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Why stable ship prices support the crude tanker industry
Year-to-date (or YTD) deliveries in 2014 stood at 25.7 million dwt.
In trading, the Baltic Dry Index declined to 850 on June 30, 2014, from 934 at the beginning from the month.
China’s economy is showing encouraging signs as the government’s policy measures have taken shape.
Global crude steel production increased at an annual 2.2% rate in May to 141 million tons as output in China hit new record levels.
In order to support the housing sector, Beijing planned cuts in taxes and loosened monetary policy to ramp up activity in the sector.
Meanwhile, total generation capacity stood at 1,251.22 gigawatts (or GW)—a 9.4% YoY increase.
For the first half of 2014, China’s coal imports stood at 159.87 million metric tons—an increase of 0.9% from the same period last year.
Imported iron ore prices in China continue to indicate a softer upward movement with no significant change seen in domestic iron ore prices.
Although shipments from Australia have surpassed their 2013 end levels, Brazil is yet to breakout of its previous highs.
June exports through the port increased 21% compared to the volumes last year.
DryShips Inc. (DRYS) and Navios Maritime Holdings Inc. (NM) are the two major market players in the dry bulk shipping industry.
Scorpio Tankers has no direct competitors for the purpose of relative valuation as other large players are in the very large gas carrier (or VLGC) industry.
During the 2Q14, Scorpio Tankers (STNG) acquired 11.5 million of its common shares that are being held as Treasury shares.
The company maintains its policy to fund its fleet growth through raising equity and maintaining low leverage levels.
In 2013, the company’s revenue growth was primarily driven by charter-in of vessels while its charter hire cost increased and dented the company’s margins.
The combination that STNG follows in its chartering strategy includes commercial pools, time charters, and the spot market.
Scorpio’s product tankers are likely to deliver in 2014–2015, while new vessel orders would be available post 2016.
Dorian LPG has 16 fuel-efficient VLGC newbuildings on order at Hyundai Heavy Industries Co. Ltd. and Daewoo Shipping and Marine Engineering Ltd.
Trading at a market cap of $1.84 billion, the company records a dividend yield of 3.71% and a beta of 1.79.
EV and EBITDA can be adjusted to take into account the impact of operating leases, or chartered-in vessels.