• «
• »

Sector #3: Shippers

If you look at the stocks of those companies that ship goods overseas you would think that world trade has completely evaporated. Obviously that is not the case. Goods are still being transported from port to port, even with the collapse of the global economy.

Yes, the dry bulk index, which is the rates used to ship goods, has collapsed, but there is no indication that current levels will be permanent. However, it appears that the market thinks global trade is over just like a broken relationship.

I think the shippers are in need of some love here. These stocks have been beaten down to extreme levels. Today they may merit reasonable speculation.

Yes, the recession is deep and painful, but eventually we will recover. Third World companies that are experiencing rapid growth do not have the resources internally to support such growth and need to ship in goods to sustain it.

I would bet on a recovery in these stocks. A company like DryShips (DRYS) is priced like a stock heading for bankruptcy. In May of last year, this stock traded above $100. Even if you think half that value is more reasonable, showing the love at around $5 per share may make sense.

Other names in the shipping space include Frontline (FRO) and Teekay Corporation (TK).

Next: Sector #4 – Banks