Mention shipping stocks and one of the first things that comes to mind is the Baltic Dry Index. While the Baltic Dry Index is interesting and useful it is also misleading. This is essentially because of the way in which it is constructed. The BDI is an average of three indices the Capesize, Panamax and Supramax.
Baltic Dry Index
The following gives one a bit of an idea as to the classifications:
[Related -Aetna Inc (AET) & Coventry Health Care, Inc. (CVH): Game Changer]
What is interesting is how the Handysize index is excluded from the Baltic Dry Index. This is no big deal, but the problem really lies with how volatile the Capesize index is. Due to the relatively small numbers of Capesize vessels the demand and supply is very volatile compared to the numerous numbers of Handysize vessels.
Baltic Capesize Index
Baltic Handysize Index
[Related -How to Avoid the Losers and Find the Winners]
I think the more emphasis should be placed on looking at price behaviour of the Handysize Index than the Baltic Dry Index itself…….the trends are considerably less subject to noise and deception.
In any event the behaviour of the Handysize index suggests that there is a clear pick-up in demand for ocean freight, perhaps little wonder why shipping stocks are now making up for lost time!
One of my favorite things to see in a long candidate is a pattern of beating Wall Street's earnings read on...
Tobin’s Q, a market-valuation metric, is back in the news, in part thanks to a widely read Bloomberg read on...
Despite the chorus of analysts and investors calling for the long-awaited correction, the market is showing read on...
What's going on at the Fed? Notorious dove, Charles Evans of the Chicago Fed, gave a speech in read on...