It’s almost an annual ritual when it comes to ocean shipping. Times get rocky and stock prices plummet, then the bulls in the marketplace assure people this is the exact time to invest in the industry. Well, that’s precisely what’s happening today.
But remember, this pattern has repeated many times before over the last decade. People make these bull pitches which all can be reduced down to the concept of ‘buy low, sell high.’ This pitch which was also a popular call right after the 2008-2009 financial crisis. Then the falling rates were due to the decline in the global financial system, not necessarily the world economy. People speculated that because of this shipping would rebound into the popular “V” pattern.
A couple years later the idea was that vessel asset values were low when compared with the 10-year trailing average. Consequently, people theorized that they’d revert to the mean, yanking stock prices back up with them.
And still after that, the ‘bull’ argument was that ‘eco ships’ constructed to be more fuel efficient would yield higher returns for those that purchased them. And, finally, when dry bulk markets were absolutely horrid, the ‘bull’ pitch was that the market was so dreadful that it was actually good.
And now here we are again…
The Bull argument in 2019
Currently, the bull belief is that rates are quite removed from their lows and have grown all year to this point. In fact, with the 2020 fuel sulfur cap rules set to lift them even higher at the same time stock prices remain steadfastly unconnected to the much healthier fundamentals. Bull theorist argue this disconnect is bound to cease soon.
Joakim Hannisdahl, head of research at Oslo-based Cleaves Securities, echoes these optimistic theories. “The tide has turned. Market sentiment could not ignore the strong fundamentals forever. We see significant upside in all shipping segments.” This positive assessment comes from Hannisdahl’s newly released quarterly outlook.
Hannisdahl’s optimism is most bullish on tanker owners. “The segment is our top pick, with an expected 143 percent jump in our oil tanker share index by the third quarter of 2020,” he wrote in his outlook.
As far as dry bulk is concerned, Hannisdahl sees “one of the longest cyclical expansions since the 1740s.” In particular, he predicts that Cleaves’ dry bulk share index will leap beyond beyond 47 percent in the coming year.
Hannisdahl also believes gas shipping is bound for a rise. In the liquefied petroleum gas sector, he figures Cleaves three covered stocks will surge 80 percent in the coming year. In the liquefied natural gas market, he sees a jump of potentially 40 percent.
So what do you all think? Are the experts right about a coming bull market in ocean shipping?