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Planet Money Podcast: Shipping is Underwater


txlaw
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Thanks very good listen. I have been following shipping for about a year looking for big value. OSG was fairly cheap, but is not currently. My favorite play right now is KSP. They just cut their dividend and that has pissed off investors. I think its cheap just dont have the cash to buy currently.

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As someone admittedly completely ignorant about shipping, could you fill in the holes to the thesis for me?  Generally speaking, I'd guess that most things look cheap on a book value basis (mkt value > ship value), but there don't seem to be any real barrier to entry. 

 

 

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Im probably not too far ahead of you so take this with a grain of salt. Ships are commodities. They just went through a massive overbuilding phase. Now everyone is waiting to see how it plays out.

 

All ships - containers, dry bulk, tankers, barges, tugs, ect. Were overbuilt and the order book is now much higher than current demand. Single hull ships have to be scrapped and people are slow steaming ships or using ships for storage. These measures are helping out but rates for most ships are in the tank and will never support the prices used to justify the ships bought at the peak.

 

BV is probably  too high for most carriers unless they did not buy many ships in the last few years. I am looking for shippers who bought limited amounts of ships and have cash. They can take advantage of the downturn and buy ships on the cheap. I like TNP, and am looking at DHT.

 

I also want some added safety and want a protected industry. I liked OSP (bought out by parent OSG) and KSP because they operate in the Jones Act. US laws prevent movements from US Port to US Ports from using non US Jones Act ships. Its hard to find a ship built, crewed, and owned by a US company so these carriers have a few added barriers to entry.

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