Shipping rally and equity correction candidate list Shipping rally and equity correction candidate list Shipping rally and equity correction candidate list

Shipping rally and equity correction candidate list

Equities 8 minutes to read
Peter Garnry

Chief Investment Strategist

Summary:  Shipping stocks are enjoying tailwind from the pandemic that has lifted shipping rates and profitability. Our view is that the current dynamics will continue in 2021 and thus shipping stocks could continue to perform well, but longer term we prefer more broad-based logistics companies. In today's equity update we also take a look at US momentum stocks and highlights an inspirational list of stocks that could be hit hard if we get an equity market correction in the near future.


This week the world’s largest container shipping company reported Q4 earnings showing a solid tailwind from the pandemic with revenue up 16% y/y reaching $11.3bn and 84% y/y increase in EBITDA reaching $.2.7bn. This translate into a healthy operating margin increase from 15.3% to 24.1% in just one year. This is part of the overall trend of rising costs everywhere in the global supply chain with UPS reporting 8% increase in average revenue per piece in their Q4. A global composite container freight index is running at levels 3x higher than normal at this time of the year.

Despite strong tailwind from the pandemic lifting shipping stocks in general with the Bloomberg Global Marine Shipping Index up 81% since March 2020, the industry is only up 19% or 1.1% annualized since late 2005. The industry has been plagued by oversupply, something that has plagued the entire commodity sector since 2010. The big question is whether we have entered a new secular trend in shipping stocks with more gains in front of us? Our view is that stimulus and inflationary pressures building everywhere will continue to support shipping rates this year and combining that with the momentum factor being positive (shipping stocks have outperformed global equities the past year), we are optimistic on shipping stocks on a tactical level in 2021. Longer term, we have not moved to a positive position and like the broader logistics companies more as we highlighted in our Are logistics companies long-term winners? from December 2020.

Source: Bloomberg

For those investors that want exposure to shipping stocks the list below is a good starting place. It shows all the shipping stocks in the Bloomberg Global Marine Shipping Index that can be traded on Saxo’s trading systems. We have included the consensus price target from analysts covering the stocks and calculated the spread in percentage to the current price. Analysts are quite positive on the industry with an average price target 21% above current market prices.

NamePricePrice targetMkt. cap. USD mn.Price vs. price target (%)
AP Moller - Maersk A/S2,085.802,503.0639,21620.0
Hapag-Lloyd AG125.42113.1621,657-9.8
COSCO SHIPPING Holdings Co Ltd0.991.3718,87638.4
Orient Overseas International Ltd9.6514.676,15252.0
China Merchants Energy Shipping Co Ltd0.721.174,86361.9
Nippon Yusen KK28.0230.644,7679.4
COSCO SHIP ENGY0.410.583,83843.3
COSCO SHIPPING Development Co Ltd0.163,622NA
Mitsui OSK Lines Ltd29.4639.313,55533.4
Wan Hai Lines Ltd1.511.803,34319.7
Euronav NV9.0011.481,95727.5
Kawasaki Kisen Kaisha Ltd18.4517.471,734-5.3
Frontline Ltd/Bermuda6.887.121,3603.5
Star Bulk Carriers Corp11.8213.921,13517.8
DHT Holdings Inc6.006.551,0259.2
Stolt-Nielsen Ltd14.7818.4193724.6
Pacific Basin Shipping Ltd0.190.2290813.3
Scorpio Tankers Inc15.4819.3589825.0
SFL Corp Ltd7.337.20886-1.8
Golden Ocean Group Ltd5.47789NA
D/S Norden A/S18.8220.637549.6
Danaos Corp35.8435.00733-2.3
Navigator Holdings Ltd9.7313.4054437.7
Nordic American Tankers Ltd3.263.494936.9
FLEX LNG Ltd8.6412.3447142.8
GasLog Ltd4.605.0843810.4
Teekay Corp3.12315NA
Odfjell SE3.264.7529945.4
Diana Shipping Inc2.923.2626111.6
Eneti Inc20.9024.4023616.7
Tsakos Energy Navigation Ltd9.2210.5017313.9
Ardmore Shipping Corp3.905.1213031.3

Source: Bloomberg and Saxo Group

Is a new momentum crash on the horizon?

Equities are grinding higher everyday and the speculative fever is running high with Bitcoin price action and the short squeeze in GameStop and other shorted stocks as recent evidence. If we look at the Russell 3000 Index in the US, we observe 720 stocks with a one-year total return above 50%. Yes, you read correctly and note that the starting point for the calculation is before the major selloff started. In the finance literature, many different authors have covered a concept called momentum crashes (read here, here, and here). Momentum crashes mean different things to different investors. The ones that implement equity factor strategies in long-short versions tend to view momentum crashes when the equity market bounces back from a huge selloff as the one in 2008 when the losing stocks shorted suddenly reverses big time creating large losses in the short component of the portfolio relative to the gains on the long component.

