Sunday, August 21, 2005

Hit #59

I mentioned in a recent post about CP Ships' (TEU) possible sale. Hapag Lloyd, or more specifically, its German parent TUI AG, announced that it is buying CP Ships for $2 billion in cash, valuing the shares at $21.5. This is a 53% premium to my average cost of $14.09/share.

The earlier rumors hinted at 2 other possible suitors including China Shipping and French shipping company, CMA CGM. I think China Shipping will still be looking at other targets.

Growing up in a port town, I heard names of cities like Limassol and Monrovia (think flags of convenience) as often as I heard names of other "real" cities. I boarded tens of ships - from large oil tankers to lumber/iron-ore hauling giants - just for fun. There are other advantages associated with living in a port-town, but those cannot be detailed in an investing blog! Hapag Lloyd is a name I saw often. As such this hit is extremely satisfying.

Shipping is entering another golden era and the entire sector is worth loading up on. A number of shipping IPOs have performed badly, but I see that as a short-term trend and a great buying opportunity. With a global synchronized slowdown now looming, shipping stocks may get even cheaper, but that will be short-lived. China and India's long-term ascendancy is not in doubt and global shipping will prosper alongside.

Look especially for shipping companies that haul crude and other mineral resources on the Pacific and to a lesser extent on the Baltic seas.

I have recently opened positions in Dry Ships (DRYS) and OMI Corp (OMM) and will continue buying these and possibly a few others. Others I am watching include Quintana Maritime (QMAR), Diana Shipping (DSX), Ship Finance (SFL), Seaspan (SSW), Genco Shipping (GSTL), Aries Maritime (RAMS), Top Tankers (TOPT), Eagle Bulk Shipping (EGLE), Sea Container (SCR), TBS International (TBSI), Excel Maritime (EXM). Most of these went public in the last 2 years, and some have paid dividends since their initial offerings.

Given that a good number of these are based in Greece, all these offerings are also likely to stimulate the local Greek economy. So an alternate way to play a shipping boom is to invest in a Greek Index.

How does one go about spotting a shipping top ? Look for a Greek shipping magnate to feature on the cover of People magazine!

Previous hit - Epiphany (#58)


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