In the past couple of weeks we have seen an explosion in many of the shipping related stocks. The dry bulk index has shot higher and is up over 100% in the past several months, and investors have been piling into shipping stocks.
This has been a horrible sector for the past few years as the industry was at record capacity in 2007, just as the credit crisis caused a global recession. Shipping rates and booking plunged dramatically and most shipping firms were losing big money. Several were forced into bankruptcy liquidation. Now there’s solid reason to think that as the global economy continues to grind towards a sustainable recovery the industry has turned the corner.
The important thing for investors to keep in mind as they approach the shipping industry is that fundamentals matter even more than usual in this sector. Many of these companies s are actually in very poor financial condition, and even though they may rise with the short-term pop in the sector, the fundamentals could easily cause them to crash back to earth. It looks like there’s a lot of money to be made in shipping stocks, but it is also very easy to lose a lot of money if you bet on the wrong stocks. By using Portfolio Grader, you can find and buy the very best stocks, minimizing your risk and maximizing your potential gains.
Global Ship Lease (GSL)
London-based Global Ship Lease (GSL) owns and leases container ships under long-term fixed-rate charters to container shipping companies. GSL owns 17 vessels with a total capacity of 66,349 20-foot equivalent units. In the most recent earnings release, GSL announced that the fleet was 100% leased, which maximized the current earnings potential for the company.
Global also repaid $15.8 million of debt during the third quarter 2013 for a total repayment of $214.8 million since the fourth quarter 2009. Earnings are up more than 200% so far this year, and Portfolio Grader recognized the improvements in the company and upgraded the stock to an “A” in November.
GSL stock is a “strong buy” at the current price.
Safe Bulkers (SB)
Safe Bulkers (SB) is based in Greece and ships commodities such as goal, grain and iron ore all over the world. The company recently posted a positive earnings surprise and raised its dividend as business continues to improve along with the economy. SB has used the industry weakness to expand its fleet during the downturn and has grown the fleet from 11 vessels in 2008 to more than 31 dry bulk cargo ships as of today. The company recently completed a stock offering to fund the purchase of 10 additional vessels while prices are still low for new vessels.
The continued fundamental improvement was noted by Portfolio Grader, and SB stock was upgraded to an “A” in November. At the current price, SB remains a “strong buy.”
Navios Maritime Holdings (NM)
Also based in Greece, Navios Maritime Holdings (NM) ships dry bulk cargoes and runs a logistics business that provides integrated transportation, storage and related services to various petroleum, agricultural and mining companies. Navios owns 30 vessels and charters another 20 to ship commodities on a global basis. Earnings are up a whopping 320% this year, and analysts are looking for further improvement in 2014.
As fundamentals have improved so has the ranking in Portfolio Grader. NM stock was upgraded back in May and remains a “strong buy” at the current price.
Again, the opportunities in shipping don’t come without risks, but using Portfolio Grader to find fundamentally sound companies can give you the best chance for success.
Louis Navellier is the editor of Blue Chip Growth.