Shipping Stocks (NYSE: SEA) Getting Ready to Move - Mike Swanson (03/08/2013)


One of the most interesting stock sectors right now are shipping stocks. They crashed in 2011 and spent 2012 forming a long stage-one base. Towards the end of last year they rallied up to the resistance area of that base and have been pausing there for the past few weeks.

Check out the shipping stock ETF SEA for example:


SEA has been consolidating for the past few weeks with resistance at around $17.50 and support at $16.60. If looks like it is getting ready to break resistance - once it does it will clear its stage one base and enter a new bull run.


The shipping stocks caught my eye the other week and I bought VLCCF. It has resistance at about $7.20 and pays a 10.50% dividend. That's a juicy income for just holding a stock. If it breaks out though I think it can double from here over a year.

Another one I'm watching is NM:


NM appears to be breaking out right now. It is paying a 6.30% dividend.

Oh and I also bought good old ESEA - Euroseas is a $45 million market cap Greek shipping company that pays a 6.00% dividend. For every share it has 74 cents in cash and has a book value over $4.00.


Shipping stocks tend to move with global markets and commodities. They crashed when both went into bear markets in 2011 and should do well the rest of this year. Its hard to beat owning a stock that pays a big dividend and rises in a bull market.

Comments

Are you still going to be posting updates on you buy/sell order in your account? With so many new posts from you, I might have missed it, but I didn' see any updates in Feb. Saying thñat you were buying these stocks. Also, I just checked your current positions in the spread sheet, and I saw that you have also entered several energy stocks, I don't remember any updates about those either.

Are you setting up stops in any of these new purchases?

Thanks a lot!

Best, Abe

Use the Open Portfolio link at the top of the page. This collects Mike´s posts.

Bests,

Alex

I had not used this link yet. And yes, all Mike's updates are there.
Sorry for the confusion.

Best, Abe

Mike,

You did not include TNK, one of your previous recommendations which is still paying a hefty dividend.

Jim

Another holding of the SEA ETF is Tsakos, TNP, which seems to have the same chart pattern.

Shawn

I'll add NAT to the list . . . it pays a 7% dividend. Here's it's chart.

While not first out of the gate, I still like how it's chart pattern is set up.

-GZ

So is anyone else in on the shippers?

I just bought ESEA and may buy TNK, as well. Both look poised to take out their long term down trend lines.

-GZ

Bought ESEA several days ago. Will buy more if/when market corrects. Plan to buy VLCCF as well on correction.

Low share price, nice chart, great dividend. What's not to love?

1. it really isn't a shipping company - it is a shell company that owns 5 ships (as of this month, March 2013). They have sold 3 crude carriers and are reducing their fleet size. No employees other than company officers. All operating activities (maintenance, chartering, etc.) are outsourced.

2. it cut its dividend 50% from $0.35 June 2012 and has cut its dividend every year since 2005 when the dividend was $4.55/share. Will it cut its dividend another 50% in June (when cuts have historically occurred) as charterers ask for and get payment deferrals and the company transitions its fleet/business? A yield cut significantly impacts the reason for owning/holding VLCCF.

3. One ship's charterer (20% of their fleet) is in financial distress and has asked to defer lease payments. The charterer is "supposed to" repay the reduction between the end of the 2-year period (June 2012) to the end of the charter, July 2014. Another drybulk charterer has also requested payment deferral. That's 40% of revenue generating assets in trouble.

4. Six customers account for 88% of revenue.

This is about 20-minutes of research on the company website and SEC filings on EDGAR. This doesn't mean VLCCF is a bad investment, a bad trade, or the above is outside its industry's norms. But, it does mean that you might want to peek behind the charts unless you view this as a very quick, rather than a swing, trade. Fundamentals mean more the longer you hold the trade and the smaller to company is.

JMHO...

Good luck.

Good inputs chuck

Thanks Chuck appreciate the info.

They made 24 cents a share in 2012 and analysts expect them to earn 8 cents in 2013, 7 cents in 2014 , and they currently pay a 70 cent share dividend. So, I'd say a dividend cut is on it's way. The shipping industry is experiencing a massive oversupply of vessels so unless the fundamentals changes soon, then dividend cuts may be the industry norm.

\\// "Nowhere am I so desperately needed as among a shipload of illogical humans"

Good inputs Spock.
did you notice thackray owns nothing gold colored
he's very by the book seasonal I guess

I thought these were in short supply. That's one of the main reasons I bot GLOG. I guess I should have paid more attention to that. They were building/ordering new ones, so I thought LNG shipping would be in demand going forward./jimo

02/08/13 YRC Worldwide Reports Positive Annual Operating Income for the First Time in Six Years

check out this stock, it got absolutely killed.
quick glance at their website, i think they ship LNG?
read about it here, http://seekingalpha.com/article/1266331-buy-yrc-worldwide-based-on-impro...

