When will Shipping Stocks be a Bargai...
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May
7
Jonathan Yates
When will Shipping Stocks be a Bargain Buy?
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The shipping industry has been hammered by a multiple of forces from The Great Recession.  It has truly been a “perfect storm” of adverse factors.  These included:

*overbuilding before The Great Recession;

*soaring fuel prices;

*a collapse of rates due to a lack of business; and

*the Chinese targeting the sector for expansion.

Smart money such as billionaire investor have moved into the sector.  But as the chart below shows, the exchange traded fund for shipping (NYSE: SEA), has performed poorly.   The same factors hit the airline industry hard, too.  The chart below also shows how airline stocks have recovered, while shippers have not.

 

The airline industry was helped by consolidation.  So far, that has not taken place with shippers.  The demand is not there to justify any company moving to take over another.  In addition, many shipping companies are burdened down with a huge debt load that was taken on when times where good in order to expand.

By far, the best way to invest in the shipping sector is through the exchange traded fund.  Certainly there will be survivors, but it could be very expensive trying to select the ones that will survive.  As the chart below shows, Frontline Ltd (NYSE: FRO), which has often been recommended as a buy in the sector, is sailing in very troubled waters.  Now selling for under $2 a share, back in 2011 it was over $30.



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