Morgan Stanley Turns Bullish on Shippers, Upgrades $GNK, $SB and $SBLK to Overweight

This is an aggressive call by the Morgan Stanley analyst, upgrading a sector that has been a deathknell to investors for nearly a decade. As someone who has invested in this sector for years and on several occasions made a small fortune, I can tell you that this upgrade is notable. The core issues with the shippers are growth in China and oversupply of available tonnage.

I once had a CEO of a major shipper tell me in a conference call that if I didn’t like China I shouldn’t invest in his company.

SB +13.8% (upgraded to Overweight from Equal-Weight at Morgan Stanley)
SBLK +8.4% (upgraded to Overweight from Underweight at Morgan Stanley)
GOGL +6.5% (upgraded to Overweight from Underweight at Morgan Stanley)

Here are some quick notes, courtesy of StreetInsider.

$SBLK
Market gradually improving driven by rising commodity prices, solid Chinese demand and muted fleet supply.

High operating and financial leverage provide meaningful upside upon anticipated 2018 recovery.

One of the largest companies in the dry bulk sector make it the preferred trading vehicle among investors.

Strong liquidity position and low cost structure allows it to further expand its fleet

$GNK
Low financial leverage with restructured debt and no fixed debt repayments until mid-2018.

Diverse fleet of dry bulk vessels spans all major vessel classes.

Dry bulk rates move above breakeven levels and GNK turns profitable.

$SB
Market gradually improving driven by rising commodity prices, solid Chinese demand and muted fleet supply.

High operating and financial leverage provide meaningful upside upon anticipated 2018 recovery.

Lowest cost breakeven in the sector, allows SB to be the first company to be in position to re-introduce a dividend.

Modern and high quality fleet of Japanese-built vessels provide significant operating advantage

According to Exodus, the following shippers are up more than 20% for the year.

And we segmented the tankers away from the shippers, thanks to an insightful member. Here are the top performing tankers.