02-17-26 spal
2026/02/16 18:27
Shipping stocks are quietly staging a comeback — and the underlying supply-demand setup suggests this cycle may have staying power. The Baltic Dry Index, a key benchmark for global shipping rates, has risen more than 60% from its 2023 lows, according to Baltic Exchange data, signaling a significant recovery in global shipping demand.
At the same time, global fleet growth remains constrained. The dry bulk vessel orderbook stands at roughly 7% of the existing fleet, near multi-decade lows, according to Clarksons Research data. That limited supply pipeline is colliding with resilient demand for transporting commodities like iron ore, coal, and grain.
This imbalance is already showing up in company earnings and cash flows.
Tight Vessel Supply Supports Freight Rates
Shipping companies like Star Bulk Carriers Corp (NASDAQ:SBLK) and Danaos Corp (NYSE:DAC) are generating strong free cash flow as elevated freight rates boost profitability. Danaos reported more than $1 billion in contracted backlog, providing multi-year revenue visibility, while Star Bulk has returned significant capital to shareholders through dividends and buybacks. Since 2021, the company has returned approximately $1.9 billion to shareholders through dividends and share repurchases.
SBLK is up 22.87% and DAC has returned 13.44% to investors, YTD.
Container shipping companies, including ZIM Integrated Shipping Services Ltd (NYSE:ZIM), remain highly sensitive to freight rate movements. Even modest improvements in rates can significantly increase earnings due to the sector's operating leverage.
ETFs like the Breakwave Dry Bulk Shipping ETF (NYSE:BDRY), up over 35% YTD, offers exposure to freight rate trends, while individual equities provide leverage to company-specific contract structures.
Structural Constraints Limit New Competition
Unlike previous cycles, ship supply cannot quickly increase. High shipbuilding costs, stricter environmental regulations, and limited shipyard capacity are slowing fleet expansion. Clarksons estimates global fleet growth will remain below 3% annually through 2027.
Meanwhile, global trade volumes continue expanding. The World Trade Organization expects merchandise trade growth to recover in 2026 after slowing in prior years.
Shipping stocks historically move early in economic cycles. With vessel supply constrained and freight demand stabilizing, the sector may already be signaling a shift that broader markets haven't fully recognized yet.
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"signaling a shift that broader markets haven't fully recognized yet"
Solution: become a Colore
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02-16-26 spal
| Carib - sounds good to me. |
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02-16-26 carib
| SPAL: I am essentially real estate and energy, besides legacy PDVsa credits and some private equity..and a sprinkle of Gold.. |
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02-16-26 spal
Ranking from Most to Least Creative and Value CreatingBased on the provided descriptions,by assessing creativity (e.g., innovation in integrations, expansions, decarbonization, and trend adaptation like AI/gas demand) and value creation (e.g., growth projects, acquisitions, returns, stability, and market positioning). This is a holistic evaluation drawing from their strategic highlights:
Enbridge Inc. (ENB): Tops the list for exceptional creativity in blending renewables (e.g., offshore wind) with traditional infrastructure, alongside massive $14B growth sanctions and Permian JVs like Whistler/Eiger expansions. Value creation is high via a $39B backlog and energy transition synergies, positioning it for long-term resilience.
Cheniere Energy Inc. (LNG): Highly creative as an LNG pioneer, securing export capacity amid surging global demand. Exceptional value through integrated value chains and high-growth facilities in Texas/Louisiana, capitalizing on LNG export trends for superior returns.
Energy Transfer LP (ET): Aggressive creativity in Permian expansions (e.g., Bay Runner) and acquisitions (Sunoco, USA Compression), responding dynamically to gas surges from AI/data centers. Strong value via midstream dominance, high-yield distributions, and portfolio scale (130,000+ miles).
ONEOK Inc. (OKE): Creative post-Magellan synergies in NGL/crude, with pivots to AI-driven gas and CO2 transport. Exceptional integrated network (60,000 miles) drives value through low-carbon opportunities and consistent growth.
Kinder Morgan Inc. (KMI): Innovative in gas/LNG expansions for data centers and decarbonization JVs (e.g., carbon capture). Solid value from U.S. network strength and energy security plays, though less aggressive than peers.
Enterprise Products Partners LP (EPD): Leader in NGL/petrochemicals with creative export/processing amid Permian growth. Exceptional for stability (26+ years dividend growth, inflation-hedging), but more evolutionary than revolutionary.
MPLX LP (MPLX): Creative in NGL "wellhead-to-water" strategy and Permian-Gulf integrations (e.g., BANGL). Value through targeted expansions, but narrower scope compared to broader innovators.
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02-16-26 spal
In my world the essence of successful schtock picking starts with sector allocation. One thing I always took away from one of my business school professors is the concept of finding a "winning game" ... which means to me that it does not matter how good you are in a game in particular, it matter much more that your game is one that is winning.
Now this can even hold in neutral or declining market, although as we both now in sharp and sustained declines one equity game blends into another.
I think right now though "picking games" is important.
There is of course a lot of background noise.
;) |
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02-16-26 spal
| Take energy - I think it's share of total market capitalization is now c. 4% ... it is conceivable that in 2 years it will be c 8%. this means the average energy weighted portfolio will double in 2 years ... whereas I feel that the average tech portfolio will at best stay the same. In that context one can even do better if one is a capable stock picker. Obviously I am not suggesting 100% allocation to energy, but I picked the extremes within this framework to illustrate the point I am trying to make. |
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02-16-26 spal
Carib - yes at some point. I hold simply that volatility has increased and that there is going to be a clear rotation among sectors. That is really the extent of my concern.
