Dry bulk shipping rates took a turn for the better.
What happened
Following in the wake of fellowdry bulk shippingstocksDiana Shipping(NYSE:DSX)last week andSafe Bulkers(NYSE:SB)Monday morning,Seanergy Maritime Holdings(NASDAQ:SHIP)andCastor Maritime(NASDAQ:CTRM)surged ahead to close the trading session up 12% and 13%.
By now, that shouldn't be surprising.
So what
Two big catalysts lifted dry bulk stocks higher Monday --first Safe Bulkers, and then Seanergy and Castor. For one thing, a fortuitously timed reversal in shipping rates is now reflected on the Baltic Exchange Dry Index, which leaped 6.8% late last week, suggesting that the downturn in pricing that had been forming earlier in the month will not stick.
For another -- and perhaps taking a cue from the first catalyst -- investment bank H.C. Wainwright waded into the dry shipping waters Monday to deliver a series of buy recommendations for nearly every stock in the industry. Diana and Safe Bulkers both got buy ratings, for example, as didGenco Shipping(NYSE:GNK),Eagle Bulk(NASDAQ:EGLE), and Seanergy, too. Castor, though, did not.
Now what
As Wainwright explained in a note covered byTheFly.com:
"Dry bulk equities [are] up more than 100% in the past year and spot rates [are] at their highest level in over a decade." This is appropriate, however -- and indeed, dry bulk stocks could go even higher -- because "moderating demand" for dry bulk cargo is being offset by "limited fleet growth" of cargo ships to carry it. This keeps demand and supply in balance, preserving profit margins.
Speaking of which, Castor Maritime is currently raking in an astounding 21.5%operating marginon its booming revenues, and Seanergy isn't far behind with an operating profit margin of 19.2%. So long as those margins remain intact, Wainwright could be right about the stocks continuing to surge.