Buy Into The Shipping Rally With These 4 Great Stocks

Ignored for some time now, the Baltic Dry Index, a gauge of shipping costs for several raw materials, is becoming relevant once again. Considered to be one of the most dependable measures of global growth at one point, the index fell out of favor when the Great Recession hit the world economy and consequently, the shipping industry.

The index has surged considerably over the last month even as market watchers are revising their opinion about the shipping business. Prominent industry members surged on Tuesday and with prospects looking bright, this may be a good time to bet on the continuing success of shipping stocks.

Baltic Dry Index Sails North

The Baltic Dry Index is a gauge of the shipping costs of raw materials such as iron ore, coal and grain. The index moved higher on Wednesday, gaining 4%, to hit a two year high. According to FactSet, the index has gained in excess of 55% during this month and around 39% on a year-to-date basis.

A section of analysts point out that the index often moves higher due to the Lunar New Year effect. However, economists at Panjiva Research discount the seasonal boost and believe that this catalyst petered out around the middle of last month. Instead, they think that the surge represents a fundamental and positive shift for global economic prospects.

In fact, in 2008, the index was providing strong indications about the economic disaster that was to come. The Baltic index nosedived during the spring of that year, continuing to move lower in the summer when the crisis finally struck home. However, in the aftermath, the discovery of the extent of the oversupply in cargo vessels led to the discrediting of the index as a signature metric for the global economy’s health.

Why Are Dry Bulk Shippers Surging?

The reversal in the Baltic Index’s fortunes arrives at a time when analysts are taking an optimistic view of the now long suffering shipping industry. Stocks of companies from this sector gained favor on Tuesday after analysts at Morgan Stanley (MS) revised their opinion about them. Several of these stocks were upgraded while their price targets were raised substantially.

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