Saturday, November 21, 2009

Baltic Dry Index and the bulk shipping business has been on the rise lately, but is there trouble ahead?

Up to a couple months ago, I did not really think much about the bulk shipping business. I had seen some folks jumping in and out of DryShips Inc. (Symbol DRYS 6.29), in the $5.50 - $7.50 trading range and it seemed to be tied mostly to the Chinese economy and how much stuff they are gobbling up.

Well, I can tell you two things about this business. When it is going well it has great margins and is extremely profitable. Second, it is extremely capital intensive to buy ships and finance them in all kinds of creative ways. So you are either doing real well or really bad, earnings wise with rapid swings.
Some companies that have performed pretty well in this space and seem to make money are Diana Shipping, (Symbol DSX), and Kirby Corp.,(Symbol KEX). Both of these have done pretty well over a one year period. Some names I would avoid are Eagle Bulk Shipping, (Symbol EGLE) and Overseas Shipping Group, (symbol OSG). OSG leads in sales revenue, but not so good on the bottom line of the balance sheet. Some prognasticators are calling for softness in the bulk business in mid-2010?

So go with whatever floats your boat, I personally like DSX.


1 comment:

  1. Here is a few more names to consider. Navios Maritime, (Symbol NM) price $5.79, PE 11, Dividend yield 4.15%. Another one is SeaSpan, (Symbol SSW), price $9.16 , PE 10, Dividend yield 4.37%. These are fairly priced.