they trade below, below the levels where they traded in February, March, April, when the tanker market was terrible. I mean this is an unbelievable chart. This thing should be inversed, it shoulda been $18 then and it should be 25 now, so we're really excited about International Seaways, it's one of our top positions and we think it's really about to break out, if not next week then definitely within the next month or two. Real quick I wanna talk about the Tanker Order Book.

Just like dry bulk we're at 25 year lows, there's not a lot of new ships coming forward which means that demand goes back up, supplies fixed, those rates are gonna move. And then this chart is a little bit more technical, but if you look over here on the left, everything in this red box are totally obsolete ships. The only reason they're on the water is because they're doing illicit trades with Iran and Venezuela. when COVID-19 hit, plus remember we had a U.S. election and changes there, we stopped enforcing a lot of the sanctions around Iran. The world leaders are starting to look at it again, and I expect we're gonna see a lot more enforcement and these ships are gonna be eventually forced out of the fleet within the next year or two.

The ships in the yellow, a lot of them do not qualify with upcoming regulations. Those are gonna start in 2023, so just about a year away, and it's gonna make it very difficult for the ships in this yellow container here, to stay on the water. So think of all of those ships pushed out of the global fleet, meanwhile the forward orderbook is really small, so if you think about supply and demand, the supply looks beautiful so we really like the setup here. The final segment I wanna talk about is containerships and we talked about that in the beginning. I mentioned that some of these stocks were three to 15-baggers for us.

However, there's a few stocks in here that haven't moved yet, or they've only moved a little bit. We talked about the global restocking, it's above the available ship tonnage, there's no new ships coming to the market until the middle of 2023. There's almost no ships hitting the water next year. It takes about, excuse me, it takes about three years to build one of these large ships. Nobody was buying ships during COVID, everybody was afraid, including myself, nobody's buying ships, so that means they didn't start buying them until early this year, so they're not coming until 2023. The global news coverage I mentioned, they're paying attention now, they're paring at home, but they're not really talking about all the different stocks and all the different investment potentials.

Most of these stocks have moved a little bit. Some of my favorites like NAUS Corp., it went from $5 to 70, right? ZIM (Zim Integrated), I'm long ZIM still, that's another one of my favorites. That one's already moved, you know, it's moved from about 15, $16 up to about 50, I think it was 54 today, we still like it, but I wanna talk to you about a company that has not really moved yet and that's Triton (TRTN) also very solid management team. I've talked to their CEO several times over the past year and very impressed at what they're doing. They just reported results two weeks ago, they raised their dividend, they have a $200 million repurchase. Now in this chart you can see it's starting to break out, it's starting to move, however, it's roughly flat since March. Even though the market's recovered significantly, their earnings are almost set to be doubled, their normalized earnings going forward from March, and yet it was stagnant all summer.

Now, when we issued a report to our members, it was a little bit earlier, it was excuse me, early October, but you can see the stock's starting to move a little bit and now it's finally breaking out. We had a major analyst upgrade, that came out in late October, and then we had the earnings, we had that 15% dividend increase, $200 million repurchased, things are really starting to look good for Triton. This is a chart that shows the freight rates. When folks talks about how importers are struggling, you can understand why these freight rates have went up five times over the past year. This is a chart that shows how expensive it is to get one of the ships that carries that freight, so not only the rates are up, the ships are up.

Well, Triton, they own the boxes. Now this seems like a really boring business and it's a company that literally owns 20 foot and 40 foot boxes, they buy 'em and they lease them out for liners. Now, why would the liners do that, why wouldn't the liners just buy their own boxes, and that's a good question. But the reason why it's a partnership, it's all about the servicing, the maintenance, the storage of these boxes. See the liners know what they're gonna do in three months, or six months, or maybe a year, but they don't know in three years exactly where their cargo mix is gonna be, they don't know what their maintenance and depot needs are gonna be in several years and that's where companies like Triton come in.

And the reason we like this sector is because it's consolidated all the way across. On the bottom here I have a few graphs, the one over here shows container lessors, that's what Triton is. There's another one called Textainer (TGH), I'm also long on that one as well. You can see the top five container lessors control almost 85% of the market, very consolidated, not a lot of competition. The customers are also consolidated. Between 2015 and 2020, the top five liners now control over 2/3, about 2/3 of the market, the top 10 control 85%. Finally, the new supply, we always wanna look at supply, we always wanna look at demand, the supply is also consolidated.

