Float Yourself Some Profits: Investment Ideas June 27
Global trade is booming. With the progression of technology and communication, economies that had previously been separated by oceans and mountains now find themselves as trade partners, increasingly reliant on each other for both natural resources and finished products.
The big up tick in global trade volumes have been a boon for many countries that are rich in natural resources. Brazil, for example, which is the one of the world's leading agricultural producers, has been experiencing significant growth in its GDP because of soaring demand for such products as sugar and soybeans. Saudi Arabia fits the mold as well. The country's oil resources have provided its citizens with an unprecedented amount of wealth as it distributes its barrels of crude all across the world, destined for energy hungry countries like China and America.
Global Trade and Shipping
This macro-level development has had a profound effect on both importing and exporting countries alike, but its effects do not end there. It has also created incredible demand for transportation services, none of them more pronounced than in the shipping sector.
These massive ocean tankers are being purchased and chartered at a record pace due to surging demand, which, as it stands, is outstripping supply. And because it is so incredibly expensive to build, operate and maintain an ocean-caliber, double-hull vessel, this dynamic should not be changing any time soon.
Fundamental Strength
Shipping companies have seen their share prices sky-rocket over the last twelve months, regardless of specialization. But the great thing about these stocks, and what distinguishes them from other sectors of the market, is that their ascent has been supported by actual earnings, which every good investor knows is the key to finding long-term winners.
So on that note, let's shift our attention to some shipping stocks that look very well positioned to produce exceptional returns due to their fundamental strength and growth trajectory.
Excellent Shipping Stocks
DryShips Inc. (DRYS) specializes as a dry-bulk carrier of such goods as grain, coal and steel. DRYS shares are trading safely below the 52-week high, but at these levels, this stock looks like a steal, carrying a forward P/E multiple of less than 5X.
Frontline Ltd. (FRO) operates as both a dry bulk carrier and a crude shipper, an industry that has obviously been very hot for the last few years. Not only is Frontline posting impressive gains in a tough market, but it also pays a fat dividend that totaled $2.75 per share just last quarter.
Teekay Tankers Ltd. (TNK) is a pure crude shipper that was spun-off from its parent company just seven months ago. The company is already posting huge gains, with its first-quarter income of $14.2 million more than doubling its fourth-quarter income from just three months ago. With the current-year estimate pegged at $2.31, this stock looks like a bargain trading at its current level.
Diana Shipping Inc. (DSX) is a pure dry-bulk carrier. Diana shares are also trading off of the 52-week high, but once again, this stock looks like an excellent buy at these levels with a forward P/E multiple just a pinch over 10X.
Expand Your Horizons
Finding good stocks in this economic environment has been very challenging. A number of sectors that have traditionally produced solid gains are now suffering painful losses. Stocks that carry exposure to international and commodity markets have done very well. Shippers fit into both of those categories and appear to be a bastion of profitability in otherwise choppy waters.
