One topic Streetwise hasn’t had to write about in quite some time is another round of bank equity analysts slashing their shipping coverage or fleeing the space altogether. This is a good thing.
The roster of sell-side researchers writing on the sector has remained pretty stable for the past 18 months or so after rounds of severe turbulence. There may be different reasons for that, and we’ll explore the issue later.
But Jefferies lead shipping analyst Omar Nokta recently told Streetwise that he’s seeing an uptick in investor interest, including a strong turnout at the Capital Link maritime forum in New York.
“Hedge funds are still the largest part of the investment universe, but more generalists are involved, a lot more eyes and a lot more trading liquidity. Interest is at a level higher than pre-Covid,” he maintained.
So it is against this backdrop that we take note of an outfit that is actually expanding its shipping research, although to be clear it is not one of the traditional investment banks.
Buy-side research outfit Value Investor’s Edge is growing its shipping staff and coverage. Streetwise caught up with founder J Mintzmyer this week to better understand the increased commitment.
Mintzmyer and VIE have been at it for eight years now after seemingly arriving out of nowhere in 2015.
The outfit has built its coverage across US-listed names and recently expanded into some Oslo-traded companies.
It also is moving into research on car carriers — Norwegian names like Hoegh Autoliners, Gram Car Carriers and Wallenius Wilhelmsen — and has designs on the offshore sector starting with deepsea drillers.
“We’re at the juncture now where after establishing an eight-year track record, and with a much larger client base, we could use more analysts,” Mintzmyer said.
VIE brought in Climent Molins in 2019 and the junior analyst has just been promoted to head of shipping research as Mintzmyer steps upstairs to the role of “founder/president” at the ripe old age of 32.
Expansion plans
The organisation has hired Henrik Alex as an offshore energy analyst and is interviewing to employ up to two associate analysts by the year’s end. The plan is to have 10 people including support staff devoted to shipping offshore by 2024.
Now before we go further, it’s important to say that what VIE does should not be confused with the role of the bank analysts.
Those traditional sell-side researchers generate fees from investment banking activities and trading commissions.
Buy-side outfits like VIE are paid by their investor clients for independent research. They also may hold “long” positions in the stocks they write about, although Mintzmyer says these are always disclosed.
If there should be an argument about which side features a more credible approach, Streetwise is not taking sides. Rather, we feel that more eyes on a sector that often has been starved for research attention is a good thing.
Mintzmyer has been a colourful, brash and outspoken addition to that landscape since his arrival at the tender age of 24.
He only burnished his legend by showing up at one point for a panel appearance at a Marine Money conference in New York sporting a shiner. It still isn’t clear whether he had walked into a door or was literally fighting for the interests of his clients.
But there’s a lot more to Mintzmyer than the hyper-aggressive exterior.
By the time he landed in shipping, Mintzmyer already held a bachelor’s degree from the US Air Force Academy and a master’s from the University of Maryland.
He has now returned to Las Vegas and his day job as an Air Force major, just after completing his pursuit of a doctorate in public policy analysis from the John F Kennedy School of Government at Harvard University.
Paging Dr J
Mintzmyer is awaiting approval of his thesis on the correlation between sanctions and international trade flows. For this, he drew heavily on his shipping exposure, analysing the effects of China’s ban on Australian coal as well as sanctions against Russian petroleum products.
Professional basketball fans of a certain age may remember the high-flying Julius Erving in US professional leagues in the 1970s and 1980s, known by the nickname “Dr J”.
We’re not sure about Mintzmyer’s vertical leap, but it appears we have another “Dr J” on the way.
So what led him into shipping stocks, to begin with?
“It started as a hobby in 2015,” he said. “It was something I did for fun. Then I started to expand the team. Hiring Climent in 2019 was a key moment. He’s done a great job and starting in 2024 will be our primary for all coverage, modelling and direction of our shipping research team.”
Mintzmyer said he does generally agree with Nokta’s assessment that shipping is getting more attention.
“I think the valuations have improved since pre-Covid. That does suggest there’s more interest and more institutional money looking at the space,” Mintzmyer said.
“It’s a very interesting time to invest in shipping. The valuations are not as cheap, but compared to the broader market they remain compelling, with tankers looking especially appealing.”
With that said, Mintzmyer also pointed out that his core client base comes from high net-worth individuals and family offices, and this base has at best held even in shipping interest.
On risking and derisking
“Some got really excited about the supply-chain crisis, and some about tankers in the early stages. Some of these had a rough ride with Zim and held on for too long. A lot who doubled or tripled their money on tankers think that story is over and don’t understand the longer-term dynamics,” Mintzmyer said.
For that reason, Mintzmyer said “I’m taking a risk here” in expanding staff and coverage amid a stagnant client base.
When it comes to those traditional analysts, it doesn’t look like many banks are taking that kind of risk. But at least they’re not cutting further, so that must be good, no?
Well, another explanation just might be that there’s not much left to cut. Some of the larger banks already have “derisked” their shipping exposure by moving analysts into other transport sectors.
For example, take a look at the top five analysts ranked in this year’s Institutional Investor magazine annual survey, as reported by TradeWinds this week.
Top-ranked Jonathan Chappell of Evercore ISI dropped dry bulk in 2020. And while he still covers tankers, he also has taken up coverage of rails and trucking.
Second-ranked Amit Mehrotra of Deutsche Bank made a similar transition, while No 3 Ken Hoexter of Bank of America and No 5 Christian Wetherbee of Citi have always had a broader transportation remit.
Only fourth-ranked Nokta is a shipping purist.
“Frankly, there really wasn’t much more to cull,” Chappell told Streetwise this week.
“The shipping focused banks like Jefferies, Clarksons and Stifel kept their presence and focus, while the bigger banks still kept an element of exposure, but just in a dialed-down manner, with the shipping analysts also covering other sectors for career preservation. With limited resources allocated — and limited time spent in many cases — there was no reason to fully drop the shipping coverage.”
So stability on the sell side, perhaps a bit of derring-do on the buy side.
- We can only hope it’s a slam dunk for the new Dr J and not another black eye.
More ship finance news
New York-listed Performance Shipping just isn’t selling what Greek shipowner George Economou wants to be buying. The tanker owner on Wednesday flatly rejected Economou’s 12 October offer to tender for the company at $3 per share. Click here to read.
Sheffield Green, a Singapore-based firm specialising in offshore wind industry recruitment, plans to list in the city-state later this month via an IPO. The company is seeking to raise over SGD 6m ($4.4m) by offering 24m new shares at SGD 0.25 per share. Click here to read.
Netherlands bank ABN Amro says it is time for action on energy transition lending for shipping. The Dutch lender has joined forces with shipowner Stena Bulk and Proman to back the sector’s first sustainable methanol shipping fund. Click here to read.
