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Maritime Financial Research

Overview

Latest Coverage

Model Portfolio

*BI SHIP - Bloomberg Intelligence Marine Shipping Index
*BI SHIP - Bloomberg Intelligence Marine Shipping Index

June 2017

  • Our model portfolio gained 3.2% from March 2017 to June 2017, clearly outperforming its sector-specific benchmark, Bloomberg’s BI SHIP (down 2.5%), while being lower than MSCI, the global benchmark index (up 4.6%). Download the June report
  • This outperformance was a result of our larger allocation to container shipping companies and port operators. However, at average P/B valuations of 2x for liner companies, most of the positive developments are in the price, and hence we believe it is time to book profit in names such as Maersk and OOIL, which have led the rally in the liner space.
  • We also trimmed our exposure to port operators in view of the surge in share prices especially ICTSI, which we downgraded to Neutral in May 2017.

February 2017

  • First year’s performance, Model Portfolio returns 38%. Download full report
  • In 2Q16, we made a tactical shift to increase allocation to the dry bulk sector as we upgraded it to Neutral, backing our conviction of the bottom in the dry bulk market. We downgraded the tanker segment considering its large orderbook, significant dividend cuts ahead and were also discouraged by stagnant asset prices despite healthy freight rates. Our conviction call for 2016, “Long dry bulk, short tankers” generated the highest alpha.
  • In 3Q16, our portfolio construct was geared for higher risk and we increased our allocation to the dry bulk sector to 42% as we expected the upward trend in stock prices to resume after a period of consolidation in 2Q16. The trade played out handsomely as our portfolio generated a return of 40% between October 2016 and February 2017.
  • Our portfolio defied a terrible year for the industry to produce a 38% return in our first year out. The model portfolio markedly outperformed the benchmark indices, BISHIPGP Index (Bloomberg Intelligence Marine Shipping Index, 14%) and MSCI World Index(19%) by a big margin.
  • For 2017, lowering allocation to dry bulk stocks; increasing weightage on container trade. We have reduced our allocation to the dry bulk segment to 31% from 42%. The value play is over in our view and we believe stocks could be at the risk of “too soon too fast” in the near term. Conversely, we believe that the worst is over for the container shipping and we see higher returns for the sector in 2017-18. We have increased the allocation to the sector from 8% to 27%. The port sector is another major constituent of our model portfolio for 2017 as world trade recovery gathers steam and earnings remain resilient for our portfolio constituents.
  • We are Neutral on gas shipping as we believe the stocks are trading in a fair territory, while we maintain our Unattractive stance on tankers.

October 2016

  • Our model portfolio outperformed key benchmark indices from June to October, although it is still down 6% from February 2016. The portfolio generated annualized returns of 15.7% during the four-month period starting from 16 June 2016.
  • We continue to stick to our thesis that dry bulk names will be the outperformers in 2017, and have added Star Bulk Carriers because of its high spot exposure and large Capesize fleet.
  • We have increased allocation to the Port sector as the global throughput growth is stabilising and hence earnings will remain resilient in our view; we have included China-COSCO Ports and ICTSI.

June 2016

  • We made a tactical shift to increase allocation to the Dry Bulk sector in June 2016 as we believed the bottom had been reached early in the year. Meanwhile, we downgraded the Tanker segment to Neutral on increasing vessel supply.
  • We reshuffled our portfolio to play the recovery in the Dry Bulk shipping sector albeit from a very low base, and believed that the beaten-down Dry Bulk names could provide superior risk-adjusted returns.

About our Model Portfolio

In 2016, Drewry Maritime Financial Research (DMFR) launched a model portfolio - selecting stocks within the global maritime space to ensure a balanced approach to managing risk in a low return environment.


Recommended stocks are hand-picked based on the fundamentals of each entity, coupled with near-term triggers. The objective of the model portfolio is to generate optimum returns in conjunction with moderate risk.
It is important to note that shipping is a high-beta sector; it is therefore not uncommon for shipping stocks to under-perform or out-perform the financial markets by a wide alpha.


At the launch of the portfolio in February, Rahul Kapoor, Director, Equity Research at Drewry commented, "Global trade is a key barometer for the health of the world economy and what better than to take exposure to this exciting sector when valuations are in your favour and at cyclically low point. Maritime stocks are paying the price of Chinese linkages and have been battered on slowdown in global trade and excess capacity. We expect the cycle to turn in coming quarters and the current valuations present good opportunities in our favoured sectors for medium to longer term investors."

 

Related News

2nd Edition Report assessing the financial health of the container shipping industry now available

Drewry Financial Research Services Ltd., the investment research arm of global shipping consultancy Drewry, is pleased to announce the launch of its 2nd Edition special report into the financial health of the global container shipping industry.

Drewry launches credit research services for the maritime sector

Drewry Financial Research Services Ltd., the investment research arm of global shipping consultancy Drewry, is pleased to announce the launch of a new credit research service on the global maritime sector.

6

$6bn: The combined value of container shipping industry investments we have advised on since 2010.

20

$20bn: The value of financing projects we have provided commercial due diligence advice for in port M&A since 2010.

54

The number of countries in which our advisors have completed assignments since 2005.

400

Our advisors have been involved in over 400 port assignments over the past 10 years.
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Type of Report

Date

Download

Star Bulk Carriers 2Q17 - Result update

Equity Research Report 10 Aug 2017 PDF

ICTSI 2Q17 - Result update

Equity Research Report 10 Aug 2017 PDF

Credit Research Container Shipping 1Q17 - CMA CGM

Credit Research Report 09 Aug 2017 PDF

Nordic American Tankers 2Q17 - Result update

Equity Research Report 09 Aug 2017 PDF

Gaslog 2Q17 - Result update

Equity Research Report 09 Aug 2017 PDF

Teekay Tankers 2Q17 - Result update

Equity Research Report 04 Aug 2017 PDF

Pacific Basin 1H17 - Result update

Equity Research Report 31 Jul 2017 PDF

Diana Shipping 2Q17 - Result update

Equity Research Report 27 Jul 2017 PDF

Scorpio Bulkers 2Q17 - Results update

Equity Research Report 25 Jul 2017 PDF

Credit Research Dry Bulk Shipping 1Q17 - Navios

Credit Research Report 21 Jul 2017 PDF

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