Shipping stocks on the Oslo Stock Exchange have rallied over the past four years, with the Oslo Bors Shipping Index up a staggering 800% since 23 March 2020.
The rally has attracted new investors after a decade of dismal returns since the 2008 financial crisis.
This year, the shipping index has gained 46% to 5 June.
Several companies are now trading close to their net asset value or even at a premium.
Here three Oslo market watchers give their takes on what will be hot in the coming months.
Jorgen Lian, shipping equity research analyst at DNB Markets
Jorgen Lian told TradeWinds he is most positive about the car carriers and gas sectors.
His top picks for the next six months are BW LPG and Wallenius Wilhelmsen.
“LPG has been performing extremely well. There are no signs that it will weaken at the moment. Production figures and trends are still strong in the US,” Lian said.
“As long as that continues there is a seasonal tailwind. The fleet growth is limited in the next 18 months. The shipowner can earn significant sums of money. The stocks have risen but it is still a nice exposure to have,” he added.
“BW LPG is the cheapest stock and has the most potential for repricing,” Lian said.
Lian also sees “value” in car carriers.
“They are relatively cheap. The backlog for the next two to three years covers a lot of today’s share price,” Lian said.
“It is easy to confuse car carriers with the spot market shipping sectors. Car carriers have a higher visibility. The demand side can also surprise on the upside and take away some of the newbuilding orderbook,” he added.
“There is also the fundamental shift of manufacturing cars far away from end markets, which we think will persist. It is where the cars are manufactured that has driven the car carrier markets.”
DNB Markets is also still positive on the tanker sector.
The bull case with rising rates that the market has expected for years has not yet materialised.
“What you price in today is an option that VLCCs will take off. If they do, you get a nice exposure on stocks like Frontline. But it depends on volumes and rates rising,” Lian said.
DNB Markets has a negative take on dry bulk and containers.
“The valuations in dry bulk have generally gone too far compared with the downside risk,” Lian said.
Jon Hille-Walle, fund portfolio manager at Nordea
Jon Hille-Walle thinks the shipping upturn can go on.
“The strong markets in several shipping segments can in our view last, due to the limited orderbook in several segments,” he said.
Nordea holds BW LPG in the LPG segment.
“The LPG trade from the US to Asia maintains very high profitability, supporting strong rates, and in this segment, we believe the orderbook is less demanding than what it may appear, as several vessels will be going into the ethane trade,” he said.
In the tanker space, Nordea has Hafnia and Odfjell in its portfolio.
According to Hille-Walle, the combined tanker orderbook looks highly manageable and Nordea believes the broad market will remain strong into the second half.
Nordea remains cautious about the bulker segment.
“We believe the stalling housing starts in China have yet to reach shipping volumes. We do, however, have a hedge of sorts through Klaveness Combination Carriers. The company is benefiting from strong product markets, but will also capture some upside from bulk if that market should surprise on the upside,” Hille-Walle said.
Fredrik Dybwad, shipping analyst at Fearnley Securities
Within the LPG segment, Fredrik Dybwad’s top pick is BW LPG.
“BW LPG looks attractive with a 20% dividend yield,” Dybwad told TradeWinds.
“The LPG market looks very good long-term. Despite recent short-term headwinds, it is a tight market, and we expect the East-West arbitrage to continue to be supportive,” he added.
Dybwad thinks the listing of BW LPG has boosted the stocks.
“It is positive for Oslo Bors that companies dual-list in the US. It shows that Oslo-listed companies are quality companies within shipping,” he said.
Dybwad also sees a strong outlook for dry bulk.
“Capesize looks strong for the second half of the year going into the high season,” he said.
His top picks among the bulkers are Himalaya Shipping, Star Bulk Carriers and Golden Ocean.
He said expectations are high for tanker companies and favour Frontline, DHT Holdings and Okeanis Eco Tankers among crude carriers.
He has “hold” and “sell” recommendations for container companies.
“The risk is very high, with the Red Sea situation coupled with a big orderbook,” he said.
Although Dybwad’s view on the sectors varies, he sees room for the Oslo shipping index to continue rising.
“I think it will be higher at the end of the year,” he said.
