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

2025 = Is it going to be 1997 or 2000?

Happy Holidays... After 5 months of hibernation with no real reason than writing block, I decided to use quiet morning of Christmas day to start writing again. Lot has happened in last 5 months - in particular release of Animal Spirits with Fed starting interest rate reduction cycle and historic victory of President Trump for 2nd term. As the year turns into 2025 and stock markets at all time high, one would wonder, what's next?  To answer this, one needs to look back at 1920s and 1990s to give us some context on where markets may be headed. 1920s saw invention of televisions, radio, wider adoption of cars, vacuums, penicillin and many other which we consider household items now. These inventions created roaring 20s with markets going up by 500% eventually leading to crash of 1929. However during mid-20s, markets keep going up due to excitement of these inventions and end of World War-1 and Spanish Flu Pandemic. 1990s also saw many inventions - the key being launch of Netscape in 1...
Post a Comment
Read more

And the Oscar goes to...

It's Oscar Sunday and time for predictions for few categories - before I digress into talking about drama in DC or markets.  First of all, I want to recognize the damage LA fires have done to the beloved areas of Los Angeles and impacted families across all spectrums. My heart goes out to them and wish them recovery and rebuilding of their lives... This year's Oscar nominees and post nomination period had been interesting to say the least. Due to this, the field is wide open in almost all categories and that's what makes prediction game so interesting. Just to set expectations, I would consider a win if I get even 50% predictions correct given the dynamics of nominees this year. So here are my predictions - "And the Oscar goes to..." Best Picture - Anora (surprise could be "The Brutalist") Best Director - Sean Baker for "Anora" (Surprise could be Brady Corbet for "The Brutalist") Best Actor - Adrien Brody for "The Brutalist"...
Post a Comment
Read more

The Politics and Gamesmanship of TikTok!

TikTok is less than 3 hours from going dark on USA's east coast if TikTok owner Bytedance (and Chinese Government) follows thru its "bluff" to honor the law " Protecting Americans from Foreign Adversary Controlled Applications Act" which goes into effect on Jan 19, 2025. And suddenly there is lots of politics and gamesmanship around TikTok.. Let's look at the players and their positions US Congress: The " TikTok Ban" law was passed by congress with bipartisan support and coincidently it goes into effect one day before new administration takes charge. Everyone knew the exact date and time of oath taking ceremony of new President...but maybe the congress did not think that there would be change of President and did not bother to put effective date post new government taking charge...that created a window of 36 hours of "law being in effect" unless... President Biden: Biden himself did not think that he won't be President for 2nd term. S...
Post a Comment
Read more