I remember watching Erin Burnett on CNBC throughout 2008-09 and listening to her categorize any positive economic data points as "green shoots" in the midst of a global economy that seemed to be infertile. I do not mean to pick on Burnett, as I believe she did an admirable job of keeping the public informed during a time when plenty of non-factual doom and gloom was available for public consumption, especially via the Web. But really, when you are avidly searching for any positive sign in a sea of stock drops, it can seem like desperation.
So I checked the daily report from the Baltic Exchange in London this morning (DryShips' corporate site has a good summation here) and was pleased to see a green shoot. The Baltic Exchange's Capesize index actually rose in today's afternoon fixing by one point, and the cost of an indicative time charter rose $44 to $2,706 per day.
The overall Baltic Dry Index did fall by five points to 358 today, and the decline in that measure -- about 25% year to date and 52% year on year -- has been astounding even to someone who has been watching the dry-bulk market for the past decade.
The old rule of thumb is that the dry-bulk market follows the Capes and perhaps today's improvement in the Baltic Capesize Index -- albeit a very small one -- is a sign that shipping rates are bottoming.
That is what needs to happen for the U.S. stock market to turn around. There needs to be a global exhalation about China -- an improvement in sentiment -- otherwise, we're all just prisoners to what happens in Shanghai overnight on a daily basis. On days like today, obviously, that's not fun.
In these markets, you want to buy securities that are priced as if we are in a depression and wait for the inevitable mean-reversion trade.
This is not a valuation correction.
Look at Ford (F). I have written that this is the wrong time to own an auto stock -- coming off a record U.S. sales year of 17.4 million units -- and to avoid Ford. But, in no way shape or form is Ford expensive -- with a P/E of 6.0x on 2016 consensus EPS of $1.92 and a dividend yield of 5.2%. And yet Ford shares are getting hammered much more profoundly than the overall market, down 18% year to date as of this writing. (Ford is part of TheStreet's Dividend Stock Advisor portfolio.)
One could certainly make the same argument about Apple (AAPL). That company is in a very unappealing point in its handset product cycle, so I've been telling investors to stay away. But I've never said Apple's stock is expensive, because at 9.8x the 9/2016 consensus EPS estimate of $9.53, it's not expensive at all. And yet it is getting cheaper by the minute. (Apple is part of TheStreet's Action Alerts PLUS portfolio.)
So we've been asked by the Real Money editors to put forth our Best Ideas for 2016 and have the scoreboard on the right side of the RM page show our totals in red or green for clarity.
My best pick is Navios Maritime Holdings Preferred G (NM-G). I ran through my investment case for Navios last week and I believe these securities offer a once-a-cycle upside. Navios' byzantine corporate structure makes it hard to analyze in the good times, but also offers much liquidity cushion in the bad times.
And the BDI would tell you these are bad times for dry bulk. But this is a Sam Zell/Wilbur Ross (who has invested in the shipping sector) "Grave Dancer" trade. I think Navios is going to make it -- the same management team steered the company through 2009 -- and with an annual indicated yield of 62.75%, these preferreds are already pricing in Armageddon.