Follow Shipping Stocks?

[brewer12345]

Tempting and I have occasionally done so in the past. But I am already balls deep in this sector, so I am trying to gradually work down my positions, not increase them. So I sold covered calls when the stocks popped up and options premia were juicy, and I have now bought them back for a fraction of what I sold them for because I think most of the downside is over. When they pop again, I will sell more covered calls.

 

[Brat]

Notice that DSX has lost its momentum?

It is getting closer to the level that I last sold it. Any reason why I shouldn't once the price suits me?

 

[brewer12345]

I personally find the sell-off baffling. Day rates are a hair away from breaking a new record high, and unless you think we are entering a eriod of global recession that will slake China and India's thirst for raw materials (includeing coal for electricity generation), it is hard to imagine that rates will crash. Having said that, I note that the day rates implied by the shipping derivative market for the next two years is falling. But t aht is such an illiquid market in its infancy tat it is hard to really draw any conclusions from it. Charterers appear to be more than willing to sign time charters at rates far above what the derivatives suggest (they need the actual ships, I presume).

DSX just signed a 1 year deal for a ship that more than triples the day rate the ship was earning. I think they have 4 or 5 more ships re-setting their charters in teh next few months. 95% of the increase falls to the bottom line. SO I think DSX shares are quite attractive in the 20s.

Also check out EGLE and NM. Both have most of their fleet locked in for the next few years and have even bought insurance against their charterers defaulting.

 

[Brat]

I think DSX became a trader's investment. They weren't in for the long haul and don't study the industry fundamentals.

Cramer once advised folks to sell when everyone loved the stock, then he loved DSX.

I am waiting until the traders turn and run. The are just backing out right now.

 

[brewer12345]

Could be. I think they are close to done. I think liquidation value of DSX is north of $25, which will help offer a floor.

NM and (to a lesser extent) EGLE seem to have avoided the attention of the traders. They are also more conservatively run.

 

[Brat]

Found on line:

11/2

CEO Interview: Simeon Palios, Diana Shipping (DSX)
Simeon Palios admitted the dry bulk market is a "very dangerous" place to predict future rates, but added the short-term picture looks good for the company given cargo movements and the demand for ships. "I like the stock, but am not hitting the bull button," Cramer said. "That was not the reassurance I was looking for."

Related: Until Friday, Cramer was bullish on Diana.

$25 is my re-entry point too.

 

[brewer12345]

$25 would be an attractive, conservative place to jump in. I watched the Cramer interview and found it tragically funny. Cramer is a rah-rah idiot and wanted that from 70+ YO Palios. Instead, he got a careful, measured answer from someone who has been in t his cyclical business since before Cramer was born.

 

[twaddle]

The shipping stocks with high exposure to spot prices have become a proxy for the Chinese stock market. China is down today, so go the shippers.

 

[brewer12345]

Fair enough, but even the guys with charters locked in for years are getting hit. And day rates are up strongly despite the Chinese market.

That may be the way the idiot traders play it, but its a long way away from the fundamentals.

 

[Running_Man]

Basically isn't the drop in these stocks indicating there is going to be an economic contraction? Or at least a good size fear of one? That is what I am taking out of this sudden drop, fear of economic contraction in the forward years.

 

[brewer12345]

Very hard to tell because lots of short term traders and Cramer-followers have flocked to the sector. So inferring much from the price action is a lot tougher than it otherwise would be. Which is precisely why I am fixated on the fundamentals. If the coal doesn't get mined and shipped, the lights go out in China, India, Korea, Japan, etc. And you tell me if you think China will let their economy slide into recession. Given the nagging social problems that would quickly eclipse everything else, I think this is highly unlikely.

 

[brewer12345]

Found on line:

11/2

CEO Interview: Simeon Palios, Diana Shipping (DSX)
Simeon Palios admitted the dry bulk market is a "very dangerous" place to predict future rates, but added the short-term picture looks good for the company given cargo movements and the demand for ships. "I like the stock, but am not hitting the bull button," Cramer said. "That was not the reassurance I was looking for."

Related: Until Friday, Cramer was bullish on Diana.

$25 is my re-entry point too.

