Price Targets – SB or BS

[Monday, November 27, 2023]

In our last blog post, we discussed the value of Net Asset Value. We now move to the subject of price targets. Do they add value to the investor?  If you look back to the 4th Quarter of 2022, did they help?  In other words, based on what we know today, we want to evaluate the value of price targets as an investment tool.  Are they the best thing since sliced bread or bull sh-t?

We have returned to research from October 2022. Torm (TRMD) was assigned a price target of $15.81 by one Norwegian analyst.  Had we sold it when it reached its price target, we would have missed $8.47 dividends, plus price appreciation of 65%.  On the other hand, Costamare had a price target of $15.00.  One would have received approximately $.60 in dividends, since October 2022, which together with price appreciation of 7.5 bps, would have represented a total 7.6% return.  To be fair, there are other price targets from October 2022 that were more successful but in the whole, price targets deliver a mixed track record.

Similar to NAVs, we confess we use price targets as another arrow in our quiver in our investment process.  If we were short term traders, we would pay more attention as quant funds employ them frequently to determine when to buy and sell.  But we are long-term investors, so short term moves are less important to us.  We are also not without sin.  We missed the run in VGLC stocks because we looked at the significant order book and decided to pass on the segment.  On the other hand, in one of our early blog posts from July 2020, we compared Starbulk (SBLK) to Meta (Meta).  Looking back roughly three- and one-half years, SBLK has returned 508% including dividends versus META’s 45.6%.  This past week, the media has focused on the controversies at Open AI.  However, we would argue one would have been better off concentrating on cape and panamax rates.