I Would Rather Be Lucky…

I just returned to Dallas after a week of meetings and a conference in New York.  What a difference a year makes. In investing you can be right for the right reasons, right for the wrong reasons, wrong for the right reasons, and wrong for the wrong reasons.  At this time last year, we had reduced our holdings in shipping to their lowest 2021 levels.  Most notably, we cut our exposure to a container-shipping lessor due to their outsized and new exposure to dry bulk.  We did not have a clue that container shipping markets would collapse, rather we prefer in most cases to own pureplay shipping silos.  We didn’t think our container shipping lessor would get credit for their dry bulk exposure, which to the company’s credit, was brilliantly executed.  A year later, we have increased our exposure to various shipping segments based on opportunities, while the stock of the aforementioned shipping lessor has fallen 21%.

The conference was a breath of fresh air.  Face to face and impromptu dialogue is much better than zoom or telephone.  In many cases, some of the themes are the same. In November 2021, the prices of ships were at a historical high level without clarity on what propulsive technology is truly future proof.  That is still the case in various segments including product tankers and crude carriers, among others. In November 2021, we were optimistic that once we exited Covid-19, outbreak, demand would reassert itself.  However, we didn’t foresee Russia invading Ukraine, nor China going into lockdown for much of 2022. 

For shipping investors, the trends have treated various segments differently.  Container shipping has been pummeled by a shift from goods to services, as consumers seek experiences such as dining out and travel, while purchasing fewer goods.  In dry bulk, the market has been weakened by the continued lockdowns and declines in economic activity in China.  Product and crude tankers have benefited so far from the acceleration in trends that were visible in 2021.  Ton miles have increased as there were too many closures of Western refineries bringing down local capacity, with new capacity being built in China, India, and the Middle East.  There is an adage from the 1930’s, “I would rather be lucky than good.” Looking at the last year, this saying came frequently to mind in New York.