Global supply chains faced a crunch during the pandemic as countries closed their borders, with the jamming of the Suez Canal aggravating the issue. As demand soared, business boomed for the shipping companies.
As we headed into pandemic recovery, the markets expected the music to stop for the shipping industry. However, ports around the world continue to face congestion and contract rates for shipping continue to remain high.
In fact, according to American Shipper, annual contract rates for container ships rose sharply in 2022 with Asia-U.S. contract rates seeing an increase of 122% since pre-Covid levels. As the supply chain remains congested, experts estimate that long term shipping contract rates will run at about 200% more than last year.
That said, the shipping industry is highly competitive and is often plagued by high costs and relatively thin margins. Their demand may also be cyclical depending on the type of goods they transport. Hence, instead of trying to value them, I prefer to use momentum as a criterion to profit from their price movements.
Here, I took all the shipping stocks listed in the US and ranked them according to their momentum. I present the top 5 shipping stocks with high momentum as of 27 March:
5 shipping stocks with high momentum
Danaos Corporation (NYSE:DAC)
One of the largest independent owners of large container ships, Danaos Corp was established in 1972 and their ships have been traversing the seas ever since. It owns 71 vessels in its fleet.
They saw a 49% increase in total operating revenues in 2021 and are +12% since momentum picked up in early Feb.
Golden Ocean Group (NASDAQ:GOGL)
Golden Ocean Group is an international shipping company based in Norway, that specialises in shipping dry bulk cargo like coal and sand. It owns 81 dry bulk vessels and operates 11 chartered-in vessels on long term time charter contracts.
They saw a 97.9% increase in total operating revenues in 2021 and are +29% since their momentum picked up in early Feb.
Star Bulk Carriers (NASDAQ:SBLK)
Star Bulk Carriers is another dry bulk shipping company with 128 vessels in operation based in Greece. They also provide vessel management services and fun fact, they have a subsidiary based in Singapore as well.
They saw a 106% increase in total operating revenues in 2021 and are +31% since momentum picked up.
Eagle Bulk Shipping (NASDAQ:EGLE)
A U.S. based ship-owner and operator of dry bulk shipping vessels, Eagle Bulk has 53 vessels in its flights having just acquired a new vessel last year.
They saw a 116% increase in total operating revenues in 2021 and are +42% since momentum picked up.
ZIM Integrated Shipping Services (NYSE:ZIM)
ZIM is an international container shipping company that also offers door-to-door and port-to-port transportation services. They offer a premium, in-house cargo tracking service, ZIMonitor which is a great value-add for their customers. ZIM operates 118 vesels of which, 8 are vehicle transport vessels.
They saw a 169% increase in total operating revenues in 2021 and are +54% since momentum picked up.
Use momentum to catch opportunities in difficult industries
Momentum is a phenomenon that has long been proven. Using the QMT framework, we can ride on trends simply by measuring and ranking “momentum” in numbers. That way, you don’t have to spend hours studying a company’s background. In fact, prior to this exercise, I have not even heard of some of these shipping companies.
However, the best part is that it can also be paired with fundamental analysis to allow you to find the best time to buy a stock.
If you think this could help improve your investing results, I’ll be sharing how you can use the same framework at my upcoming webinar.
