by Tim Melvin | October 17, 2013 10:42 am
When it comes to shipping stocks, I am not alone in my quest for value. Wilbur Ross, the noted distressed investor has been very active in the space for some time now.
Ross recently told CNBC that, although pricing had improved in the sector, we are a long way from topping. He says he’s not even done buying, and the cycle is far from busting — the industry won’t see a full-fledged recovery until 2014, according to most analysts. As a real global recovery begins to take hold, these stocks could soar to several times their current prices. Many stocks in the sector would have to double just to trade at book value.
Oaktree Capital (OAK[1]) is another distressed investing firm that is very active in the shipping sector. I mentioned yesterday that the firm has a significant position in Star Bulk Carriers (SBLK[2]). They also have a position in Baltic Trading Limited (BALT[3]) of more than 1 million shares, which were purchased just this year. The company owns 11 dry-bulk vessels that are used to haul iron ore, coal, grain, steel products, and other dry bulk commodities around the globe. Right now BALT stock trades at just 60% of tangible book value and at just a little more than 10% of its 2009 highs.
Oaktree also took control of General Maritime when that shipper filed for bankruptcy last year and teamed up with German ship owner Rickmers (RCKMF[4]) to order up to 16 container ships. So it’s safe to say that OAK has a significant stake in the shipping industry.
Distressed funds and value funds aren’t the only major investors looking at the shipping industry. Private equity firms are awash with cash raised this year, and many are looking at shipping stocks. Blackstone (BX[5]) has already made significant shipping investments, as has Apollo Global Management (APO[6]). Kohlberg Kravis and Roberts (KKR[7]) has taken matters a step further and opened a maritime finance unit. The unit specialize in asset-based lending, meaning it will hold maritime assets such as drilling rigs, development and production assets, subsea construction vessels and other shipping assets as collateral.
You have large pools of smart, patient money in the form of distressed investors buying into the shipping sector right now. Stocks like Stealth Gas (GASS[8]), Tsakos Energy Navigation (TNP[9]),Global Ship Lease (GSL[10]) and other shipping stocks are very cheap right now in spite of some improvement from the lows. Those of us with smaller pools of aggressive, patient money should be looking to join the big guys in the maritime industry.
As of this writing, Tim Melvin was long GSL, TNP, GASS and SBLK.
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