Should the Shipping Industry Enjoy Greater Equity Coverage?

Whenever I have talked with industry participants and mostly CEOs of publicly traded shipping companies, I have understood that they would expect the industry to have enjoyed a bigger audience of analysts and asset managers, and therefore a larger number of investors interested in the sector’s developments. For years now, this appears not to be the case for many companies regardless of their size, performance and track record.

It is true that there are some structural issues in place that may be responsible for this situation such as the sector’s level of transparency or instability of income generation. These are always the perceptions on behalf of investors meaning that they may contain some truth but also lead to some fallacy. It could also be that investors don’t feel very comfortable with the “mechanics” of the industry, as they don’t quite understand the breakdown of revenues, the anticipation of charter rates, the market volatility, the operating costs, the size of financial leverage and many other aspects. In that sense, investors cannot very easily draw up their expectations and decide whether they would like to buy or sell a shipping stock.

Even the asset managers, who tend to be much more familiar with the dynamics of the shipping market, don’t pay too much attention and consequently place the shipping companies at the lower-end of their selections either on their watch or on their focus list. Perhaps they see a sector that embeds a bigger risk than the level they can tolerate within their portfolios.

However, if we look at the importance of the shipping industry towards the functioning of the global economy and if we consider how much the industry facilitates trade, exchange of goods and capital flows, then it is naturally implied that the shipping market is of paramount importance. But again, the sector seems not to be the most popular one in the stock markets across the globe and many could say that in terms of interest it is precisely the “opposite” of sectors such as the likes of technology, healthcare, energy, industrials. It may not be a sector with economic moat as several other industries are, but it is certainly a sector that plays a prominent role in the mobilization and development of the international economy.

Moreover, since nobody can think of the end of world trade and globalization, I would be inclined to say that despite the cycles of the global economy (credit crisis more than 10 years ago, Covid outbreak recently), the shipping market deserves the attention of investors and participants in general, irrespectively of the special conditions prevailing at each time. Therefore in the longer-run, shipping companies can be good investment choices even if you enter the worst point of the right, though, cycle of the market which at the end of the day is not so difficult to gauge or even surmise. By this way, perceptions may change and the shipping industry may start gaining more traction from investors and asset managers alike.