The top three manufacturers of these boxes, they're all in China, they're not a cartel, but they all kinda work together, and they're all in China, they control 85% of the market. So the suppliers are consolidated, the customers consolidated, our companies are consolidated, we definitely really like this segment. Because of the surge in demand for freight, for these boxes, the lease rates have went from about five or six years up to 12 to 14 years. This isn't spot, this isn't like, you know, good today, bad tomorrow, this is they're signing deals day in and day out for 12 to 14 years. Now, I mentioned in shipping, normally our holding period is six, maybe 18 months.

Triton is one of those rare firms where I think we'd be really happy owning it for several years. Now, obviously, if the price is $100 in January, yeah, we'd be happy to take our profit and move on, but this is a company at 60, I think it's 61 or 62 today, this is a company where we're really happy with the prospects, a really quality company and quality management team. So, a review the top three picks and it was mentioned by Daniel at the start, that nothing here is investment advice. I do shipping research, I share my research with folks, everyone needs to do their own due diligence and make their own decisions.

I have long positions in all three of these companies, it'd be crazy if I didn't. I eat my own cooking here, but just keep that in mind, I own positions, I do trades in these names. Dry bulk, we like the supply shortage. In the global infrastructure boom we like Eagle Bulk. Tankers, the de-value setup is great when you think there's great recovery potential in 2022, we like International Seaways. And then finally in containerships, it's all about that overlooked name that nobody's really talking about yet, and that's Triton International. So with that, thank you everybody for joining us today. We're gonna open it up for some Q&A and I'm happy to take all your questions.

Daniel Snyder

J, that was amazing, man, thank you so much for giving us the rundown on that. I learned a lot, I hope a lot of you did as well about the different areas within the container shipping industry. First thing we wanna do real quick, before we jump into the Q&A session, I'm gonna throw up a quick poll we just wanna get your quick feedback on what you thought of this presentation of this webinar. Did you like it? Did you think it was amazing? Did you learn a lot? Did you think, yeah, I knew some of this, and I'm already invested in some of these companies, let us know right now, look down at your screen, answer that poll for us, just so that we can get some good feedback. And while that's going on, J, I wanna go ahead and dive into this first question for you. We had one that came in that says, I am new to trading, with your suggested stocks are these long-term investments, or are they hold for a few months in swing? What would you say?

J Mintzmyer

Yeah, that's a really good question, Daniel, it's always important to understand your holding period before you get into a stock, right, so you understand the difference when you trade an investment. Eagle Bulk, we'll go in order, so I talked about Eagle Bulk first, that one is primarily focused on the dry bulk trading markets, those rates change. They change every day, day-to-day, week-to-week, month-to-month. That's one of the stocks we're gonna be looking at it closely. We're gonna watch the rates, we're gonna watch the trends, we're gonna watch the market data, and that's kind of a month-to-month.

We'll check in, we'll reassess. Our current fair value estimated at $62, the company trades around 40 today. It had a great day yesterday, it's kinda having a tough day today, it's going kinda up and down a little bit, you can see that the graphs kinda flattish. We like it we think the margin of safety is fantastic, but we're watching that one a little closely. International Seaways is a recovery play, that's a one year, two year type stock, and I'd buy that one and rest easy, I'm not really worried about what happens next month. Same thing with Triton, in fact Triton is an exception, and Triton's a company where three, four, five years I'd be fine with. Now, don't get me wrong I'm buying the stock, I bought a bunch of it at $50 about a month ago, actually I think it was about 49, 50, 51, now it's $62. Look, if it's $100 in January, I'm probably cashing in, or at least taking some money off the table, but if not, at 60 bucks, I think that's good for four or five years.

Daniel Snyder

Awesome, going into the next one we have, is container transportation a good investment over the next six months, if so, what companies based in the USA are the best investment? What comes to mind?

J Mintzmyer

Yeah, another good question on containerships. Look, we like containerships a lot. One company I talk about a lot, it's not based in the USA, but it's traded on the U.S. Stock Exchange, it's called ZIM Integrated, Z-I-M. That's an excellent company here, however, I think that the person who asked the question was right, they're saying next six months, next year, we think that's probably around mid inning, yeah, I use baseball a lot as my analogies. I'd say ZIM is probably, you know, fourth inning, fifth inning, somewhere in there.

