BDRY - 3 Best Dry Bulk Shipping Stocks to Buy in the Fourth Quarter
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Marine shipping stocks have flown under the radar for most investors but are now poised to offer incredible returns in the foreseeable future. Several macroeconomic elements are disrupting the market, and maritime shipping companies are sure to profit from this predicament.
Overall, global supply chains are out of whack, leading to a demand and supply imbalance and pushing day rates for ships in the process. Hence, these conditions are likely to offer a massive windfall for companies involved in the shipping industry.
Dry bulk shipping, in particular, has exploded this year. It is directly linked to the demand for consumer goods, which has grown at a robust pace in the past year. Moreover, the Baltic Dry Index has been on a tear, up more than 100% over the past year. Additionally, the global dry bulk fleet will only increase by 2% over the next two years. With the economy picking up, shipping rates may stay or even move higher.
Having said that, let’s look at the best dry bulk shipping stocks to scoop up for the fourth quarter.
- Star Bulk Carriers (NASDAQ:BULK)
- Breakwave Dry Bulk Shipping ETF (NYSEARCA:BDRY)
- Textainer Group Holdings (NYSE:TGH)
Now, let’s dive in and take a closer look at each one.
Best Shipping Stocks To Buy: Star Bulk Carriers (BULK)
Star Bulk Carriers are one of the largest shipping companies globally, boasting a fleet of 128 vessels. Moreover, it is also one of the most profitable sectors marked by impressive top-line growth and a high dividend payout to boot. With impeccable forward revenue growth of over 20%, BULK stock trades at just 2.27 times forward sales.
With the rapid growth in the Baltic Dry Index, shipping rates have elevated Star Bulk’s results in its most recent quarter. In its second quarter, revenues rose to $311 million, from $146 million from the prior-year period. Moreover, it posted a gain of $1.22 per share from a 46 cents loss last year.
Furthermore, it grew its cash till by roughly 17.5% even after the repayment of its debt obligations, Capex requirements, and dividend payouts. Star Bulk increased its dividends by 40 cents to 70 cents per share in the second quarter on a sequential basis.
Breakwave Dry Bulk Shipping ETF (BDRY)
The Breakwave Dry Bulk Shipping has been on a monumental run in the past year. BDRY stock has returned a whopping 284% over that period, which dwarfs the S&P 500’s total return of roughly almost 23% this year. Dry bulk earnings have been stellar in the past 12-18 months, shown in BDRY’s lofty returns. With the Baltic Dry Index on fire this year, expect BRDY stock to pounce on these trends with its freight futures portfolio on dry bulk indices.
Moreover, Breakwave holds freight futures contracts which come with a three-month expiry. It operates a laddered strategy that involves buying out the next quarterly contracts during the month while settling its existing positions in cash. It currently has roughly $87.2 million assets under management with a bulk-sized expense ratio of 3.3%. The ratio is typically high for the dry bulk market, mainly due to the quirks of the sector.
Though the industry and the exchange-traded fund (ETF) seem to be on a roll, investors should be somewhat agile concerning BDRY stock with regards to the future.
Best Shipping Stocks To Buy: Textainer Group Holdings (TGH)
Textainer Group is one of the largest owners and managers of shipping containers with a fleet of 4.1 million. TGH stock is in an excellent position to take advantage of the tailwinds in the sector.
The company’s top-line growth had been stellar, with rental income in the second quarter up a handsome 30% to $187 million from the same quarter last year. Moreover, adjusted net income per share increased by an amazing 428% from a year ago. A lot of it was due to better pricing for containers and much better fleet utilization rates.
Furthermore, the company has made several investments to capitalize on the rising demand for containers totaling over $1 billion. Collectively, Textainer has done well to materially lower costs through effective financial management, which will have helped fortify its balance sheet.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
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