Some equity analysts are urginginvestors to take advantage of the sell-off by accumulating shares of certain names,however, based on a bet that the dry-bulk market will rebound in the monthsahead.
In a morning note Deutsche Bank analyst Taylor Mulherin encouragedclients to accumulate shares of Scorpio Bulkers and Diana Shipping, which haveunderperformed the broader market year-to-date and are currently commanding $9.10and $11.52, respectively.
“Increasing vesselprices combined with recent share weakness have led to shares trading at amaterial discount to our updated net asset value (NAV) calculations,” theresearcher said.
“New and secondhand drybulk asset prices have increased materially since year-end 2013 and havecontinued to show strength more recently despite spot market rate volatility.
“This trend underscorescontinued optimism by industry participants for a sustained long-term recoverythrough at least mid-2016.”
Mulherin pointed outthat bulker operators benefit from an improved freight rate environment by wayof increased cash flow and uptick in asset values, which have spikedsignificantly in recent months despite the dip in day rates.
The researcher, whotook the reins from Justin Yagerman last week, believes a basket that includesshares of both Scorpio Bulkers and Diana Shipping is the “optimal way” to playwhat he described as “the expected improvement” in the dry-bulk market in thecoming months.
At last check all but fourof the 26 US dry-bulk stocks tracked by the TradeWinds Shipping Index, whichincludes shares of owners that are listed in the US and abroad, were losing steam in the hoursfollowing the opening bell on Wall Street Tuesday afternoon.
According to a briefingissued by Global Hunter Securities earlier in the day capesize, panamax,supramax and handysize bulkers trading in the spot market are currently seeing dailyrates of around $10,300, $6,300, $9,600 and $8,100 on average, respectively.
