Skip to main content

Shipping companies: Ready for turnaround ?

For past few weeks I have been watching shipping companies like DRYS, EXM, NM and found that they have been going down almost every day. In fact some of these companies are down by 50% in last 3 months. There are various reasons for this downturn:
  • Worldwide economy slowing down reducing need for shipping
  • Commodities demand slowing down
  • Credit becoming tight and these shipping companies depend on credit to fund their major purchases and operations
  • Some of these companies have debt repayments coming up in 2009
  • Baltic Exchange Dry Index (BDI) has come down from 11700+ to nearly 4000
Let's look at how these factors would change in next 12-18 months
  • Now that bailout package is near approval, World Economy should start turning around (or at least stop going down)
  • Credit markets should start working again enabling shipping companies to refinance their debts
  • Speculation in commodities would go down and they would start trading at their true economic value. China and India are still growing at more than 7% needing steel, coal and oil
My prediction is that BDI would start turning around after going below 4000 for a brief period. The stocks of shipping companies would go down little bit but I believe they are very close to their bottoms. Here are my two recommendations:
  1. DRYS near $35
  2. EXM near $15
Shipping companies pay hefty dividends with yield of almost 6-8% so these companies could become a good income generating investments

Caution: I am no expert on shipping industry. My analysis is purely based on my understanding of macro-economic factors. Do your own homework before investing

Good luck and have a good weekend!

/Shyam

Comments

Anonymous said…
No more essays shy???

I give you last tip

Short WFC and BAC with put options before the NYSE casino goes back to two way street

for WFC I like the april 35's...I have been accumulating since the friday they banned shorting and have cost of 4.9

here is a sample of the logic behing WFC

1. changed the way the recognize NPA from 90-180 last Q

2. have some dodgy CRE loans and that stuff is just starting to crack

3. they have the BUFFETT halo + they say they never did subprime...well check this
my man (notice that many of theses other companies are ZEROS now

--------------------------

Exhibit 8: Top 10 Alt-A Lenders, 2006

Rank Company 2006 YTD MarketShare% Total Orig Vol Alt-A Share%
1 IndyMac $49,620 16.5% $64,000 77.5%
2 Countrywide 47,000 15.7% 333,740 14.1%
3 Wells Fargo 30,050 10.0% 310,890 9.7%
4 Res Funding Corp 29,730 9.9% 66,100 45.0%
5 WMC Mortgage 19,300 6.4% 24,140 80.0%
6 Washington Mutual 19,050 6.4% 153,630 12.4%
7 GreenPoint 12,310 4.1% 27,120 45.4%
8 Aurora Loan Svcs 11,000 3.7% 25,300 43.5%
9 Homecomings 9,980 3.3% 21,660 46.1%
10 First Magnus 9,900 3.3% 22,030 44.9%
Total Top 10 $237,940 79.3% $1,048,610 22.7%
I note that WFC prudently had the lowest Alt-A as a percentage of its total origination.

Exhibit 14: Top Subprime Lenders, 2006

Rank Lender 2006 Market Share (%)
1 Wells Fargo $ 83,221 13.0%
2 HSBC Finance 52,800 8.3%
3 New Century 51,600 8.1%
4 Countrywide Financial 40,596 6.3%
5 CitiMortgage 38,040 5.9%
6 WMC Mortgage 33,157 5.2%
7 Fremont Investment 32,300 5.0%
8 Ameriquest 29,500 4.6%
9 Option One 28,792 4.5%
10 First Franklin 27,666 4.3%
11 Washington Mutual 26,600 4.2%
12 Residential Funding 21,869 3.4%
13 Aegis Mortgage 17,000 2.7%
14 American General 15,070 2.4%
15 Accredited Lenders 15,000 2.3%
Top 15 $ 515,217 80.5%
------------------------------

4. they have 80 bil in HELOC exposure in CA NV mostly written down only about 5%

5. If they eat WB, a bank that if you remember I was all over before, they will have some serious issues with that option arm portfolio