So it's not one of those companies that hasn't, it's not like an International Seaways, or an Eagle where it's like on the ground floor, right, just waiting to lift off, it's already moving, we'd say it's probably fifth ending. There's another U.S. listed name, U.S. headquartered named called, Matson (MATX). It's a great company, they have good management, but ZIM's really been our favorite. And of course I have to disclose I have a long position in ZIM.

Daniel Snyder

Perfect, thanks for sharing that as well we always love to know where your positions are, it helps us, it helps the viewer as well. This one I really like, so get ready, stick with me through this, if the Jones Act, 1920, makes the supply chain crisis even worse, if so, why is this Act still valid? And according to the Jones Act, any cargo transported between two U.S. ports must be carried by ships that are built, owned, and operated by U.S. citizens, or permanent residents, so why is this Act still valid?

J Mintzmyer

Wow, well that's a, the Jones Act is very political, so there's a loaded question there, there's a lot of stuff to think about. However, the person asking the question has a lot of insight because they're looking at the U.S. to U.S. trade and understand that only U.S. companies can do that. So the first question before that was asking, U.S. companies, Matson, MATX, they're definitely benefiting from that setup. There's a couple of other companies, but they're private, ones TOTE, another one's Pasha. Matson definitely benefits from this. As far as why it's still valid, or relevant, it's really a political setup.

There's a lot of roots in national security considerations, right, we wanna make sure that we have ample seafarers, we wanna make sure that we have ample ship-building capacity. That's something that a lot of the Defense Department and industrial lobbyists are pushing for. There are states that have shipyards that have unions that work on these ships, so it's a very political setup so I don't wanna get too much in the merits of if it's good or bad. I mean, I think folks have sort that out on their own, but if you're asking about U.S. to U.S., that's a Matson play, and if you're asking about international, I definitely think ZIM is our favorite there.

Daniel Snyder

Gotcha, now J, this next question is pretty personal 'cause a lot of us are seeing this happen right now in all of our grocery stores whenever we go, can increase food costs, affect shipping profits?

J Mintzmyer

Yeah, that's a really good question. It definitely applies to the containership sector, what are called in refrigerated containers, we call 'em reefers, which usually when folks hear reefer, they're thinking something else. But refrigerated containers can definitely impact things like banana imports, pineapples, other stuff that's coming from Mexico, coming from South America, things like that. We do think the surging shipping prices in these containers are gonna impact food prices, in fact, you probably seeing that at the grocery store. If you haven't noticed it already, you're gonna start seeing higher prices in things like bananas, and pineapples, and mangoes, and avocados, things like that.

It's unfortunate, the inflation is moving on us, but yeah, containerships are definitely gonna hit that. Now, the question was kind of more inverse, are higher food prices gonna hurt containership ? I don't, I think the volumes are gonna go down a little bit, 'cause of constriction, and we're already seeing that, however, because of the log jam, the revenues and profits from shipping are way, way, way up. So overall as an investor, I never like to celebrate higher food prices, in fact, I hope that gets normalized, I hope that gets back to normal soon, but as an investor, purely looking at profits, this is a positive for container shipping.

Daniel Snyder

Yeah, and as you mentioned during your presentation, I mean we know the oil demand is coming back, the food demand of course has always been there, so we've gotta get the food to the grocery stores and hopefully those prices do come down. Let me see what else we have, at this moment do you prefer containers over dry bulk?

J Mintzmyer

It definitely depends on my holding period. For some of the trades I like dry bulk a lot because you always, their rates are changing, their spot rates, they're changing every day, they're changing every week. We're seeing a lot of activity, a lot of good trades in dry bulk. For the longer term risk reward, something that I'm willing to hold two or three years, I like some of those containership lessors a lot. One public article that I put out on Seeking Alpha, I put this out about a month ago, was on a company called Global Ship Lease (GSL). So this is already public, it's already out there, you can go find it, go read about it.

That's one of my top picks in containership lessors. We believe they're worth between 40 and $45, they trade around I think 23, 24 today, that we believe is a long-term play. They have long-term three to five year contracts they've signed on their vessels. So you're asking me, you're saying, J, you gotta hold this thing for two years, what do you like better? I like containerships. You're saying, J, what do you like now, you wanna trade it in and out, one or two months, three months, four months, five months. Yeah, I think I like dry bulk, there's a lot of action, there's a lot of liquidity there right now.