They are the old Yellowfreight company. They haul everything from soup to nuts. Over the road carriers mostly (I think). I was more interested in a sorta "pure" approach to playing the world NG game. Checked into the time factor for setting up a NG delivery/receipt terminal, doesn't take too long to happen. Not much required. Some of these energy deficient countries, I'm thinking especially Japan, still v. close to #2 world GDP, these guys are essentially set up for a major increase, esp. if they are going to walk away from nuclear power.

Nuclear energy, this is scaring a lot of people. Not so sure just when/if uranium miners are going to come into their own---price right now is profitable for in situ, but only weakly so. I ain't gonna buy any more U stocks until I see better demand. Also discouraged about the "method" used by the bigger U energy countries. They just go out and buy up a miner; enough to supply their needs then comes first. The in situ guys are stockpiling their production, only selling enough to pay the bills; that is kinda neat. Can't do that with most commodities.

I read an article about some small exploring in an African hell hole. Whichever country it was, the country GDP from U was like 20% from ONE producing mine, and the labor force was the typical going on today (NO, NO, NO). Paladin, a company I have owned off and on, was in that area too, and shuttering mines. I think RIO was the managing company of the one producer, and they were reducing the work force. So, conclusion, things ain't gonna happen to supply needs until some of these U reactors are nearly built---Over 500 now are in the process of construction. I think I might be pushing my anticipation of increased uranium needs. So, no more U stocks, but I'll keep what I have./jimo

I thought fracking was supposed to reduce the demand for LNG transport. The US is not the only country with frackable deposits - many exist worldwide increasing demand for transport pipelines rather than LNG conversion plants, terminals and ships.

But the infrastructure in many countries is so ancient/non-existant, it is going to make the US the big kid on the block for a few years. Learning how to frack even, building rigs, supplying necessary support. Even roads, this will take time. Meantime, it's already been in force here for the better part of 3-4 years. Our infrastructure is already in place. With some government wind, it certainly could be better.

Cost factor, Japan is paying now over $9 equivalent for NG. Our quantity cost is under $.50. Our diesel cost is somewhere around $3.50, so things are going to weigh toward NG. Here and elsewhere. Truckers and trains are already switching over here. There are already several LNG sell sources here in this little cow town. Thinking about one of those fancy new, Chebby PU's. They come from GM with either LNG or conventional installed.

I don't think any country is better situated to take advantage of fracking like the US. Australia and NZ, example, certainly potential competitors, their environmental laws alone will take much time, delay. AND, their infrastructure---pipelines, any transport, export facilities, etc., is so weak. It's just going to take time. Advantage, USA./jimo

Thinking it's happening here first. I saw a photo of an unloading LNG facility, really not much there. A dock and a line extending out to the ship. Getting this to the end user, and setting him up for LT use, foreign facilities, this would present a much bigger problem. The infrastructure isn't there. Even with the foreign government wind at their backs, this is going to take several years. And, IMO American companies are going to benefit the most.

CE just announced price increases. Down in this report, near the bottom, cost of production versus finished product, methanol, a precursor to ethanol, shows a healthy ~X2 relationship. I think CE is raising their price simply because they can. Demand is there. I'm thinking NG is going to be the energy fuel of choice, and export of CE type products should make this type of company(ies) growth strong going forward. We have been importing LNG and secondary products. This fracking supply here is going to keep price low, profits higher than importing.

CE is a specialty supplier (precursors) for companies making everything from soup to nuts. They recently announced a new manufacturing facility in Malaysia for ethanol, another precursor for myriad secondary products. I'm thinking this type of announcement will go right around the present mandate our leaders have imposed on the ethanol from renewable resources for gasoline. So, they bring in NG from the cheapest source and export wherever (back here?). Our government will miss out on some taxes here and Malaysia (I think it is them) will benefit.

Worth reading. Strong Fundamentals here./jimo
---------------
* Shale gas boom makes feedstock more affordable
* N. American producers building, restarting plants
* Shares of Methanex, LyondellBasell poised for more gains
By Bhaswati Mukhopadhyay and Krithika Krishnamurthy
March 21 (Reuters) - North American methanol producers, fueled by cheap natural gas, are embarking on an expansion drive that will slash the region's dependency on imports and boost revenue for sector leaders such as Methanex Corp .
Methanex, the world's No. 1 methanol supplier, plans to raise production capacity by 60 percent in the next few years to meet growing demand for a petrochemical used as a fuel additive to make gasoline engines burn cleaner.
Shares of the Vancouver-based company have nearly doubled in the last three years. Investors are betting the stock will rise further, as well as that of fellow producers such as Celanese Corp and LyondellBasell Industries NV .
"It is a bullish time for methanol producers," said Michael Morden, a portfolio manager at Mackenzie Saxon Stock Fund. The fund is part of Toronto-based Mackenzie Financial Corp, which owns 1.60 percent of Methanex, according to Thomson Reuters data.
The shale gas bonanza has revolutionized North America's methanol industry. As supply has outpaced demand, the price of gas has fallen to a level profitable enough for methanol producers to revive mothballed capacity and build new plants.
The result: North America, which relied on imports for more than three-quarters of its methanol in 2011, will be able within a few years to produce most of the methanol it needs.
"It looks like North America will become self-sufficient over the next three to four years," said Brahm Spilfogel, a senior portfolio manager at RBC Global Asset Management. The Toronto-based company owns 2.46 percent of Methanex.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ GRAPHIC-N.American methanol production set to soar