If I felt a deeper concern of overall risk levels then I would not be concerned with rotation.
Rotation will likely make me a lot of money. Collapse of markets ... not so much ... unless short ;)
The S&P is very much weighted by the Mag 7 so at best it will go sideways largely from here for the next period.
My horizon on stocks is very limited. I do however run a barbell strategy for "shit/fan" scenarios holding extensive RE and multiple passports.
At the moment I am not ringing any alarms.
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02-16-26 carib
SPAL: I am no expert, but I guess that if the S&P loses 20%.. (just an example) and takes time to recover, there could be an impact on spending and credit.
Am I mistaken? |
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02-16-26 spal
| Carib - agree - but in the main in the US the stock market can be very volatile and have major rotation independent of the real economy. Major impacts in the bond market are another matter. |
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02-16-26 carib
A Bank of America survey published on Friday said fund managers’ exposure to the dollar had dropped below last April’s nadir, when President Donald Trump spooked the world with sweeping tariffs.
The survey found that the managers’ positioning in the dollar was the most negative since at least 2012, the earliest year for which it had data.
The shift comes as Trump’s aggressive geopolitical actions and pressure on institutions such as the Federal Reserve have raised anxiety over the country’s attractiveness as a haven for the world’s capital.
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02-16-26 spal
| The Mega Cap 8 will again determine how long and how far the S&P 500 index and growth measures decline. It is extremely difficult for the S&P 500 to stay positive while the Technology sector gauges continue to be negative. Semiconductors and software are among the most important segments of the technology sector, and they have asector correlation to Bitcoin. |
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02-16-26 carib
| Concerning "exceptionalism".. let us see what happens with the Abraham Lincoln and the Gerald Ford in the gulf area, to see what comes next. |
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02-16-26 carib
| SPAL: I guess that the fist connection between the stock market and the real economy, in countries like the USA where most people with significant spending power hold stocks, is that if the market falls.. they blame the president, feel poorer, and reduce spending. In a country like Italy, where a small minority hold stocks, there is much less direct connection. |
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02-16-26 spal
Value is where investment managers move their clients during high uncertainty or after a loss in growth momentum, where there is fear that growth stocks have moved into "bubble" territory.
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02-16-26 Merlino
the equities market and the real economy are largely separate animals ... that is one of my most basic working assumptions.
.....................
I agree on this fwiw |
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02-16-26 spal
| Savo - the equities market and the real economy are largely separate animals ... that is one of my most basic working assumptions. Thus when I talk of a rotation the real economy effect is largely agnostic - no matter one's opinion on that. |
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02-16-26 savo
merlino.. FWIW.. i think the opposite might happen... without exceptionalism there will be an excess of dollars in the world with nowhere to go. Remember there are still 8 trn in the fed...
The US is trapped between the rock of a 2 trn fiscal deficit and the hard place of a 37 trn debt mostly with short maturities.
I like what carib says of a new world order still not fully born.
I think that order will continue monetizing gold and silver.
And the proof is the panic of last week and the periodic interventions in the paper market to control the price of gold and silver.
Unfortunately for them... one day they will have to deliver... but there is not enough gold and silver at comex and LME.
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02-16-26 pillz
| Virtual currencies, real risks. The only guarantee in crypto is risk. |
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02-16-26 Merlino
The end of the universal dollar is already a mature, old story and plenty of currencies and assets have already positioned for this. Nobody can be sure if the trend will continue or will reverse.
THe US has a positive trade in food, energy and other core goods, beside weapons and services. I see no reason US can not reverse the deficit in vehicles. Regarding negative trade in electronic and capital goods they are in large measure importing from their own corps located in other countries.Regarding cheap consumer goodies, well, US can leave that to cheap labour countries, I guess.
With a more balanced trade assuming they continue running deficits, US T&Bs will be largely bought locally not by foreigners.
If all this happens I think most of the rest of the world will cry for renewed US deficits and usd pumping.
I mean, neither me not anybody else, I guess, can be sure how events will unfold |
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02-16-26 savo
spal..
problem is that US exceptionalism is in high tech (and the military.. which in the end is the same thing)...
the US has no particular competitive advantage in oil, mining, automobiles, pharma, clothing, telecom, etc...
it is one more among a number of countries that have very competitive companies in those sectors.
So the US stock market will have to compete with those companies abroad for capital.
But investing in those markets requires selling the dollar... which I think would be a good thing for the US but nonetheless does not mean well for US stocks.
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02-16-26 carib
| We might live in an unbalanced world for quite a while longer, I suppose.The old order is not yet dead, and the new one still unclear. |
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02-16-26 spal
| Expensive-looking stocks in sectors like industrials may actually still be cheap, while cheap-looking stocks in some tech areas may be expensive, as we're at a point where massive disruption is hitting a cyclical upswing. |
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02-16-26 savo
merlino... the trade and current accout deficit are the consequence of the 2 trn budget deficit...
i do not think there is any willingness in congress to balance the budget.
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02-16-26 Merlino
| I do not see why USA can not relatively balance her import/export equation relatively quick. This however would likely dry the world of usd dollar liquidity causing a wide spread recession, a revaluation of the usd and generalized defaults in global debts issued in usd |
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