Daniel Snyder

Yeah, I appreciate you breaking that down because I'm sure everybody that's tuning in right now, there are different types of investors, right, so we gotta break it down for all of them. So now let's talk about Eagle Bulk real quick, this question came through. Would you elaborate on Eagle Bulk's P/E ratio and why it's reasonable?

J Mintzmyer

Yeah, so again, good question. The issue with price-to-earnings is it's backward-looking. So whenever you pull up like a screen and you look at, you know, price-to-earnings, usually you're gonna get what's called TTM, that's trailing 12 months. So that's gonna be the earnings that have been reported, which are Q2 of this year, Q1 of this year, Q4 and Q3 of last year, so you're really looking back at like what already happened. And I showed the charts of the rates, in the middle of my presentation, and I showed this, in fact, I think I can click back, I don't know if it'll let me, if I can do that that would be helpful. I'll see if I can click back. Hope I don't throw anyone's eyes out here. There we go, so let's look at this.

So when you're looking at that trailing 12-month of earnings, you're looking between where my mouse is at here, and you're looking about right here, 'cause it takes two or three months for those earnings to show up in results. So you're looking at these way lower earnings, so when you're looking at our price-to-earnings ratio it's really gonna understate what's going on because what's coming is right here, what I'm circling, and with shipping the way this works, and the way we really like it, is there's a lot of operational leverage.

So this right here covers all your fixed costs, all your costs are fixed, they don't go up, so when your revenue doubles, your free cashflow might go up 10, 15, 20 times because your expenses aren't moving so all this is just covering the expenses, all this is 100% free cashflow so that's why price-to-earnings can be misleading. We look at something called price-to-NAV, that's net asset value, that's what the ships are worth today. Eagle Bulk has an estimated NAV of around 65 to $70 a share, it trades at 40, so you're really getting a huge discount and the earnings are gonna be better and better going forward. They're gonna report earnings this Thursday, so put that on your calendar and check 'em out this Thursday.

Daniel Snyder

Yeah, definitely, that's a good thing to highlight right there on that event. Now we asked about Eagle Bulk, let's ask about International Seaways. We had somebody jump in the chat and said, why is it thinly traded, what's wrong with it, where's the beef with international?

J Mintzmyer

Yeah, it's thinly traded just because it's lesser known and that's why we consider it a sleeper stock. Not as many folks are looking at it, it doesn't have quite as long of a history as some of these other firms. Some of these firms, there's one called, Frontline, which is really popular, it's been public for like 20 years, 25 years, very popular, a Norwegian backer named, John Fredrikson. I know that Seaways is a little bit quieter, it's a little bit of a sleeper stock, it was formed off of a spin off about six years ago. They just did a merger with another lesser-known company this summer, so there's, whenever you have like a merger and you do a stock-for-stock, and you bring two companies together, sometimes there's a bit of an overhang, right?

Some of the legacy folks, they've been there for four or five years, they wanna get out or they wanna exchange their shares and whatnot, that's what we see with Seaways. We've seen a chart that makes no sense. I mean things are getting better and better every day and every week, and the stock price is flat all year. We think the overhang is almost gone, we think it's gonna start to move soon, again, it might not be next week, but we definitely think in the coming months that stocks really gonna move.

Daniel Snyder

Gotcha, all right, so we've got, next question, if supply is so tight, now this one, this reminds me a little bit about what's going on with semiconductors right now, the global shortage of semiconductors and how long it takes to build the foundries to make them, right, if supply is so tight, what's going on with the ramp up of shipbuilding? Like why, I mean, you mentioned the process, could you elaborate that on a little bit more?

J Mintzmyer

Yeah, of course. So these are significant new building projects. I mean the cheapest ship that we're talking about building in these segments, would be probably around 50 million, some of the larger designs cost 150, or $170 million per ship. These are 2 1/2, three, 3 1/2-year projects, so you can't just flip the switch. I mean, it's not even like, you know, it's not even like building a car. I mean it would be like building a spaceship, well, maybe not a spaceship, but like building, imagine like a destroyer, or a battleship or something, like this isn't something I can turn around in a year, it takes two to three years.

