Highly leveraged to spot market — Of Genco’s 50 on-water vessels, 22 (3 Capes, 6 Panamax, 5 Supramax, 1 Handymax, and 7 Handysize) are either on index-based time charters or are in pools trading in the spot market. Furthermore, the average duration of the time charters for remaining 28 on-water vessels is less than one year. As a result, we expect Genco’s earnings, and ultimately stock price, to remain highly correlated with spot rates (Genco’s stock price has had a 0.95 correlation with the Baltic Dry Index) and could see further downside in estimates if rates remain suppressed following 1Q11’s flooding and cyclones in Australia and continued industry fleet expansion.

Christian Wetherbee, Citigroup

Hey buddy, how’s that 0.95 correlation working out for you?

Tweet