Evermore Global Advisors jumped into shipping with both feet in 2015/2016, but it is fair to say that one foot is now clearly out.
The New Jersey-based investor more than halved its overall shipping portfolio in 2020, selling more than 2.4m shares in companies such as Frontline, Genco Shipping & Trading and Scorpio Bulkers.
Filings with US securities regulators show Evermore also sold its minor positions in Star Bulk Carriers and Tsakos Energy Navigation entirely.
But Evermore's David Marcus and Tommy O told TradeWinds that while they will probably never have such a large concentration of their portfolio in shipping again, they have not lost faith in the sector and will add positions at some point.
Evermore entered 2020 with nearly 20% of a $1.1bn portfolio in shipping stocks.
'Devastating environment'
But the ravages of Covid-19 on the sector and a wish to redeploy some of the capital into other industries fed the decision to sell down — mostly in the year’s second half, the managers said.
“We’re not a shipping fund — we can invest anywhere in any sector,” said Marcus, who is chief executive and portfolio manager.
“The whole shipping industry is going through a devastating environment. We’re value investors. We got into shipping in a strong way in 2015 and 2016. Maritime was perfect back then, and we still think it’s interesting today.”
Evermore had been excited about the potential impact of the International Maritime Organization's 2020 sulphur cap regulations for shipping stocks. But that, of course, was before Covid-19 struck. The virus caused the managers to reassess.
“Our view was that this is going to be delayed — the pandemic is going to slow everything down,” Marcus said. "Other things were also affected in our portfolio. It wasn’t confined to shipping.
“And we started to see new listings and spin-offs, so we shifted around capital in our portfolio. It didn’t happen all in one shot, it was dribs and drabs. And we did reduce. But we didn’t say, ‘Let’s get out of this thing, we’re dead’.”
Evermore still holds sizeable positions in tanker owner Frontline and dry bulk’s Genco, with 1.7m and 941,000 shares, respectively.
But these reflect cuts of 592,000 and 1.1m shares — reductions of 26% and 54%, respectively.
The managers offered these explanations for those and other moves:
Genco
“We started easing out of it in the last four or four-and-a-half months of the year,” Marcus said. “The dry bulk industry is ripe for consolidation, and we always thought Genco was a key candidate, either as a consolidator or consolidatee. That piece of our thesis never materialised.”
John Wobensmith-led Genco recently saw significant selldowns by its three largest private equity holders: Centerbridge Partners, Strategic Value Partners and Apollo Management.
But it is clear that most or all of the shares Evermore jettisoned came before the so-called “Prexit” move of the trio.
Also clear is Evermore’s take on Wobensmith.
“We have ridiculously high respect for John Wobensmith and what he has brought to the table,” Marcus said. “We decided to take money out and deploy it elsewhere, but we’re not running away from this stock or shipping.”
Frontline
“We did take it down, but it’s part of the same thesis of reducing exposure and reallocating into other investments,” Marcus said.
Evermore held departed Frontline chief executive Robert MacLeod in high regard, but Marcus also spoke highly of his interim successor, Lars Barstad.
Star Bulk
The Petros Pappas-led company is the leading consolidator and the largest player in the dry bulk market, but Evermore came into the position through its former 11% stake in Arne Blystad’s Songa Bulk.
“Again, [president] Hamish Norton is one of the best executives in the business, but our 11% became 1% once Star acquired Songa. It wasn’t a huge position and we sold for the reasons I mentioned,” Marcus said.
Tsakos Energy Navigation
“Like Star, it was not a large position and we evaluated whether we should make it bigger,” Marcus said. “We chose to move on but we have no issues with the company being well run.
“With both Tsakos and Star [Bulk], we don’t want positions in our portfolio that are less than 1% — they just don’t move the needle.
“I think you will see us increase maritime exposure again, and I wouldn’t tell you that if we didn’t mean it. But I think you will see us concentrate on fewer names and bigger positions.”