Nobody was building these things during COVID because everyone was pessimistic. I mean, like we all were, right, and so these companies weren't really thinking about it until maybe late last year around Christmas, maybe January, February, they started ordering ships, so they're not really gonna hit until the middle of '23. Now, right now a lot of the focus is on containerships. People are scrambling to order these things, but they can't get 'em until '23, '24, the latest ones we saw, we saw some earlier that were confirmed for Q1 of 2025, that's how long it takes.

The containerships are kinda blocking up the new-build burst. So if you want a bulker, you want a tanker, you want one of those types of ships, it's like get to the back of the line buddy, right, I've got all these liners paying top dollar for a containership, I don't wanna build you a tanker. So, it's a supply shortage across the entire sector and it's gonna be that way for at least another two years.

Daniel Snyder

Wow, that sounds like some tailwinds to me, honestly, if we're gonna be looking out into '23, '24, '25, even depending on how long it takes to get these things back to operation and this mood pipeline, it's a lotta tailwind. So we covered, we covered Eagle Bulk, we covered International, let's move over to Triton and just a reminder for everyone, those are the three companies that J presented to you. Triton could be good, but this person wants to know why so much leverage?

J Mintzmyer

Yeah, I mean, it's an excellent question. I know a lot of folks, we talked earlier about price-to-earnings, and price-to-book and how those can be misleading, leverage is one of those things we have to look at carefully as well. The way Triton structures their leases is either 12 to 14-year deals with the liners, and these are very high-quality counterparties, we're talking about companies like Maersk, we're talking about companies like Costco, the CMA CGM.

These are companies with 10, 15, 20 billion in EBITDA earlier, with balance sheets that are very low-levered, very clean companies, very strong companies and these leases are 10 to 12 years so when they bring on 80% leverage, what they're doing is they're structuring a facility, almost like when you buy a house, think about when you buy a house, you get a mortgage, you put maybe 20% down, you put 25% down, nobody says, oh no, your house is too levered at 75 or 80% levered, no, that's just how you do it 'cause it's a 20-year, 15-year mortgage, it's a 30-year mortgage, a long-term investment. That's the way these box lessors work.

They're 75, 80% leverage from the banks, they're paying the bank like 2% 'cause interest rates have been so low, they're hedging and they're fixing, they're fixing those costs at 2%, and then they're taking that and they're sending that box over to the liner for 12 to 14 years. I, if anything, I wish they had more leverage, I mean the economics are so good and they've streamlined the amortization because the banks aren't stupid, right, the banks are looking at their contracts and the banks say each year we want you to pay down part of the debt and by the time you get eight or nine years through, we want the debt paid back. So it's a partnership, the banks, the box lessors, the liners, they're all working together to make sure this structure works. We think 75, 80% leverage is actually very good right now.

Daniel Snyder

Wow, that's very interesting, looking forward to that. This user, or this viewer brought in a question and said, what about air? Like, we get your focus on maritime ships, everything else, but you're pretty much in the logistics industry already, so why don't you focus on air that much?

J Mintzmyer

Yeah, no, again, these are great questions, I'm glad we were able to put this webinar together. The air traffic is mainly for high-value goods. It's extremely expensive to ship anything by air and the entire global air traffic capacity is less than 10% of what's available to move by water, in fact, I think it's about 6%, so we're talking about a very small portion of global freight. And so we're not putting pineapples, bananas, and TVs, and washing machines on airplanes, we're putting things like iPhones.

We've talked about the auto chips, you know, we've had a big shortage of that, that's the kinda stuff that you would put on airplanes. It's a good business, air freight has been booming, I have nothing, I'm bullish on air freight. The problem is a lot of the air freight companies, think UPS, FedEx, DHL, these companies have already moved. I mean you look back at like a two-year price chart, these companies have already ripped, they're trading at price-to-earnings, multiples, or whatever you have, you can pick any multiple you want, price-to-fee, cash flow, price-to-earnings, whatever, they're trading about 10 times higher than the ocean freight companies. On a business model that is more expensive and extremely niche. So no, we think the way, way better value here, nothing wrong with air freight, but we think a way better value is in ocean freight.

Daniel Snyder

This question just came in. You keep saying, pineapples, are we in trouble with pineapples, they are my favorite. We won't get into that, but I just had to throw that in there. Here's one, regarding LNG shipping, is there one U.S. firm that you would say is doing at best in this specific industry?

