Shippers: Anchors Aweigh?

Shipping stocks have had a solid bounce from their November lows and seem to me to be ahead of many groups as well as the major market indices in their bottoming process. Just as this group signaled caution in global trade and transport mid-year in 2008, it would make sense to think it may be one of the first sectors to turn up in signaling an economic recovery somewhere out through the windshield, right?

First, know that shippers very much remain on investors' radar screens and their awareness and willingness to bet on the constituents and the sole ETF (NYSE: SEA) is high. The explosive recent bounces, increasing volume and, most importantly, confirming relative strength readings suggest to me this may be with good reason. Indeed, three key facts have been converging and moving in the same upward direction, albeit in vary speed: shippers' share prices, forward freight agreements (FFAs, a sort of futures market on shipping rates) and the Baltic Dry Index all suggest to me a bottoming is at hand.

Keep in mind, Chinese New Year is early this year and is already upon us - January 26^th. This same holiday break led to the first sharp correction in the shippers we saw last year, so in the short-run traders should be a tad cautious, but those willing to speculate on recovery can hang their hats on the positive early signs mentioned above, and they can continue to expect shippers to be one of the first groups to move.

 

**Disclaimer: the author's firm serves as portfolio consultant on a Shipping sector UIT, and it provides the index which underlies the Claymore/Delta Global Shipping ETF (NYSE: SEA).