SB - Safe Bulkers: Better Margins At A Cheaper Price
2024-05-31 03:33:57 ET
Summary
- Safe Bulkers has significantly outperformed its peers, achieving a total return of 89% since I covered it in early 2023.
- The demand and supply balance in the dry bulk shipping industry has weakened, but SB remains undervalued compared to its peers.
- SB's fleet continues to out-margin its competitors, and management's capital allocation strategy is impressive.
Thesis
When I first wrote about Safe Bulkers ( SB ) in January 2023 , my thesis had four pillars.
- Shipping rates should improve, given the restricted supply and muted demand.
- SB was cheap relative to the sector, and its valuation might re-rate closer to peer valuations.
- SB’s efficient fleet set them up to generate profits above industry norms and navigate a changing regulatory environment.
- Management’s capital allocation fits my investing profile (smaller dividend, larger reinvestment).