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Shipping Turnaround: Hedge Funds Think Shipping Stocks Are Underestimated

Posted
8/24/2011 7:24:00 PM
By: Kapitall
Referenced Stocks:CPLP;DSX;GSL;NAT;NMM;OSG;RLOG;STNG;TDW;ULTR

(List compiled by Eben Esterhuizen, CFA)

With so much doom and gloom in the economic headlines, it's easy to dismiss the shipping industry. Since these shipping companies are directly leveraged to global economic growth, any economic weakness can have a severe impact on their share prices.

But several big-shot hedge funds think the shipping industry is set for a rebound. Short-term pessimism might have pushed these stock valuations below fair value, creating an opportunity for long-term investors. 

Wilbur Ross is one of the investors expecting a shipping rebound. The billionaire investor, who specializes in distressed assets, said he was prepared to invest heavily in the shipping industry.

Ross' firm and China Investment Corporation, the sovereign wealth fund of China, recently financed the purchase of 30 oil product tankers for Diamond S Shipping.

"The history of the industry is one that goes from immense prosperity to immense poverty and back again, and we think that’s going to continue. We’re not necessarily at the exact bottom of the cycle, but we think we are relatively close to it," said Ross, in an interview with the Financial Times.

It's also worth pointing out that the Baltic Dry Index has demonstrated strength recently. In other words, there are indicators confirming that activity is returning to the shipping industry--is this the signal of a turnaround?

To help you get ideas, we scanned institutional money flows in the shipping industry, and identified the 10 shipping stocks that have seen the biggest buying during the current quarter.

Big money managers think these names will rebound--do you agree? 

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1. Scorpio Tankers Inc. (STNG): Over the last quarter, institutional investors were net buyers of 10.8M shares, which represents about 53.7% of the company's 20.11M shares float. The stock has returned -39.49% over the last year.

2. Global Ship Lease, Inc. (GSL): Over the last quarter, institutional investors were net buyers of 844.1K shares, which represents about 15.9% of the company's 5.31M shares float. The stock has returned 24.9% over the last year.

3. Rand Logistics, Inc. (RLOG): Over the last quarter, institutional investors were net buyers of 1.2M shares, which represents about 13.2% of the company's 9.09M shares float. The stock has returned 43.09% over the last year.

4. Navios Maritime Partners L.P. (NMM): Over the last quarter, institutional investors were net buyers of 3.4M shares, which represents about 9.58% of the company's 35.49M shares float. The stock has returned -4.91% over the last year.

5. Tidewater Inc. (TDW): Over the last quarter, institutional investors were net buyers of 4.3M shares, which represents about 8.48% of the company's 50.72M shares float. The stock has returned 29.87% over the last year.

6. Ultrapetrol (Bahamas) Ltd. (ULTR): Over the last quarter, institutional investors were net buyers of 1.8M shares, which represents about 8.43% of the company's 21.34M shares float. The stock has returned -31.3% over the last year.

7. Diana Shipping Inc (DSX): Over the last quarter, institutional investors were net buyers of 5.3M shares, which represents about 7.99% of the company's 66.32M shares float. The stock has returned -28.45% over the last year.

8. Capital Product Partners L.P. (CPLP): Over the last quarter, institutional investors were net buyers of 1.4M shares, which represents about 7.12% of the company's 19.65M shares float. The stock has returned -15.78% over the last year.

9. Nordic American Tanker Shipping Ltd. (NAT): Over the last quarter, institutional investors were net buyers of 3.0M shares, which represents about 6.46% of the company's 46.44M shares float. The stock has returned -32.4% over the last year.

10. Overseas Shipholding Group Inc. (OSG): Over the last quarter, institutional investors were net buyers of 1.4M shares, which represents about 5.91% of the company's 23.69M shares float. The stock has returned -47.75% over the last year.