J Mintzmyer

That's a good question, and just to the pineapple guy, I should say avocados more often, I'm a huge guacamole fan and avocados are also at risk of being constrained by that supply chain. On the LNG question, it's good as well. There are surging LNG prices in Asia, we've seen that happening in Henry Hub as well, the U.S. natural gas prices. One of the companies that we've really liked is Flex LNG, I don't have a position anymore, it's FLNG, and if you'll look that one up, I know the CEO personally, his name's, Oystein Kalleklew, he's in Norway, a really solid manager, he's available, accessible, he's done some podcasts, interviews with us on our service.

That one's kind of a success story because they've done so well and the market's rewarded them. We were buying that company last summer, summer of 2020, about 4.50, $5, and if you look at 'em now they're 20, $21 a share, so I'm talking about a four-bagger or better returns, phenomenally managed, I mean, they've crushed it, they've done everything right. But the stocks already moved, so unfortunately, you know, if we were doing this webinar last year we coulda talked about Flex, that one's been a winner, we love it, two thumbs up, all props to Oystein, but that stocks kinda already moved.

Daniel Snyder

Yep, all right, so let's recap this one real quick. We had a question come in that says, thanks to the media we're all aware of the current situation with maritime shipping, but even those containerships who stocks are at, or near 52-week highs, trade only a few hundred thousand shares per day, so where, oh where, is the big money interest?

J Mintzmyer

Yeah, that's been something that I've noticed this entire time. It's like the more, 'cause I do consulting, I do consulting with hedge funds, and family offices, but most of these are boutique hedge funds. So anywhere from maybe 20 million, to maybe like four or 500 million under management, so I mean the non-small players by any means, but we're also not working with like Goldman Sachs, Asset Management, or Oaktree, or things like that.

A lot of the big money is frankly focused on big stocks that they can get into and out of with proper size. So remember how I said we like shipping because there's the trading desk at Goldman Sachs, and Morgan Stanley, and they can't really afford to deal with it, well, same thing for the big hedge funds. Look I mean, a huge, huge hedge fund wants to come in and get into something like Eagle Bulk, they're gonna rip the price up five, 10 bucks, it's not quite liquid enough for these guys. So we're seeing more interest in a lot of the links. I talked to a friend of mine who's an analyst at Jefferies, his name's, Randy Giveans, he was telling me, you know, institutional interest is soaring.

He's done more phone calls with long-onlys the last few months than he's done maybe in the last year, or the year prior, just in a couple of months. So I think there's interest, I think they're on the sidelines, but they haven't really moved in force. I think the one company, the one example, where we have seen institutional's move in, and we do see a lot of volume, is ZIM Integrated, I mentioned that's one of my favorite companies, Z-I-M. It's actually one of my biggest long positions right now. It is more, I didn't include it in this webinar because it's more like fifth inning. I didn't want folks, I wanted folks to really see like sleeper stocks, right, I wanted to stay true to the title.

Daniel Snyder

Yeah.

J Mintzmyer

But ZIM has lots of volume, big market caps, like six billion, seven billion market cap, lots of institutions coming into that name. So they're not all small caps, I mean, seven billion's a respectable size firm.

Daniel Snyder

Yeah, no, you're right. So, this is really a question that I think is also thrown around a lot in the media right now, but how well-prepared are your top picks for the energy transition and potential tightening in CO2 emissions?

J Mintzmyer

Excellent question, in fact that, I almost wanted to include this as one of our misnomers in shipping, 'cause a lot of people tell me, you know, hey, why are you in shipping, there's gonna be climate regulations, it's gonna hurt you. Well, if you think about it, I go back to that slide I brought up with well, in fact, let's just go back to that. This is for tankers, but it really applies to most of the segment. You can think about this for all, this is for tankers, but you could do this for dry bulk, or containers, or whatnot. You have this stuff that's over 20 years old, which is frankly, it's just obsolete, it's not gonna comply with anything in any of the regulations. You have this middle-aged older stuff, which is gonna be constrained.

Now starting in 2023, there's a significant regulation called EEXI, it's European Emissions Restriction Initiative. And so what that's gonna do is gonna restrict the speed limit at which these ships can go. If you think about you're driving your car down a freeway, you're going like 65 miles-an-hour, you're getting like decent gas mileage, right, but if you go from 65 to 85, suddenly your gas mileage plummets, that's the same thing that happens with ships.

