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Maritime Financial Research

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Model Stock Portfolio - Feb 2017

First year performance model portfolio returns 38% (Feb 2017).

February 2017 - 1st year performance returns 38%

  • First year’s performance, Model Stock 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.

February 2016

  • At the start of the year, we were positive on Tanker and Port sectors.
  • Our reasons for being positive on the tanker segment were increasing stockpiling and higher global refinery throughput
  • We backed diversified Port operators, but slower global throughput resulted in below par returns.
  • With correction in Tanker stocks and muted performance of Port operators, our model portfolio lagged the key benchmark indices by a wide margin.

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Drewry launches credit research services for the maritime sector

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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.

48

The number of countries in which our Maritime 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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Date

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DP World - FY Results - Limited upside on current valuation

Equity Research Report 22 Mar 2017 PDF

Credit Research Port Operators 1Q17 - DPW and ICTSI

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Teekay Tankers 4Q16 – Earnings better than our estimate; reiterate Unattractive on potential headwinds

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Drewry Maritime Financial Insight - Model Portfolio Update: 38% return since launch

Maritime Financial Insight 28 Feb 2017 PDF

Gas Shipping 2017 Outlook - Stocks returns to be muted; oversupply to cap recovery

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Nordic American Tankers 4Q16 - Earnings in line with expectations; maintain our Unattractive stance

Equity Research Report 08 Feb 2017 PDF

Credit Research Container Shipping 1Q17 - APMM CMACGM and HL

Credit Research Report 07 Feb 2017 PDF

DHT Holdings 4Q16 - Better earnings and Frontline’s offer up the ante; upgrade to Neutral

Equity Research Report 06 Feb 2017 PDF

Euronav 4Q16 - Earnings shy of our estimates; reiterate our Unattractive stance

Equity Research Report 03 Feb 2017 PDF

Tanker Shipping 2017 - Returns unlikely before 2018, further dividend cuts likely

Equity Research Report 25 Jan 2017 PDF

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