Investor sentiment on shipping stocks is probably at an all-time low, and that’s just fine with a couple of the buy-side firms that are still in the lonely room.
That’s because the opportunities ahead may well be the most compelling ever, said investors David Marcus of Evermore Global Advisors and Richard Diamond of Castlewood Capital Partners as the 32nd annual Marine Money Week conference opened today in New York.
“You have to buy things when people hate them and people hate them now,” said Marcus, the Evermore chief executive.
“We see less and less competition in this sector as we invest capital — we can pick and we can be choosy. You really get your best opportunities when there’s fear and panic.”
Diamond, a principal at Castlewood, sat shoulder-to-shoulder with Marcus and spoke the same language.
“Very few people have made money on shipping stocks,” he said. “When you try to bring a shipping deal to people the answer is usually ‘I lost money on shipping,’ or ‘I know someone who has lost money.’
“But right now the values are compelling. In the 10 years I’ve been investing in shipping, this is the most propitious moment I’ve experienced.”
The two men were joined on the panel by Robert Brinberg, president of investor-relations firm Rose & Co, and J Mintzmyer, the Seeking Alpha analyst.
All were high on the potential of the IMO 2020 emissions deadline to lift the market. Marcus was particularly bullish.
“The last big inflection point was double hulled tankers — some didn’t think it would be a big deal and it turned out to be a huge deal,” Marcus said.
“IMO 2020 is another sea-change for the industry and there will be winners and losers like anything else. What’s so fascinating is that some companies are embracing it and putting the scrubbers in while others are saying we’re not going to do anything.
“That’s what creates a market — that difference of opinion.”
Most investors still don’t understand the detail, and that’s an advantage, Marcus said.
“You want to be there before things are better understood by other market participants,” he said.
“Of course, the cemeteries are full of people who thought they understood this industry. I don’t want to be in a cemetery.”
Diamond made the case that shipping will regain its popularity with investors once the IMO 2020 effect is on full display.
“When stocks have doubled, everyone is going to want meetings with the public companies,” he said.
“Beneficiaries will be companies like Diamond S Shipping which is trading at three times [projected] 2020 earnings and at 60% of its net asset value. Not a lot needs to work to see improvement in those numbers.”
