Since the credit crisis hit in 2008 some sectors have fallen and have since come back, while others have remained depressed. One area that has not recovered and has shown a steady decline since 2008 has been the shipping industry. When looking a chart of the Baltic Dry Index there was a crash four years ago and a moderate trend down, which up until a couple of months ago looked in-tact. However, there are some reports that seem to suggest that dry-bulk rates are starting to rise after a four-year slump.
The Baltic Dry Index, which measures commodity-shipping costs, has slowly been trending upwards after nearly a 40% drop that ended in late October. When looking at the BDIY chart, technically speaking it looks like an early bottom has formed in the index. Profits in the industry are not expected to go to back to pre-credit levels in the near future, with a slow recovery to be expected over the next few years.
That said, there are a bunch of companies in this industry that have been greatly oversold due to fear of economic conditions not getting any better. Those that have weathered the storm in the shipping industry will be able to come out stronger as we have seen the survivors of the housing market perform quite well this year. Navios Maritime (NYSE: NM) and Dryships, Inc. (NASDAQ: DRYS) have been severely oversold due an ailing industry and the fact that their headquarters are located in Greece. With a rebound expected in the industry these two stocks offer great points of entry.
Navios Maritime (NYSE: NM) is a shipping and logistics company focusing on the transportation of dry bulk commodities, including iron ore, coal, fertilizers, and grains. The company has a fleet drybulk that consists of 49 vessels in the water. The company is a hidden game in a tough economic environment, with operations primarily in North America, Europe, Asia, and South America
Navios Logistics has recently become a key provider in the Hidrovia Region of South America. The stock offers a comfortable yield of 6.27% while waiting for the stock to appreciate. The company has a market capitalization of $387 million and is trading at $3.83, in the middle of its 52-week low and high of $3.08 and $4.49.
DryShips, Inc. (NASDAQ: DRYS) owns 49 drybulk carriers and tankers that operate worldwide. The company owns Ocean Rig which operates nine offshore ultra deepwater drilling units. DryShips involvement in deep water drilling company has diversified the company’s operations from being just a drybulk cargo operator. The company has a 65% stake in OceanRig as the drilling sector is expanding due to growing demand from oil companies and more oil fields discovered underwater.
Deepwater drilling operators are finding there are shortages of rigs globally as the energy companies have increased their production levels. The diversification in the company’s operations make DryShips an interesting investment as the company is adjusting to economic conditions. It is a very respectable move by management to try and diversify the company’s operations and expand into other parts of the industry. The company remains down over 95% from before the credit crisis and investors may want to take a look at Dryships and put aside past performance. The company has a market capitalization of $700 million and is trading at $1.69, just above its 52-week low of $1.46 and well off it high of $3.84.