Dry Bulk Shipping!!
Courtesy: Jim Crammer.
Nobody talks about dry bulk shipping stocks because they're boring. The money to be made on these stocks, however, is very exciting; they provide "huge and reliable dividends".
Dry bulk shipping stocks have risen enormously since July. "This industry is one of the great bull markets in the world right now".
Because dry bulk shipping companies don't invest in growth (they rarely build new ships), they pay a lot of dividends back to investors.
Even though investing in these stocks is "not sexy," sometimes you have to go for the easy money, and that's what dry bulk shippers offer.
These companies are consistent performers that pay big dividends.
Globalization and high demand for raw materials in China are behind bulk shippers' recent success. In addition, because dry bulk ships offer lower margins for shipbuilders, few of them are being made, so the ships are scarce. The high demand and short supply work together to drive up the price of this kind of shipping.
All of these companies are in the "sweet spot, but they can be grouped into two distinct groups that offer different scenarios to investors.
The first group of shippers is completely chartered out for the year, meaning that changes in the Baltic Exchange Dry Index, an indicator of the price of dry bulk shipping, will not affect the stocks' performance. Those companies have already booked their shipping in advance, so they offer steadier performance that doesn't depend on external factors. Conservative investors should opt for these companies.
Those shipping companies that have partially chartered their fleets have greater exposure to the Baltic index. Their prices will rise or fall based on demand for the goods they ship. Investors who can tolerate more risk should buy these stocks.
Peter Georgiopoulos, CEO of General Maritime and chairman of Genco.
To shed more light on dry shipping, Cramer welcomed Peter Georgiopoulos, CEO of General Maritime and chairman of Genco.
He asked Georgiopoulos if bulk shipping rates are currently sustainable and whether they have room to improve. Georgiopoulos compared the current dry cargo market to the period immediately following World War II, when iron, steel and cement had to be brought to Europe and Japan to rebuild the war-damaged countries. Citing a similar environment in today's China, he said he believes there is a lot of room for growth in the shipping market. He further asserted that shipyards are "locked up," and it could be as late as 2011 or 2012 before a new dry bulk boat is built, meaning that supply should not change any time soon.