In a paper from the quant investment firm Robeco it is shown how generic momentum stocks (sorted on simple 1-year total return metric) suffered greatly in the subsequent 36 months. Long-only momentum strategies are part of an overreaction and buying on narratives aggravating the mispricing which drastically lowers the expected returns (they become negative) on such stocks and is realised when the market reverses. The recnt erratic behaviour in financial markets and equity valuations getting inflated across what we call tier-2 and tier-3 companies (those with little earnings) are a cause for concern. We could very well soon be experiencing a momentum crash in combination with a normal and healthy equity market correction. In this case the inspirational list below shows the stocks in Russell 3000 that are up the most the past year.

NameReturn 1YReturn 5YMarket Cap (USD mn.)P/EReturn YTD
Novavax Inc4150.14220.1318993.58167.56
Veritone Inc1815.661486.8067.66
Plug Power Inc1368.723883.2832326.9589.71
Digital Turbine Inc1275.397304.177944.40211.7957.09
GameStop Corp1199.49149.013571.04171.76
FuelCell Energy Inc1187.38-53.778550.38137.42
eXp World Holdings Inc1124.9818836.119537.27426.06116.00
Overstock.com Inc1120.07673.184315.00430.04110.34
Workhorse Group Inc1101.87669.204635.5594.44
Waitr Holdings Inc1078.42434.0040.65
Retractable Technologies Inc1019.48513.52583.0053.5260.52
Aspira Women's Health Inc1018.32644.92972.7131.00
GrowGeneration Corp1002.793422.521,217.7257.11
Pacific Biosciences of California Inc992.86422.788538.9097.6976.95
Celsius Holdings Inc940.513172.584414.13957.0620.99
Fulgent Genetics Inc924.174186.4684.89231.04
Nautilus Inc902.7556.80882.9517.7660.86
Silvergate Capital Corp791.833349.34108.9793.82
Atomera Inc752.76894.68159.17
CarParts.com Inc736.86690.371022.7672.24
SunPower Corp690.03242.878361.6491.65
ExOne Co/The669.57607.881123.41467.65
Moderna Inc658.3170966.6571.67
iBio Inc616.06-51.85545.94147.62
Vaxart Inc614.41-46.03922.8247.64
Clean Energy Fuels Corp602.90642.983358.70167.27115.52
Seres Therapeutics Inc600.8211.122353.295.27
Arcturus Therapeutics Holdings Inc557.70120.852086.7586.03
MicroStrategy Inc543.43549.009342.34223.17150.80
Tupperware Brands Corp531.14-7.801744.2419.099.51

Source: Bloomberg and Saxo Group

Quarterly Outlook 2024 Q3

Sandcastle economics

01 / 05

  • Macro: Sandcastle economics

    Invest wisely in Q3 2024: Discover SaxoStrats' insights on navigating a stable yet fragile global economy.

    Read article
  • Bonds: What to do until inflation stabilises

    Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain inflation and evolving monetary policies.

    Read article
  • Equities: Are we blowing bubbles again

    Explore key trends and opportunities in European equities and electrification theme as market dynamics echo 2021's rally.

    Read article
  • FX: Risk-on currencies to surge against havens

    Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperform in Q3 2024.

    Read article
  • Commodities: Energy and grains in focus as metals pause

    Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities in Q3 2024.

    Read article

Disclaimer

The Saxo Group entities each provide execution-only service, and access to analysis permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Inspiration Disclaimer and (v) Notices applying to Trade Inspiration, Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular, no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Trading in financial instruments carries risk, and may not be suitable for you. Past performance is not indicative of future performance. Please read our disclaimers:
Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
Full disclaimer (https://www.home.saxo/en-sg/legal/disclaimer/saxo-disclaimer)

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments. Saxo Markets does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo Markets or its affiliates.

Saxo Markets
88 Market Street
CapitaSpring #31-01
Singapore 048948

Contact Saxo

Select region

Singapore
Singapore

Saxo Capital Markets Pte Ltd ('Saxo Markets') is a company authorised and regulated by the Monetary Authority of Singapore (MAS) [Co. Reg. No.: 200601141M ] and is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms & Risk Warning to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Trading in leveraged products such as Margin FX products may result in your losses exceeding your initial deposits. Saxo Markets does not provide financial advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Markets does not take into account an individual’s needs, objectives or financial situation.

The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit www.home.saxo/en-sg/about-us/awards.

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website are not intended for residents of the United States, Malaysia and Japan. Please click here to view our full disclaimer.

This advertisement has not been reviewed by the Monetary Authority of Singapore.

Apple and the Apple logo are trademarks of Apple Inc, registered in the US and other countries and regions. App Store is a service mark of Apple Inc. Google Play and the Google Play logo are trademarks of Google LLC.