Stocks: Betting on Dry Bulk Shipping

The article below is clipped from thestreet.com.  Simon Constable points to reasons why investing in the bulk carrier shipping market is a potentially profitable thing.

Specifically Simon points to recent disasters in China, credit crunch and a fuel demand for coal as reasons why to invest. Iron ore is needed to make steel.  China has an insatiable appetite for steel to grow its economy and infrastructure. The earthquake there has now increased demand as reconstruction will have to take place. Coal is a primary fuel for electrical generation, and also for gasification to create liquid fuels such as Dimethyl Ether. DME can be used as a fuel or to create plastics etc.

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What bugs me though is how little some analysts actually know about the shipping business. References to dry bulk cargo vessels as "cruisers" gives me some pause to wonder whether this guy did much homework beyond macro stock trends and potential linkage between transportation and cargo demand. 

The analysts I know talk to people in the business daily.  I wonder whether that happened here. Thats not particularly unique to thestreet.com.  Motley fool does the same thing.  Even the title of the article below makes me wonder if there is understanding of the differences in demand for oil tankers, bulk carriers, container ship charters, etc.  All qualify as "shipping".

Shipping charters typically follow sales transactions by about 4 to 6 months.  Vessels for charter have to be deployed, then loaded etc. So a delay in a seasonal market, or a change in demand slowly shows up in the demand for shipping space. Simon gets this pretty much right, but what about availability of the right kinds of ships at the right size to meet spot markets? That is the difference between which company will be able to meet the spot demands of the global economy and natural disasters.

My experience is that analysts typically get the big picture right, but the devil is often in the details.  It is there that they often lose focus and why people actually "in the business" take analysts with about a 14 lb. grain of salt.   On that note, its wise to do your own homework.

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clipped from www.thestreet.com Three Reasons to Bet on the Shipping Sector The dry-bulk shipping stocks have been good to investors this year. But things stand to get a whole lot better. Why, when things are up so much, can they stand to go even higher? There are three reasons: coal, the earthquake in China and the credit crunch. First, a quick review of how things got to this point. Since I first highlighted the sector in late January, shares of DryShips (DRYS - Cramer's Take - Stockpickr), Navios Maritime (NM - Cramer's Take - Stockpickr) and Eagle Bulk Shipping (EGLE - Cramer's Take - Stockpickr) are up 73%, 42% and 52%, respectively. These stocks, the "Class A" acts in the dry-bulk shipping sector, have followed the roller-coaster ride in the cost of freight rates. Last November the Baltic Dry Index, which measures the cost of moving bulk commodities such as ores and grains, started plunging from a November high of 11,039 down to a low of 5,615 -- a 49% drop -- on Jan. 29.

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