Today we're looking at dry bulk shipping stocks. Is this beaten-down sector getting ready to set sail?
On the bullish side, the eventual end of China's zero-Covid policies will lead to the end of lockdowns, a positive development for the sector. Last week, China eased some lockdown measures, such as shortening quarantine periods and reducing restrictions on inbound travelers.
However, those are just incremental measures. A complete lifting of lockdowns is not imminent.
On the bearish side, we need to balance the effect of a potential recession against the removal of lockdowns. What if demand falls due to a contracting economy?
This sector features high yields and small market caps. It appears to have bottomed recently and could be rising in anticipation of future positive developments.
Here are my three top picks in the dry bulk shipping sector:
Genko Shipping & Trading
Genko Shipping & Trading (GNK) reported last week, and while earnings came in light the company beat revenue estimates handily. The New York-based company is focused on its balance sheet, retiring 60% of its debt over the past two years.
Genko has formed an inverse head-and-shoulders pattern (curved lines). This bullish formation projects the stock to the $18.50 area, where its 200-day moving average (red) awaits. Genko's stock already has crossed above its 50-day moving average (blue).
This is a small-cap stock with a market cap of just $685 million. This means traders should use limit orders and small position sizes when investing in this stock as well as other stocks in this sector.
Source of charts: TradeStation
Genko has broken out on high volume (shaded yellow) since reporting earnings last week. In its post-earnings conference call, Genko announced a quarterly dividend of 78 cents per share payable Nov. 28 to shareholders of record on Nov. 21.
Star Bulk Carriers
Star Bulk Carriers (SBLK) has completed a double bottom formation (curved black line). On Monday, this stock reached its highest level since Aug. 26 before pulling back.
Star Bulk's next major obstacle is its 200-day moving average, currently at $25.30. The $2.1 billion market cap company is scheduled to report earnings on Nov. 16.
Golden Ocean Group
Like the two names above, Golden Ocean Group (GOGL) has formed a bottoming pattern and is trending higher. The stock's market cap is just under $2 billion. The earnings release date for Golden Ocean is Nov. 30.
All three of these names are small-cap stocks, so they must be handled with care. All three boast high dividend yields, but unlike most blue-chip stocks, those dividends have a wide variance from quarter to quarter.
My plan is to ease into this sector, starting with Genko Shipping. If the current bullish trend continues, I'll add Star Bulk and then Golden Ocean after their earnings reports. If the trend falters, we'll liquidate Genko and move on.