They're going 10 and 11 knots, nautical miles per hour in the ocean, they're doing pretty good, but they go from 11 to 14, just a little bit faster, and their emissions almost triple. So this new initiative is gonna take all these ships that are in this yellow container here, actually probably a little bit further out to here, and it's gonna force them to go slower. So what happens when you take the same amount of ships on the water and you force them to go slower, your supply goes down, right, it's like synthetic-

Daniel Snyder

Right.

J Mintzmyer

Your supply goes down even with the same number of ships. So what we're doing primarily is we're investing in companies that have middle-aged to modern tonnage, so where my mouse is at here, kinda this dark blue to light blue new-build sized stuff. So as those regulations come in, it's gonna force this stuff over here to get scrapped, they're gonna demolish it, recycle it, it's gonna force all this stuff in the yellow to slow down, meanwhile we're gonna own primarily the, we own a little bit of the older stuff, but primarily owning the tonnage that's not gonna be affected, except rates are gonna be way higher because supply goes down.

So we're actually really bullish on future regulations, and plus, I mean, you just gotta understand where the wind's blowing and it's pretty obvious that there's gonna be a lot of regulations coming down the pike. We welcome them as long as they're well-thought-out, and as long as they target the entire transportation complex. And think about ocean shipping, how efficient that is compared, we talked about air freight, what do you thinks gonna hurt more, air freight which is 100 times more inefficient, or ocean freight, right, and so we're very bullish on a lot of those regulations.

Daniel Snyder

Yeah, that makes a lot of sense. All right, so I gotta ask you, this one's a little bit specific, but we have to ask this question. We have somebody tuning in from South Africa and they wanna know, first of all they say, very insightful presentation, thank you so much, but do you know anything about the Grindrod Group and can you talk a bit more about Textainer, they both have south African connections which is where I live.

J Mintzmyer

All right, well, thanks for joining us from South Africa. I appreciate ya, I know it's evening over there, so thank you for joining us. Yeah, I followed Grindrod for many years, ever since they IPO'd. I've been behind the scenes pressuring them to shift to quarterly reporting and they finally did, I told 'em, divest those tankers, you guys are confusing everybody. You gotta divest the tankers, or stick to dry bulk, you gotta go quarterly. You know, Martin Wade over there, the CEO, he's done a great job, I'm really happy with what he's done. Look, Eagle Bulk's our favorite, I shared that one, we're long that one, it's nothing personal against Grindrod.

We think Eagle Bulk is a little bit more upside here, we also think there's less overhang. The legacy, private equity backers of Eagle Bulk, have already left, they've already sold, whereas there's a lot of overhang in Grindrod, we think that's gonna hold the stock back a little bit. Nothing wrong. we like Martin, we like Grindrod, we just think there's a little bit more overhang there. Textainer, or TGH, big fans of Textainer, were long that, we're long Triton. I brought Triton in here as a sleeper stock, because it's a little bit more of a sleeper, Textainer's been running a little bit nicer, we like that we're enjoying it we always love one that runs, but that's why we fit, we picked Triton, we like 'em both, Triton and Textainer.

Daniel Snyder

Great, so everybody just to let you know we're gonna take another question or two before we wrap this up so that you guys can get back to what you're doing. So how does the spike in steel prices, which is probably temporary, if everything is transitory, right, affect your view on price to NAV, given that the steel price is a significant portion of secondhand value?

J Mintzmyer

Yeah, another excellent question. We're already starting to see the steel prices normalizing a little bit, we think steel is similar to lumber. There was reasons for lumber to go up, and it did go up, and it's gonna stay high. I mean we're not going back to 2020 prices on lumber, we're probably not even going back to 2019 prices on lumber, lumber's gonna be higher, but that spike we had in the spring, it was a little bit too much, too fast, it was speculative. We saw similar things in steel, the prices are normalizing right now we think the market's gonna be a lot more healthy going forward.

