SITIY - BOAT: Shipping Stocks Are A Momentum Buy
2024-05-17 11:27:59 ET
Summary
- Shipping stocks have underperformed the S&P 500 in the past decade but have outperformed the market year-to-date.
- The SonicShares Global Shipping ETF is a globally diversified ETF with equal exposure to container and energy shipping, and it has a modified cap-weighted structure.
- Shipping stocks typically have low but volatile profits, meaning that the best point to take a position is when they are cheap and distressed.
- BOAT's value proposition has been weakened by strong momentum over the last year, but the momentum itself is a good reason to take a position.
- The lagging performances of larger-cap shipping stocks gives BOAT more room to run for now.
Over the past decade, shipping stocks as represented by the Dow Jones Maritime Transport Index have underperformed the S&P 500 by about 60%, but year-to-date, they have outperformed the market by about 30%. This article reviews the SonicShares Global Shipping ETF ( BOAT ) through the lenses of value, quality, momentum/trend, and diversification to assess its potential fit in a portfolio. In the end, I will conclude that although BOAT started off as a good value buy in 2022 and 2023, it is now primarily a momentum buy and should be treated as such.
Below, I will briefly discuss the composition of the BOAT ETF, then move on to an examination of its performance and value, and finally argue that anybody thinking of entering into the position at this point should probably only do so as a momentum trade or as a way of adding long-term portfolio diversification in a richly-priced market. I currently own five shipping stocks, CMRE , SB , PSHG , SHIP , and GLBS , two of which (CMRE and SB) are held in BOAT (comprising around 2% of the ETF's holdings).
A Global Shipping ETF
According to the SonicShares Fact Sheet , BOAT "consists of global shipping companies engaged in the maritime transportation of goods and raw materials, including consumer and industrial products, vehicles, dry bulk, crude oil and liquefied natural gas." It tracks the Solactive Global Shipping Index , which appears to have a higher concentration of global shipping stocks and container shipping stocks than the Dow Jones Maritime Transport Index has.
Chart A. The BOAT ETF is evenly divided between containers and commodities. (Solactive)