Two Water Transport Plays - Besides DryShips

by: Eric Frantz posted on: July 18, 2008 | about stocks: DRYS / DSX / GNK    

The water transportation sector has seen incredible growth over the past years and has spawned well know success stories such as DryShips (DRYS). Like much of the rest of the market, the industry has been hit by the recent slowdown. There is no doubt in my mind, however, that when the market begins to recover, the water transport industry will be very attractive. That being said, I have found a couple of alternatives to DRYS, just in case you don't like it for one reason or another.

Genco Shipping and Trading (GNK) is a stellar company and big investors have noticed. It is almost 75% institutionally owned and is slightly undervalued when looking at its P/E ratio. It has a strong return on equity of 33% and shows very strong margins and aggressive management of its debt. On top of all of this, it pays a 6% dividend. Definitely worth a look.

Diana Shipping (DSX) has just about doubled in the last three years. While this may not sound as impressive as some of its competitors, it has the potential to make you much more than that in the next three. The stock currently pays an 11% dividend and has one of the highest EPS growth rates in the industry. Its P/E is on par with its competitors and it boast a profit margin higher than 92% of its competitors.

While both of these may be attractive, it is important to understand that we are experiencing a slowdown that has affected the entire global economy. The slowdown is likely not over and I would, therefore, wait on buying into the shipping industry. Nonetheless, these are two great companies that will be even more attractive as the market bottoms.

This article has 14 comments! Add yours below...

Eric Frantz

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This article has 14 comments:

  •  
    schminkie
    Jul 18 08:43 AM
    excellent call on dsx. as far as slow downs... dsx's fleet is fully contracted so the 'slowdowns' are less germane. if you want, their website has a list of contracts including future contracts and a little map showing where their ships are and where they're going.

    i wouldn't overplay this 'slow down'. the dry bulk business is quixotic to say the least. i've found articles in complete opposition in the same or consecutive trade periodicals. additionally i see expansion, aggressive expansion, per acquisition and exploration vis a via the coal and iron ore/steel industries.

    i guess wall st and its usual suspects are looking at a different world than these global corporations; companies that feel confidant in investing 2008 capital for profits and market share years down the road. if industry is the body wall st is the tape worm.



  •  
    Vito54
    Jul 18 09:03 AM
    Just remember that anyone willing to play in the Dry bulk shipping arena needs a cast iron stomach, this is an extremely volatile sector with wild swings in stock price. Patience is rewarded when the sector is on an upswing run and pps can drop back just as quickly.

    So don't panic if your position drops into the red for a stretch of time, wait out the cycle and sell into run ups. I traded DRYS from the 60's to the 110 range and stepped to the sidelines right before the drop back to the 70's.

    I am long in GNK and NAT (both good dividend pays) but use DRYS for trading purposes only right now


  •  
    notsosmart
    Jul 18 09:19 AM
    My Website
    nobody has figured out a way to pave over the ocean. i have no agenda,connection to either or the st. but check out FRO & NAT. well run great yield & i think a good future for a few years to come.
  •  
    burncapital
    Jul 18 09:21 AM
    Any opinion on OCNF?
  •  
    Cartledge
    Jul 18 04:04 PM
    Listen to what Doug M has to say during the capital link website interview. That has some nice insight if you are thinking about DRYS.

    It's funny, most people who are in these stocks know more about the people who are writing articles about them. This article was poor. It offered little substance.
  •  
    Eric Frantz
    Jul 18 09:51 PM
    My Website
    First of all, I'm not sure it is funny or odd. Someone in the stock would have a more vested interest in paying more attention to the company. I have simply put forth two ideas, and yes, with substance, that people could look into a little more. I never recommend that you invest without doing your own research. Second, I understand that some people don't like or agree with my articles, but I am curious as to why you found it necessary and beneficial to the public, and yourself for that matter, to criticize it, especially when you offer no "substance" yourself.
  •  
    biomedlives
    Jul 18 09:52 PM
    I believe it's important to differentiate shipping companies that rely primarily on spot charters from those that rely on long term contracts.

    Seaspan, in container shipping rather than dry bulk, may be worth a look.
  •  
    Breadnight
    Jul 20 03:50 AM
    If you're going to make a move in shipping I believe it would be more beneficial to stick with the dry bulk companies as opposed to container.

    The dry bulk market will stay strong due to increased iron ore and coal production/demand. The container ind is more prone to the global slowdown.

    I recommend listening to some of these conference calls prior to investing in this industry. It is more complicated than most.

    There will be a big increase in world wide dry bulk vessels in the coming years. Depending on how many of the shipyards stay in business (due to higher steel costs), and how many of the older vessels need to be retired, the dry bulk indexes could come down dramatically.

    There is also potential for a lot of consolidation in this sector. Once the dry bulk stocks begin to move, I say go with DRYS. Their earnings are impressive compared to their peers. DRYS is better known, and has a higher beta. Therefore, I think it will have more momentum and will work better as a trade.

    Lots of research necessary here. Good luck.
  •  
    retrobeast
    Jul 22 03:01 PM
    you don't have a clue punk. go back to boarding school and leave the trading to men. got it boy?
    DRYS still #1 !!
  •  
    billf921
    Jul 24 10:03 AM
    i like ocnf and free both better than your picks
  •  
    morgan77
    Jul 24 12:50 PM
    GNK as a leader--
    A little more support for the GNK rally-
    James RevShark DePorre called it a market leader today in his podcast on greenfaucet.com. He also named EXM and GNK as stock picks.
    Just wanted to let you all know that now is the time to get in if you haven't already.
    You can listen on the site under podcasts if you want more info (he talks about the market generally too)
  •  
    Periploi
    Jul 25 10:48 PM
    The ocean transport sector is the Wild Wild Wet. Good volatility for trading, few safe harbors for investing. Lots of tricky ownership and management puzzles, much of it foreign. Can keep you up at night. Nonetheless, I own several dry bulk carriers.
  •  
    podiddly
    Jul 30 08:03 PM
    I'm mystified by some of the above. Dry ship, Container Ships, and Oil or LGN ships. I own some of each. What's not to like? Some pay good dividends (FRO, DSX) for example...FRO has been trading in the 60 to 70 range, offering a choice between a 14% or $2.75/ Q div. or a 8 to 10 point Cap Gain. DHT, ONAV, DRYS etc. all have a Profit and yield place in a portfolio, if you can handle the volatility.
  •  
    bones33
    Jul 31 01:35 AM
    All kinds of shady shell games are associated with these stocks.Like the Directors shorting thru put and dumping large blocks of shares to drive the price down.I admeit tthe PEs and yields are attractive but beware the manipulations.
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