We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
On November 2, the world's largest shipping company by capacity, AP MOLLER-MAERSK A/S-B,reported a decline in earnings due to a 16% year-over-year drop in freight prices, as per CNBC. Its underlying profits came in at $426 million in the third quarter of this year, down from $662 million recorded in the year-ago quarter. However, the bottom line bettered the analysts’ expectation.
The news added to the worries in the shipping industry, which is already reeling under pressure. Guggenheim Shipping ETF (SEA - Free Report) is off over 16% so far this year (as of November 2, 2016). On November 2, Guggenheim Shipping ETF (SEA - Free Report) lost over 3.8% on elevated volumes of almost six times.
The sector has been seeing several headwinds including global growth concerns leading to slowing trade demand, adverse translation in currencies and an oil price carnage. Notably, the energy sector accounts for about half of the Guggenheim Shipping ETF. Plus, the industry is struggling with overcapacity issues.
Now, lackluster results from a sector behemoth might drown the shipping ETF in the coming days. This is especially true as AP MOLLER-MAERSK A/S-B accounts for about 19.4% of the fund.
SEA in Focus
The product tracks the Dow Jones Global Shipping Index, which measures the stock performance of high dividend-paying companies in the global shipping industry. Holding 27 securities in its basket, the fund is guilty of concentration on the top two firms – AP Moller and Nippon Yusen (8.37%). Other firms hold no more than 6.18% share (see: all the Industrial ETFs here).
In terms of country exposure, United States takes the top position with 41.69% share, closely followed by Denmark (19.56%) and Japan (14.30%). The industrials sector takes the majority of the fund with about 52.58% of exposure. Currently, the ETF has an AUM of $59.8 million and average daily trading volume of about 66,000 shares. The product charges 65 bps in fees and expenses (read: No Danger from COP21 for Airline and Shipping ETFs).
Any Hopes Ahead?
In short, shipping companies are highly co-related to the industrial sector which is on an upswing.Thus, the ETF may turn around ahead with the surge in global industrial and trade activity. Notably, manufacturing PMI of several big economies came in at the growth zone in Octobersignaling a strengthening economic outlook formost developed nations (read: Global Manufacturing in Growth Zone: ETFs to Watch).
Is Sector Consolidation Looming Large?
The industry players are looking for consolidation or inorganic growth to stay afloat in a prolonged low freight environment. As per Bloomberg, Japan’s three largest container lines lately indicated merger possibilities. Nippon Yusen KK, Mitsui O.S.K. Lines Ltd. and Kawasaki Kisen Kaisha Ltd. will likely have a total of 7% of the world’s container-shipping trade if the deal materializes.
Technical Indicators
The 9-Day SMA is slightly lower than 50-Day SMA but above the longer-term 200-Day SMA. On the other hand, the fund’s relative strength index is 26.87 suggesting that SEA is in oversold territory and may turn around if favorable developments come on its way.
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Danger Ahead for Shipping ETF?
On November 2, the world's largest shipping company by capacity, AP MOLLER-MAERSK A/S-B,reported a decline in earnings due to a 16% year-over-year drop in freight prices, as per CNBC. Its underlying profits came in at $426 million in the third quarter of this year, down from $662 million recorded in the year-ago quarter. However, the bottom line bettered the analysts’ expectation.
The news added to the worries in the shipping industry, which is already reeling under pressure. Guggenheim Shipping ETF (SEA - Free Report) is off over 16% so far this year (as of November 2, 2016). On November 2, Guggenheim Shipping ETF (SEA - Free Report) lost over 3.8% on elevated volumes of almost six times.
The sector has been seeing several headwinds including global growth concerns leading to slowing trade demand, adverse translation in currencies and an oil price carnage. Notably, the energy sector accounts for about half of the Guggenheim Shipping ETF. Plus, the industry is struggling with overcapacity issues.
Now, lackluster results from a sector behemoth might drown the shipping ETF in the coming days. This is especially true as AP MOLLER-MAERSK A/S-B accounts for about 19.4% of the fund.
SEA in Focus
The product tracks the Dow Jones Global Shipping Index, which measures the stock performance of high dividend-paying companies in the global shipping industry. Holding 27 securities in its basket, the fund is guilty of concentration on the top two firms – AP Moller and Nippon Yusen (8.37%). Other firms hold no more than 6.18% share (see: all the Industrial ETFs here).
In terms of country exposure, United States takes the top position with 41.69% share, closely followed by Denmark (19.56%) and Japan (14.30%). The industrials sector takes the majority of the fund with about 52.58% of exposure. Currently, the ETF has an AUM of $59.8 million and average daily trading volume of about 66,000 shares. The product charges 65 bps in fees and expenses (read: No Danger from COP21 for Airline and Shipping ETFs).
Any Hopes Ahead?
In short, shipping companies are highly co-related to the industrial sector which is on an upswing.Thus, the ETF may turn around ahead with the surge in global industrial and trade activity. Notably, manufacturing PMI of several big economies came in at the growth zone in Octobersignaling a strengthening economic outlook formost developed nations (read: Global Manufacturing in Growth Zone: ETFs to Watch).
Is Sector Consolidation Looming Large?
The industry players are looking for consolidation or inorganic growth to stay afloat in a prolonged low freight environment. As per Bloomberg, Japan’s three largest container lines lately indicated merger possibilities. Nippon Yusen KK, Mitsui O.S.K. Lines Ltd. and Kawasaki Kisen Kaisha Ltd. will likely have a total of 7% of the world’s container-shipping trade if the deal materializes.
Technical Indicators
The 9-Day SMA is slightly lower than 50-Day SMA but above the longer-term 200-Day SMA. On the other hand, the fund’s relative strength index is 26.87 suggesting that SEA is in oversold territory and may turn around if favorable developments come on its way.
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>