link.reuters.com/jat76t
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
Spilfogel expects North American imports to fall to about 1 million tons by 2015, a drop of more than 80 percent from 2011.
The region accounted for about 10 percent of global methanol demand of 62 million tons last year, data supplied by Jim Jordan and Associates, a privately owned U.S.-based consultancy, show.
Sometimes known as "wood alcohol", methanol can be produced from natural gas or coal. In addition to fuel blending, it is used in the production of windscreen washer fluids, recyclable plastic bottles, plywood floors and synthetic fibers.
Importantly, demand for methanol is forecast by analysts to remain strong as more fuel is blended for new applications, such as powering ships.
"Demand growth looks to be stronger in the future than it has been in the past," said Jason Chesko, director of investor relations for Methanex. "Greater use of green energy applications is causing demand to be higher."
Toronto-listed shares of Methanex closed at C$42.57 on Wednesday. Two days earlier, brokerage firm Jefferies upgraded the company's Nasdaq-listed stock to "buy" from "hold" and raised its price target to $54 from $40.
Thomson Reuters StarMine's intrinsic valuation, meanwhile, rates the Toronto-listed stock at C$71.73.
The StarMine intrinsic valuation, which charts analysts' growth estimates over five years and models the typical growth trajectory of companies over a longer period, rates the stock of LyondellBasell at $100.6 versus Wednesday's close of $65.42.
CHEAP GAS DEALS
Gas prices have fallen 70 percent to about $3.90 per million British thermal unit in less than a decade, a period during which advances in hydraulic fracturing have brought vast North American shale fields into production.
Methanex took advantage of lower gas prices to lock itself into a 10-year supply contract with Chesapeake Energy Corp , the second-largest U.S. natural gas producer, in January.
Celanese Chief Executive Mark Rohr, also in January, said a long-term gas contract might be an option for his company too.
Jim Jordan and Associates forecasts that world methanol production will rise to 74.6 million metric tons per year by 2015, up 18 percent from 2012. North American output is likely to jump 132 percent to 3.95 million metric tons in the same period.
North America should account for 5 percent of world production in 2015, up from 3 percent last year, data provided by the consultancy showed.
Projects under consideration now could potentially add a further 11 million tons to U.S. capacity by 2018, it said.
Methanex, which has a market value of C$4.03 billion ($3.93 billion), is adding capacity at its plant in Canada's Alberta province. And when a gas supply crunch idled its 1 million-ton-per-year plant in Chile, the company's answer was to move it to Louisiana, a process due for completion by 2014.
In Texas, LyondellBasell will restart a plant this year and OCI Beaumont, a division of Egypt's Orascom Construction Industries SAE , restarted output in July at a plant unused for seven years.
"A lot of these plants are going to be a million tons or larger each, and each ton of product now goes for between $375 and $400," said Gregory Dolan, acting chief executive of trade association Methanol Institute.
Spilfogel gave a higher estimate for contract prices in the first quarter of 2013, saying they had risen to about $500 a ton from $350 a ton in early 2010.
Either way, margins are good. Current industry estimates place the average cost of production at $150 to $200 per ton.
Some industry analysts expect North American producers to grab market share from their Chinese counterparts, whose costs are higher as they mostly use coal to produce methanol.
Demand in China, by far the largest methanol consumer, is expected to rise to more than 50 million tons in 2016 from 30 million tons last year, Mackenzie Saxon's Morden said.
While North American producers will benefit, they will continue to face competition on the global market from methanol producers in the Middle East, where costs remain lower, said Brijesh Ramani, analyst at New York-based GBI Research.
The priority, said Spilfogel, is to satisfy demand at home.
"All of this capacity that is getting built over the next two to three years is essentially going to back out North American imports," he said.
($1 = 1.0268 Canadian dollars)
(Editing by Robin Paxton)
((bhaswati.mukho@thomsonreuters.com)(within U.S. +1 646 223 8780)(outside U.S. +91 80 4135 5800)(Reuters Messaging: bhaswati.mukho.thomsonreuters.com@reuters.net))
Keywords: METHANOL IMPORTS/
For Reuters Top News page click the following link:

How can valuations rise without economic growth? Via cost cutting?

Or is everyone assuming that the BDI itself is about to break out? If so, based on tech or fundamentals?

Or perhaps the present undervaluation is so extreme that prices MUST bounce back?

For more charts, go to http://www.investmenttools.com/futures/bdi_baltic_dry_index.htm

W


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