I have found there is one sector in the stock market that I really enjoy researching the companies. This group is shipping companies. Every time I look at a new (to me) shipping company I am led to a couple of others with interesting stories. My research shows that shipping companies tend to be highly profitable, but at the same time highly cyclical. They are dependent on economic cycles, commodity prices and often at the mercy of inclement weather. Yet, no matter what the underlying prices are, raw materials need to get to manufacturers and manufactured goods need to get to their retail markets. This will happen whether oil (or any other commodity) is $50 or $150 a barrel.

My recent foray into shipping companies led me to a small group of companies that do a type of shipping that I had not considered before: inland or river shipping. River shipping is highly efficient. One barge can carry the same amount of product as 15 railroad cars. I found three publicly traded companies that provide this type of transport and here is a little about each:

Kirby Corporation, NYSE: KEX, is based in Houston, TX and has the nation's largest fleet of 904 inland tank barges and 241 towing vessels. Their fleets transport petrochemical products across America's inland waterways: The intercoastal Waterway, the Mississippi River, the Illinois River, the Ohio River and other waterways. The list of products they transport is the lifeblood of U.S. industry: Styrene, benzene and methanol; liquid fertilizer, including anhydrous ammonia; refined products, including gasoline, diesel and jet fuel; black oil products, such as asphalt, No. 6 fuel oil and coker fuel; and pressurized products, such as butane, propane and butadiene. Kirby also has a second business in the overhaul and repair of diesel engines for the marine, railroad and power generation industries. KEX has a market cap of $1.1 billion, recent earnings growth has been in the 20% range, the stock has a current PE of 7 and the company currently pays no dividend.

American Commercial Lines, Inc NASDGS; ACLI, is headquartered in Jeffersonville, IN and operates primarily dry bulk barges in the same inland waterways as Kirby Corp. ACLI's fleet consists of 2,074 covered dry barges, 366 open dry cargo barges, 388 tank barges and 137 towboats. A short list of some of the products they ship: grain, steel, coal, salt, alumina, fertilizers, cement, ferro alloys, ore, gypsum, chemicals, petroleum, ethanol and edible oils. ACLI also has a second business line, they have a barge manufacturing facility in Jeffersonville. ACLI has a market cap of $211 million and what appears to be very seasonal earnings. Current PE is 4.5 and the company pays no dividend.

Ultrapetrol, Ltd, NASDGS: ULTR, is based in the Bahamas and looks like the South American version of ACLI. They operate a fleet of 564 river barges and 26 push boats that haul agricultural products out of Argentina, Paraguay and Brazil down the Paraguay and Paraná Rivers to the ocean transport vessels. The company started the fleet in 1993 with 4 barges and a single push boat. They have a barge manufacturing facility in Argentina. The company also provides coastal freight business in South America with a fleet of 9 dry bulk vessels and offshore supply to oil rigs in the North Sea and off Brazil. Finally, the company operates a single passenger cruise ship in the Aegean Sea. Quite a list of niche shipping businesses. ULTR has a market cap of $67 million and trades at a PE of 2. Yes, 2. For the recent 3rd quarter the company increased revenues by 45% and went from a loss in 2007 to a nice profit.

The stock market has been very hard on shipping companies due to the global economic slowdown and falling Baltic Dry Index. The three companies outlined here offer essential shipping services. Interested investors should take a closer look at their businesses and see if the market is missing growth opportunities in spite of macro economic problems.