2 Shipping Stocks To Buy, 2 To Avoid

After suffering a setback last year due to COVID-19-related restrictions, the shipping industry has been recovering this year with increasing demand for shipping due to the reopening of industries around the globe. So, we think it could be wise to bet now on fundamentally sound shipping stocks Costamare (CMRE) and Safe Bulkers (SB). Conversely, shippers Golden Ocean Group (GOGL) and Castor Maritime (CTRM) look significantly overvalued at their current price levels. So, they are best avoided now. 

White and Green Cruise Ship on Sea

Pexels

The shipping industry plays a crucial role in transporting goods and raw materials around the globe. Some 80% of goods globally are transported by ships. And it is telling that several industries were negatively affected recently when the Ever-Given, one of the world’s largest container ships, got stuck in the Suez Canal.

The recent closure of the Ningbo-Zhoushan port in China also highlighted the importance of the shipping industry. The Baltic Dry Index (BDI) recently declined from a more than 11-year high but recorded its second monthly gain in August due to  global shipping constraints and robust demand. Because the need to  transport goods is expected to remain high in the coming months, the shipping industry should achieve  decent growth.

Therefore, we think it could be wise to scoop up the shares of fundamentally sound shipping stocks Costamare Inc and Safe Bulkers, Inc. However, since the prices of shares of Golden Ocean Group Limited and Castor Maritime Inc. have far exceeded their   intrinsic values, they are best avoided now.

Stocks to Buy

Costamare Inc. 

Based in Monaco, CMRE is an international owner of containerships and charters its vessels to various liner companies. Its fleet of ships includes Cosco GuangzhouTitanValiant, and Maersk Kobe.

On June 14, CMRE acquired 16 dry bulk vessels of between 33,000 – 85,000 DWT. Gregory Zikos, the company’s CFO, said, “We are pleased to announce the acquisition of dry bulk vessels. We have decided to invest in a liquid sector with strong fundamentals that provide enhanced return opportunities for our shareholders.”

CMRE’s voyage revenue increased 49.1% year-over-year to $166.77 million in the second quarter, ended June 30, 2021. Its net cash generated through operating activities came in at $104 million, up 45.5% year-over-year. Its adjusted net income for the quarter was  $58.28 million, up 83.8% year-over-year. Also, its adjusted EPS was  $0.47, representing an 80.8% year-over-year rise.

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Dick Kaplan 1 week ago Member's comment

I think this article is somewhat biased. They state that $CTRM being up almost 742.7% in revenue is worse than $CMRE's 49.1% growth during the same period because CTRM did it with 97% utilization of its ships. But they failed to note that CTRM has also acquired more ships with anticipated growth. 

The other main issue is the liabilities of CTRM going up because they secured a loan... that's a good thing but the writer doesn't see it that way.

Finally they harp on past trends as if it predicts future price. The author stated that CTRM exceeds its intrinsic value ignoring that its price is below its book value and also commenting on having a high P/S average since there are individuals holding at a higher share price when it was oversold. Some would see this rather as an opportunity understanding that if those holding have held this long, will wait for it to return to break even or profit from.