Last week brought positive surprise for shipping stocks such
as Paragon Shipping Inc (NYSE:
PRGN), Eagle Bulk Shipping Inc (NASDAQ:
EGLE), and Excel Maritime Carriers Ltd (NYSE:
EXM). The boom in these stocks comes after an extended period of selling pressure.
There have been a number of brokerage reports predicting the
demise of many of these companies and the rating downgrades as soon as last
month were testimony of this line of thinking. However, the recent rally offers
a counter view of value at the bottom. Actually, more so in light of the strong
prevalent negative buzz about shipping stocks. Here is a closer look at
It was only last month that Paragon Shipping Inc (NYSE:
PRGN) was downgraded by Cantor Fitzgerald from a “buy” rating to a “sell”
rating. As a result, the stock dropped but the decline turned out to be a temporary
affair and just after three days of the downgrade, it started moving up. It has
jumped nearly 50 per cent so far in the month and that too on pretty strong
volumes. Part of the trend reversal lay in PRGN’s charter agreement with
Western Bulk Carriers for one of its Supramax bulkcarrier.
Excel Maritime Carriers Ltd (NYSE:
EXM) is another Greek shipping play that was battered to its lowest 52 week
low level of $1.37 in January. However, February brought some relief to this
oversold stock with a 40 per cent gain so far in the month. Interestingly,
there has been no notable change in its business fundamentals during this
period. Apart from risk preferring investors jumping into shipping, EXM seems
to have benefitted from the talks progress around Greek sovereign debt.
Eagle Bulk Shipping Inc (NASDAQ:
EGLE) was downgraded by Jefferies Group from a “buy” rating to a “hold”
rating last month. However, before that, it was recommended by a couple of
brokers citing relatively better fundamentals. In the first seven trading days
of February, it has advanced 15 per cent.
Overall, there appears to be a strong case for shipping
stocks as they have most negatives factored-in. On the contrary, they are
jumping on every announcement that has a remote connection with word “positive”,
even if it is Greek bailout. While this kind of rally can fizzle out anytime, oversold
shipping stocks can continue to augment their lead for the time being
especially as the debt problem in Greece appears to be sorted out.