SO TO SUMMARIZE, DO I THINK THEY ARE ZERO, NO DEFINITLY NOT...ARE THEY OVERVALUED...YOU BETCHA

SO I NOW HAVE ABOUT 25 WFC PG AND WILL WRITE OUT OF MONEY FRONT MONTH LOWER STRIKE CALENDAR SPREADS ON FLUSHES...ALREADY SHORT 5 OCT 29'S FROM 1.05 AVG

I will cover/close this position when they trade in the low 20's...maybe if i am lucky enough they will be teenager

ALSO LIKE BAC SHORT HERE...failed breakout on both BAC WFC if you look at daily chart...I HAVE ABOUT 25 BAC NOV 30'S AT 1.49 I THINK...THEY WILL NEED TO DO SOME TYPE OF EQUITY CAPITAL RAISE TO SWALLOW THE LARGE TURD KNOW AS MER CDO BOOK
9:13 AM
Anonymous said…
SO FUNNY THIS ENTIRE YEAR I GIVE YOU ROADMAP TO MAKE SERIOUS DOLLAHS

I KNOW I HAVE

WB WM BOTH PRINT ZEROS AND I POINTED THEM OUT

WFC CRAP THE BED TODAY ALONG WITH BAC

INDEX OPTIONS ETC AND YOU JUST IGNORE MY POSTS AND DONT EVEN RESPOND

BWAAAAAAAAAAAA

THATS COOL
11:31 AM
Post a Comment

Popular posts from this blog

Clicks to Tokens: Will 2026 Echo 1998's Boom or 2000's Bust?

My "blogging" was in hibernation last 8 months due to my self-imposed restraint given the environment as well as built-in inertia to get started despite so many interesting events and markets reaching all time highs after taking a big dump around "Liberation Day" in Apr...Around that time I had the blog ready that it would be repeat of Mar/Apr 2020 panic and recovery during onset of Covid Pandemic. The hunch happened to be correct and I was glad that I could keep and take some positions which I am still holding especially around AI theme. But that was then...as 2025 is about to wrap up in 10+ weeks, let's look at what's in store for rest of 2025 and 2026. And what's better time than to start writing again just before one of the most important week on the calendar with multiple key events coming up next week... Fed meeting to decide the course of interest rates - it's almost guaranteed that Fed will cut rates by 25 basis points (2nd time in 2025) and...
Post a Comment
Read more

2026: The Year of Convergence – Melt-up, Moonshots, or Mid-cycle Correction?

Happy New Year! After another period of self-imposed hibernation from the blog—partly due to the festivals, travel, intertia and partly to watch the dust settle on a chaotic 2025—I decided to use the quiet of this New Year’s morning to finally reboot.  Looking back at my October post,  “Clicks to Tokens,”  the hunch about the AI theme held firm. We spent much of 2025 debating whether we were in 1998 or 2000. As we enter 2026, the answer seems to be "neither and both." We have the roaring optimism of the 1920s fueled by "Silicon Spirits," but with the high-speed volatility of the 2020s. So, as the calendar flips, what is in store for 2026? Markets may experience melt-up (S&P touching 8000),  with some moonshots (like SpaceX and OpenAI) IPOs or even see mid-cycle correction bringing down S&P to 6000. That's a wide range and will be decided by Four R's... Here are my thoughts on the " Four R’s ":  Rates, Robots, Rotations, and Real Assets. 1. ...
Post a Comment
Read more

Rockets, Relics & Roaring Markets: The $4 Trillion Crossroads of 1927 and 1999

Happy (almost) Summer! After watching Kevin Warsh get sworn in at a White House ceremony two days ago, tracking three S-1 filings that could collectively hoover up more capital than every U.S. IPO since 2022 combined, and watching 26-year-old stock charts finally break to new highs — it felt like the right moment to ask the uncomfortable question out loud. Are we at a party that ends gracefully, or one that ends with the furniture on fire? The market is simultaneously flashing the neon signs of 1999  and  the orchestral excess of 1927. Most commentators reach for the dot-com playbook. I think the original Roaring Twenties is the better map. Here's why... Assembly Lines to AI Clusters Ford's River Rouge complex was the largest industrial facility on earth in the 1920s — raw iron in one end, a Model T out the other. Steel, rubber, and oil became the picks-and-shovels of the age. GE and Westinghouse were electrifying factories and homes. The infrastructure buildout  was ...
Post a Comment
Read more