The shipping industry is a sizable one in the U.S. economy. It’s valued at $700 billion, and is projected to grow to $1.3 trillion by 2020 according to the U.S. Department of Transportation and Research and Innovative Technology. If you like trading penny stocks, you’ll probably like shipping stocks too.
- Know the challenges to the industry
- Find out about successful companies
- Learn about sympathy trading
Challenges in the industry
Since shipping companies own and operate vessels and offshore assets, the health of the industry depends on good trade relations and a strong global economy. Recent economic tensions between the U.S. and China have made shipping stocks vulnerable to volatility shocks. Also, Brexit negotiations have complicated matters for shippers in Europe.
Nonetheless, some shipping stocks deliver higher-than-average dividend yields to investors. Keep in mind that there’s a fair amount of variation, but here are five of the most popular stocks in the space, and a useful trick for trading shipping stocks.
Triton International Limited
Triton International Limited (NYSE: TRTN) controls 27% of the global shipping market. It owns the world’s most extensive portfolio of containers and deploys 5.5 million units annually.
Triton has a utilization rate of 98% on its ships, and more than 70% of its containers are on long-term lease with an average remaining lease duration of 44 months. Also, Triton may benefit from the International Maritime Organization’s new regulation limiting the amount of sulfur allowed in vessel emissions. This will increase operational expenses for shipping lines, meaning leasing could be more favorable than owning assets.
Triton pays its investors a $2.08 annual dividend, making it a top dividend yield stock.
Seaspan Corp. (NYSE: SSW) prides itself on being the largest independent charter owner and manager of container ships. It currently operates 89 of the 114 vessels it owns and has another ten vessels under construction. More than 90% of the firm’s revenue comes from chartering its container ships with long-term, fixed-rate time charters to various container liner companies.
Seaspan also has about 100 containers ships based in Hong Kong that are used to connect Asian markets to the rest of the world. Investors are paying attention to tensions between the U.S. and China as the trade war heats up. Nonetheless, equities research analysts are projecting that Seaspan Corp will post robust sales in the coming quarters.
Shipping Stocks – Crude Oil Tankers
GasLog Partners LP
GasLog Partners LP (NYSE: GLOP) is a relatively new company, but it is becoming a favorite among investors because of the handsome $2.12 annual dividend it pays out, which yields 9.58% (as of February 8, 2019). The company was formed in 2014 by GasLog and some partners to facilitate its liquefied natural gas operations. Presently, the partnership owns 10 LNG carriers that are chartered under multi-year contracts to oil and gas giant Royal Dutch Shell.
GasLog Partners has a low-risk profile since its cashflow comes directly from fixed-fee contracts. This means that it’s less volatile than some other stocks in the sector. Many investors expect the company to deliver stable revenue from its contracts, making its stock a dividend darling.
Nordic American Tankers Limited
Nordic American Tankers Limited (NYSE: NAT) is the largest independent owner of Suezmax crude oil tankers. It currently has 33 vessels in its fleet and another three tankers under construction. What makes it different is its strategy. For example, it owns the same type of ship, which streamlines maintenance and keeps costs down across its fleet. It also leverages its operational standardization to remain profitable when shipping rates drop. This allows it to earn more operating profit than its competitors when the market bounces back.
Unlike Seaspan Corp., Nordic American Tankers does not offer any long-term charters for its ships. Therefore, it has full exposure to the spot market, and its cash flow levels fluctuate with general shipping rates.
DryShips Inc. (NASDAQ: DRYS) is one of the most volatile stocks on the market. In 2017, the stock’s trading price crashed by 99.9% to practically negligible prices. However, the company has propelled itself back to the fast lane, and there are ways to PROFIT from crashing stocks. It now owns and operates ocean-going petroleum cargo vessels around the world. The company is located in Athens, Greece, and operates a fleet of 36 vessels through four divisions, which include Drybulk Carrier, Tanker, Gas Carrier, and Offshore Support.
The fundamentals matter less to traders. When it comes to trading day stocks, DryShips should be in the hall-of-fame: Shares skyrocketed, moving from $5 to as high as $100 in about five days! That said, when DryShips is running, you better believe other stocks in the space are too.
Shipping Stocks – The Sympathy Trade
Jason Bond is one of the best penny stock traders around. In 2019 he nearly doubled his $200,000 trading account in the first month.
The concept of the sympathy trade is pretty straightforward: If one stock in a closely-related sector has a positive catalyst, similar stocks in the industry will rise too. It happens in many different sectors, especially shipping stocks. Other examples include marijuana, cryptocurrency, and blockchain stocks. Read about marijuana and how to invest in the boom.
Shipping stocks are considered somewhat riskier than other types of logistics stocks, and this can put off investors from exploring opportunities in the industry. However, many of the top stocks in the space do pay out handsome dividends. And, from time to time, shipping stocks can make for excellent day trades if you’re interested in learning how to make money trading stocks.
If you’d like to learn more about winning day trading strategies, check out Jason Bond’s “3 Favorite Stock Trading Patterns I Use Daily” webinar.