Yes, steel prices do contribute a little bit to the NAV, however, steel prices are only really relevant when you're gonna scrap, or recycle, or demolish your ship, so it's really only relevant for the end-of-life assumptions, or for the really old tonnage. And when you look at a modern tanker, or a dry bulk vessel, like we talked about, something that's like five years old, I'm just using round numbers here for napkin math, but take a $50 million vessel, only about 10 million of that is like the residual steel, so it's only about 20%. The 80% of the rest of it is based on the rates, based on the economic expectations, so the steel price is going up a lot, or going down a lot, it's not really gonna move the needle.

I mean it's gonna be a few percent. Obviously, you know, if we're trying to demolish and recycle old ships, we would want steel prices to be higher. But I mentioned earlier we're really focused on that middle age and modern tonnage, so steel prices, I mean, we keep an eye on them, but more so in the way that we want the market to be healthy. We're not really particularly worried or wanting higher steel prices on that.

Daniel Snyder

Yep, makes a lot of sense. Now, I do wanna get to this one. This one is something that everybody went through, and we heard about it of course through the media, but then also saw the effect of it on the supply chain. So when the Suez Canal was blocked, who can forget that, it almost became a national security issue. Can you touch on upcoming SHIPYARD Act and what will it do regarding shipping money, or anything other as a result of ?

J Mintzmyer

Yeah, so again, we're getting a little bit into politics there and a little bit of hypotheticals about what passes, or what doesn't. And there's also some interesting nuances in the Infrastructure Bill, which again, you know, you gotta tune in every-other-day to see what's going on with that political football right now in Congress. But broadly speaking, look I mean, you have a lot of entrenched interests for valid reasons, I'm not just discounting this, pure politics, but you have a lot of defense interests that are looking at that. U.S. shipyards are, honestly, they're woefully behind the curve. We're way more inefficient than Korea, than China, than Japan.

I think the folks that bring that up and say, hey, we have a national security concern here, I think they're correct, I think we've really fallen behind the curve on that. So any funds that can be used to modernize ship yards, I think that's well-intended. Will the outcomes be efficient, I really don't wanna get into that too much. I am skeptical, right, just based on the last 10, 20, 30 years of U.S. maritime success, but I wish 'em the best and I think it's totally correct that they're better talking about it and focusing on it. One positive aspect that I wanna bring up, well, it's kind of a mixed positive, is the Infrastructure Bill includes a lot of money for port modernization, now that is long overdue.

I've been talking about port modernization for a long time before the supply chain crisis. We haven't invested properly in the United States ports since 2010, 2011. We had the initial stimulus, right after the global financial crisis, remember 2008, 2009, we had some stimulus, we did some port spending, but then we kind of forgot about it, we forgot about it for almost 10 years and we've really fallen behind. LA, Long Beach, was the only global Top 20 port that doesn't have 24/7 operations that hadn't fully embraced automation. So we're really excited that some of that Infrastructure Bill is gonna focus on that, however, these are big projects, this takes two to three, four years. So that's like a 2024, 2025 thing. As a U.S. citizen I'm glad we're focusing on it, but as an investor, you know, it's a medium to long-term impact.

Daniel Snyder

Yeah, no, well J, I gotta say thank you so much for giving us this webinar today, I mean the knowledge is just overwhelming of how much you know and these stocks, let's just go through them again so everybody remembers. International Seaways, Eagle Bulk Shipping, and Triton International, three sleeper stocks that you can use to profit during the supply chain issues that are going on all around the world. Of course we hope that they start to ease, but in the meantime, why not profit with some investments? So, J, thank you so much for joining us today and everyone have a great rest of the day.

J Mintzmyer

Thank you.

Try Value Investor's Edge Now!

J Mintzmyer Seeking Alpha Author Profile

This article was written by

SA Marketplace profile picture
17.11K Followers
The Seeking Alpha Marketplace is our platform for investing research and guidance. Services are led by individual authors and feature communities of investors with similar interests focused on a given investment style and approach. It enables investors to get guidance and ideas that suits their needs so they can take their investing to the next level.Interested in building a business on Marketplace? Check out this story on authors' success to date, and go here to learn more about writing for SA. Contact us at premiumauthors@seekingalpha.com if you'd like to apply to launch a Marketplace service.Interested in signing up for a Marketplace service? Check out all our authors here. For any questions about SA's Marketplace, contact subscriptions@seekingalpha.com. We'd be happy to hear from you.This account will be used to highlight these authors and offer insights into investing from the authors to any interested users. Follow this account if you'd like to hear what's going on with the SA Marketplace!
Follow

Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.