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As shipping stocks soar, controlling shareholders reap the rewards

Tanker, container and dry bulk stocks simultaneously hit 52-week highs

Shipping stocks have rallied to new highs in recent days, but longer-term gains are even more impressive. Over the past half-decade, larger-cap shipping stocks have outpaced the S&P 500 by between two and 10 times. Insider wealth from shipping ownership has surged by hundreds of millions

US-LISTED shipping stocks are firing on all cylinders. From tankers to dry bulk to containers to LPG, shipping equities are hitting new peaks — not just 52-week highs but in some cases all-time highs.

It is rare for stocks in virtually all shipping segments to rally to this degree simultaneously. With the exception of the congestion-induced boom for container shipping and dry bulk during the pandemic, 2024 is on track to be the best year for shipping equities since the shipping supercycle in 2004-2008.

Listed shipowners had no choice but to revamp their model after the global financial crisis in 2009. The pre-financial-crisis era featured a pairing — highly dubious in retrospect — of highly cyclical revenues with heavy capital expenditures on newbuildings, equity sales to fund growth, full dividend payouts, and very high debt levels.

Today’s playbook is very different, at least among larger spot-centric bulk commodity shipping owners. Mirroring the similarly retooled strategy of US-listed oil exploration and production companies, it features much lower debt to reduce break-evens, limited capital expenditures, more sustainable dividend payouts, and share buybacks when stock prices are below net asset value (NAV).

That new playbook is working.

There is now “a significantly more receptive investor market for shipping”, said Clarksons Securities analyst Frode Morkedal on Monday. “Shipping stocks have made a significant turnaround this earnings season, outperforming the previous two quarters.”

Stifel analyst Ben Nolan said, “It has been pretty universal that [Q1] results have been...well-received by the market,” although he noted that “most companies are still trading below NAV”.

“Can the public companies return to the glory days of premiums to NAV across the board? We doubt it, but certainly progress is being made.”

Controlling shareholders see huge five-year gains

A Lloyd’s List Intelligence analysis of five-year price changes for stocks of larger US-listed owners shows that shipping equities have dramatically outperformed the broader stock market over this period.

And while investors do not typically buy and hold shipping equities for multi-year stretches, there is one category of shareholder that does: the controlling families and private equity firms that hold the insider shares.

A few examples of the enormous gains in value for these insiders over the past half-decade (which do not include dividend returns):

Oaktree owned 47.6m shares of product tanker owner Torm, worth $372m, five years ago. It currently owns 51m shares worth $1.88bn — a five-fold increase in value.

• In May 2019, shipping magnate John Fredriksen owned 79.1m  shares of tanker company Frontline, worth $602m. He currently owns the same number of shares but they are now worth $2.09bn, 3.5 times more than in 2019.

• Fredriksen owned 50.6m shares of bulker owner Golden Ocean five years ago, worth $257m. He now owns 79.1m shares worth $1.18 billion, 4.6 times more.

• Containership lessor Danaos was coming out of a restructuring and reverse stock split five years ago, with the Coustas family owning 31.8%, or 4.9m shares in May 2019, worth $53m. Following the pandemic boom and ongoing upside from record charter rates, the family’s current stake (47.3% of outstanding shares or 9.2m shares) is worth $765m, 14 times more than pre-pandemic.

Tanker shipping stocks hit highs

New share-price peaks are being recorded with each passing day.

On Monday, shares of product tanker owner Ardmore Shipping hit their highest level since the company went public in 2013. Shares of Torm reached their highest point since the company’s US listing in late 2017, with the price of Scorpio Tankers the highest since December 2015.

On the crude tanker side, Frontline hit its highest share-price level since April 2012 on Friday, with Teekay Tankers’ share price the highest since May 2011.

International Seaways’ share price Friday was the highest since the company went public following its 2016 spinoff from Overseas Shipholding Group.

The adjusted closing price (adjusted to account for dividends) of larger tanker stocks were up in the range of 206% (Ardmore) to 650% (Teekay Tankers) over the past five years through Friday.

In contrast, a proxy for the broader stock market, the highly popular SPY S&P 500 exchange-traded fund, was up 100%.



Container stocks surprise to the upside

The consensus at this time last year was that container shipping stocks would be in the gutter in 2024. It didn’t happen, courtesy of the Red Sea crisis and stronger-than-expected demand in consumer markets like the US.

Shares of Israeli liner operator Zim are soaring. They reached a new 52-week high Monday, double December’s levels.

Shares of liner operator Matson are now almost double the post-pandemic low hit in March 2023. On a dividend-adjusted basis, Matson’s shares are only 4% below their all-time peak hit at the pinnacle of the pandemic boom in March 2022.

Containership lessor shares are being supported by long-term charters booked during the pandemic boom together with ongoing demand for leased tonnage. Shares of containership lessors Global Ship Lease and Danaos both hit fresh 52-week highs Friday.

Adjusted closing prices through Friday of container shipping stocks were up 233% (Matson) to 767% (Danaos) over the past five years, or by more than two to seven times the pace of the S&P 500 ETF.



Dry bulk stocks also rising

Dry bulk shipping markets are profitable but not particularly extraordinary. Nevertheless, US-listed dry bulk stocks are outperforming historical levels.

New 52-week highs were hit by Golden Ocean on Friday and Genco on Thursday.

Over the past five years through Friday, the adjusted close of Genco was up by 278%, Golden Ocean by 391%, and Star Bulk by 421%, or around triple to quadruple the S&P 500 ETF.



Dorian leads the gas shipping pack

In gas shipping, most of the formerly listed LNG carrier owners have been taken private. On the liquefied petroleum gas side, Dorian LPG — which owns very large gas carriers — is the star performer.

No US-listed shipping stock in any shipping segment has performed better than Dorian LPG on a five-year basis.

Dorian’s adjusted closing price Friday was up 996% since May 2019, around 10 times the pace of the S&P 500 index. On Thursday, its shares were within $2 of the peak hit in January, when the stock hit its highest point since the company went public in 2014.


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