Play the Psychology, Not the Earnings

by Alan Ginsberg

Let’s start with the following two suppositions: (1) shipping equities remain under-owned by US-based financial institutions today; and (2) institutional ownership is desirable. With respect to the first point, it pays to remember that none of the major US stock indexes (e.g. the S&P 500, Russell 2000, Wilshire 5000) has a pure shipping component.

The inability to easily benchmark risk/return only adds to the difficulty that the potential institutional investor must account for in plotting his risk evaluation strategy. In searching for energy plays, he will consider the stocks of integrated oil majors first, oil services companies (i.e. drilling and off-shore supply) second, and ship-owning companies third. With few exceptions (Teekay comes to mind), on the basis of historical share price performance over the past few years, it is difficult to blame him for placing ship-owning companies last. But the tide is turning today, as we saw from our Investor Seminar held in New York this past January with our co-sponsor, DnB Securities: fund managers who made a killing in oil services stocks (SEACOR, Hvide, Tidewater, Trico) are now willing to see if there are any more easy pickings to be found.

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