Originally posted on https://financhill.com/blog/investing/best-shipping-stocks-to-buy
Best Shipping Stocks To Buy: The world economy depends on the shipping industry to move product from country to country. Nearly every commodity, from diesel and crude oil to raw building materials and grain, is transported by freight, whether that means cargo ships, trains, trucks, or freight planes.
From an investment perspective, shipping refers to the specific subset of companies that operate maritime vessels. Overall, merchant ships carry roughly $4 trillion worth of goods every year, and there are 50,000 ships at sea every day.
Though the businesses that operate these ships are indispensable to global trade, it can be tricky for investors to find the right balance of risk versus reward. Slight changes in economic conditions can have a dramatic impact on profitability, and an extended economic downturn can quickly drive shipping companies into bankruptcy.
Obviously, that’s bad news for shareholders, who are likely to lose their entire investment. But four shipping stocks have weathered a lot of economic ups and downs, making them favorites among investors interested in the shipping industry:
Costamare’s specialty is container ships, which manage the transport of non-bulk cargo. This includes a wide variety of packaged manufactured goods.
Approximately 90% of the world’s non-bulk cargo spends time on a container ship at some point in their lifecycle. The capacity of a container ship is measured in TEUs, which is defined as twenty-foot equivalent units. The smallest vessels carry up to 1,000 TEUs, while the largest can manage 14,500 TEUs.
Costamare [NYSE: CMRE] has been a major player in the shipping industry for more than 45 years. Its current fleet includes 76 ships with a total capacity of 541,000 TEU.
The company went public in 2010, starting off around $12 per share. However, in the past five years, there has been a sharp decline in share price. At its peak in July 2014, stock traded at just over $24 per share. Today, it is hovering around $5 per share.
While those who purchased shares in 2014 are likely regretting their decision, new investors may have an opportunity given the current circumstances. Costamere’s [NYSE: CMRE] first quarter earnings call revealed stronger than expected performance, and all signs indicate there will be solid demand for container ships in coming months.
Diana Shipping operates a fleet of dry bulk carriers, which are specially designed to transport dry commodities. Examples include grains, unpackaged cargo such as cement or coal, or metals like copper and iron ore.
The smaller dry bulk carriers can hold between 500 and 2,000 tons in their hull, while the largest – typically selected for iron ore and coal – are so massive that they can’t travel through the Panama Canal. If they must move between the Atlantic and Pacific Oceans, they have to go around the southern tip of the South American continent.
Diana’s fleet includes 45 vessels of varying sizes with combined carrying capacity of 5.5 million dwt. Shares started trading publicly in 2005, with an initial share price of approximately $16.
Shareholders saw prices peak in October 2007 at an impressive $42, but those figures were short-lived. Within months, share prices began to decline steadily, and today they have dropped down to around $3 per share.
Though some investors are discouraged with Diana Shipping’s [NYSE: DSX] progress, business leaders remain optimistic. The company is focused on strategically growing the fleet while staying on solid financial ground in order to ensure strong value for shareholders.
Pangaea simplifies the maritime shipping process for clients through a comprehensive package of services.
The organization owns and operates a fleet of bulk carriers, including specialized ice vessels capable of transporting freight to areas unreachable by other shipping companies. In addition, Pangaea [NASDAQ: PANL] manages a variety of port and inland products, so that clients enjoy end-to-end solutions for their shipping needs.
Public trading of Pangaea commenced in 2015, with an initial share price of just over $3 per share. While there have been slight fluctuations in the past four years, Pangaea investors haven’t been subjected to the same roller-coaster as peers who invested in other shipping companies. Today, share prices hover close to $4.
Pangaea [NASDAQ: PANL] leaders are optimistic about the company’s future prospects. In the first quarter earnings call, investors learned that company is performing better than most of its competitors. Co-Founder, Chairman of the Board, and CEO Edward Coll said:
“Our TCE rates, while lower year-over-year, still outperformed the market by 68%. Net income of $3.7 million was consistent on a year-over-year basis…we reported record cash levels.”
In fact, the results were so positive, Pangaea announced its first-ever quarterly cash dividend.
Matson was incorporated in 2012 as a holding company for two distinct segments that, combined, offer a comprehensive suite of ocean transportation and logistics services.
However, the business actually has a much longer history. It was founded in 1882, and for many years it served as a critical connection between Hawaii and the mainland.
More than a century of experience gives Matson [NYSE: MATX] specialized expertise in the unique challenges of traveling the North and South Pacific.
Matson’s ocean freight transportation service operates as Matson Navigation Company, Inc., or MatNav. It serves ports in Alaska, Hawaii, Guam, the western coast of the US mainland, China, Japan, and a range of South Pacific islands.
MatNav currently owns 22 vessels, including standard containerships, roll-on/roll-off barges, barges equipped with cranes, and combination container/roll-on/roll-off ships. This mix gives MatNav the flexibility to customize solutions for clients.
The other side of the business operates under the name Matson Logistics. This subsidiary is responsible for managing land-based domestic and international freight transportation by rail and truck.
In addition, Matson Logistics handles supply chain management, warehousing, and distribution, giving clients a one-stop solution for moving and storing freight.
In the 46 years that Matson stock has been traded publicly, share prices have fluctuated with the market. They peaked in 2015 at just over $49, before drifting down again.
Investors continue to show faith in Matson, perhaps because of its consistent dividend history. Some may also hope to time their stock purchase just right. Though Matson has had a number of years in which shares saw a double-digit decline in value, it has had dozens of years that were far more lucrative.
For example, investors saw increases of 39.88% in 2009, 28.72% in 2012, 35.65% in 2014, and 25.60% in 2015.
Business leaders have demonstrated their ability to grow the business carefully, balancing the benefits of investing in new assets and expanded routes with the risks of excessive debt.