Dunno if you are still interested, but some of these stocks are getting to pretty compelling valuations. I think NM is quite attractive under 15, EGLE is a real bargain in the mid 20s, and DSX might be worth a gander if it gets knocked back down to 28 again. Heck, if it drops enough (60s), I might even find some room to buy a small position in much-maligned DRYS.

The most conservative plays would be EGLE and NM.

 

[unclemick]

Hmmm - greed and lust 'may' impell adding to EGLE next month, price willing.

Sort of the Norwegian widow's early Christmas present to herself.

heh heh heh - oh and maybe a tad more BAC for triming.

 

[Dawg52]

EGLE does look attractive. Keeping my eye on it. The only stock I had up today was MO. Nothing exciting about it but hanging in there. My overall portfolio down 4% from the it's high of just 2 weeks ago. Hope Santa fattens up my portfolio stocking.

 

[brewer12345]

UM, I think STON is in bargain territory again also, if you want to scratch that itch.

 

[Nords]

UM, I think STON is in bargain territory again also, if you want to scratch that itch.

Superior Industrial (SUP) has also been getting hammered by gloomy automaker forecasts.

It's like July 2006 all over again.

If we're already fully invested, is this when we're supposed to start buying on margin?

 

[unclemick]

okie dokie - got STON on my add to list for Christmas.



heh heh heh -

 

[brewer12345]

Superior Industrial (SUP) has also been getting hammered by gloomy automaker forecasts.

It's like July 2006 all over again.

If we're already fully invested, is this when we're supposed to start buying on margin?

I am generally unwilling to go on margin for anything. I tend to invest in risky stuff, and leverage would make the volatility potentially crushing.

Having said that, I will generally go out on a limb using options for leverage purposes. At least that way I limit the potential damage that can be done to me. And options trading has been very profitable for me overall.

I think the market is getting sold by people who are doing forced liquidations. They sell what they can sell regardless of whether its is a good price.

 

[dm]

Well I bought some NM @ 14 . Not alot but Ive owned DSX and EGLE in the past and done OK with them so we will see how it goes.

 

[twaddle]

I think the market is getting sold by people who are doing forced liquidations. They sell what they can sell regardless of whether its is a good price.

You think so? I watch the action on the shippers once in a while, and I almost never see large blocks go through. It's just the retail mo-mo crowd as far as I can tell.

 

[brewer12345]

You think so? I watch the action on the shippers once in a while, and I almost never see large blocks go through. It's just the retail mo-mo crowd as far as I can tell.

I think the momos are definately in some of the shipping stocks (DRYS, EXM and DSX for sure). But I see everything getting sold regardless of price or prospects, and I know what is going on in the bond market (very illiquid, low marks) and the mortgage backed market (frozen, bend over of you need to sell). Given taht funds have to meet redemptions regardless of what the market is doing, they have t o sell something. Can't sell bonds or asset backeds, so they pound equities. That goes for shippiers as well as everything else.

Does it make any sense for DRYS to trade at 4X next year's earnings? Not that I can see. Make any sense to sell off NM when they have next year's charters almost completely sewn up and even got a AA rated insurer to guarantee the charters? Nope. But we gotta meet redemptions, so get back in there and sell!

 

[Gumby]

I am thinking of tax loss harvesting in NAT (I'm in at a basis of 37) and investing in NM at these levels.

 

[Dawg52]

Picked up a dab of EGLE at $25.50 today. 7.5% dividend not bad.

 

[brewer12345]

Of course, the risk to these companies is that the world goes into a disastrous recession and demand for everything plunges. But I guess shippers are not t he only ones at risk for that...

If QMAR gets down to 20, it will start to look pretty attractive, IMO. Not interested in it north of 20 because if no take-out offer emerges it will drop pretty quickly. But at 20 and below, I think no offer will be fully priced in.

 

[brewer12345]

Heheheheheh...

New fun fact: a consortium of Chinese steel producers along with the Chinese gummint has decided to counter BHP's bid for Rio with their own cash offer. Now how exactly were you guys planning on getting all that ore from Brazil to China? Bet you could complete the vertical integration pretty nicely by buying a publicly traded bulker for less than their fleet is worth.