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.
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.
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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