you can post charts
It’s not letting me!
if the chart is from the web, using firefox, right click on the chart then click copy_image.
in the reply box here, hit ctrl + v and it should post the picture
It’s from one of my powerpoints and it won’t let me copy it out. Maybe I’ll save it on a web image host tonirrow
BDI aint gonna do nothing until commodities rebound. yowza! any calls for when DRYS is going to finally die? bro, please tell me you put a stop on these positions! all going in the tank. let’s be serious.
I sold my SBLK on the run up, not quite at the top but I made about 25%. I still hold DSX. I have about 150 stocks on my book. DSX is around 50 bips. I plan to hold it for the next 2-3 years. If it goes down a lot I will probably buy more.
btw, the alpha is generally made either by having a better trading algo and ripping fractional cents out of the market, or holding value assets over a multi-year time period. I’m not sure the fluctuation in bulk stocks week-to-week means anything. If you simply buy a basket of quality stuff and hold it for 3 years and hedge out broad market exposure with a decent short book, you will outperform the market.
Fidelity ran a study, the best performing accounts were those who lost the passwords and just left it alone. Commodities are not going to zero. People are still going to need to move shit from A to B unless zip compression technology sees rapid advances and we can start emailing dry bulk goods over gmail. Cool, it’s out of favor right now. Buy the ones not going to zero and sit on them.
Simple buy and hold small cap value still outperforms everything else. The vast majority of the market either can’t or won’t be patient. Most funds can only buy stuff that is going up right now, which causes weird dislocations in the market. Tell me small cap healthcare is not going to underperform for the next 3 years and I won’t believe you.
i hear most of what you’re saying but with these positions in particular, if the commodity supercycle is actually over, these bulk shippers could die multiple times before they have a chance to thrive. i predict almost every mid to small cap commodity play will die so as a result i should feel the same way about the companies commidity producers work with. also, i hear Amazon is getting into dry bulk shipping. drone delivery of iron ore from the mine to the foundry in minutes! no infrastructure required!
Bromion, my view is that there is considerably more downside to be had as demand in China slacks through 2018. Additionally, the USD chinese labor is now more expensive than that of Mexico, which has brought about significant nearsourcing tha is likely to accelerate over the next few years and fundamentally change (for the worse) long haul shipping.
I would write more today but I’m battling the hangover from hell.
I wouldn’t disagree that I may be too early. However, not all 15+ dry bulk shippers are going to zero. That’s hard to see. DSX is one of the strongest and likely to prevail in my opinion. I have avoided the lower quality names even though they in theory have more upside given the greater fixed and operating leverage. My view is if you can’t have a 50 bips exposure in the highest quality stock in an industry at 30 year lows you are probably not a contrarian value investor. I respect different opinions though.
Fair enough, I’m not saying it’s going to zero, just that I feel there’s more room in these commodity / China exposed sectors for significant troughing in the cycle. The names may be at 30 year lows, but to me that’s just looking at a chart and buying off of price action. You could argue that a contrarian value investor would also be looking at the fundamentals (including the macro environment), which I don’t believe support the industry yet (although my outlook may be more bearish than most).
I think there’s going to be some phenomenal buys in 2018-2020, I just would want to wait for the right time. Both because I don’t want money sitting dormant for three years without generating a strong return, and due to the intermediary downside potential.
any good bars in hell?
I don’t predict macros. Maybe someone can do that reliably, but I can’t. I have no idea what China will do. My general opinion is that China is a disaster in terms of politics and financial markets, but it seems to keep humming along with a growing popluation that consumes natural resources. India has been picking up as well.
I do know DSX has the best operating structure and is well capitalized. Lots of other players drop first if things get really nasty. Since capacity is coming out of the industry and the BDI is arguably bouncing along a bottom unless China implodes, I would say that is looking at fundamentals. I have a 50 bips position now which is probably about to go to 25 bips on an asset raise that would double the size of the fund. I’ll take a flyer here. I don’t have conviction that it’s the bottom but I won’t be hurt or disappointed if it gets cut in half from here.
https://www.bimco.org/sitecore/content/home/reports/market_analysis/2015/0507_dry_bulk_demo_story
As with virtually all of my longs, I actually hope it goes down a lot so I can buy more. The magic of small positions that aren’t going to zero. This is hard for people to believe or execute upon, but the best IRRs are from stocks people don’t want to own that have no immediate outlook. There are plenty of 3 year triples sitting around that no one cares about. In 18 months they will be up and still be good buys but they’re better buys today.
Anyway I won’t really defend the shippers, I only own one and I’m going to sit on it until it goes up or down a lot and then make a decision. Hopefully it goes down.
i hear ya bro. i hate energy companies right now but i still hold a couple that i’m sure won’t go under. i’m glad to hear you’re in DSX of all the names as it is clear it’ll be the last man standing in the ocean operators. while we’re on shipping, take a look at Algoma Central (ALC). largest operator in the Great Lakes and has a small ocean fleet. decent way to play shipping in general at a sexy price IMO. liquidity’s terrible though.
I feel like these are all arguments that could have been used to buy us blue chip airlines over the past few decades
Blue chips are good but they simply have lower dispersion than small caps. How many small cap stocks double or more every year? On average, a few hundred. How many stocks in the S&P double every year? I don’t know, but even adjusting for the 500 in the S&P vs. 5000 in the Wilshire 5000, it can’t be very many. You can flip it and say the same on the short side, how many are down 50%? I’ve had many shorts in the last quarter alone down 50%, around 15-20 stocks actually.
I think we are in the wrong part of the cycle to take on a lot of liquidity risk. There are a few that have been too juicy to ignore but if we do have a meaningful correction illiquid stocks will be down 2x the market. Liquidity risk is one of the best risks to take at the bottom of the cycle but you don’t get paid for it 6 years into a bull market.
i should mention that ALC is only illiquid because it is >80% closely held. the volume is there to make big trades but you will see a little more price movement than in most U.S. shipping stocks. downside is still much less than in U.S. shippers despite its intraday liquidity issues.
Why ALC?
It seems like they mainly deal with canadian domestic commodity shipments.
cad is down and so are commodities…does this translate into more cashflow/income for them?
not really. the 8 ships they have in their ocean fleet pool would derive US income so it would give a little boost. very stable earnings, less than 12x trailing and if it were to monetize its real estate assets, it would have a net cash position, which is bonkers for an industrial company with stable earnings. if their balance sheet looked at all like any other industrial peer, they’d probably trade closer to 8x trailing, and they’re at the end of a fleet recharge so no major capital investment needed in 2017-2025. ridiculous.