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Shipping Stocks Poised to Grow on Strong Demand: 4 Top Picks

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The shipping industry is responsible for transporting the majority of goods involved in world trade and is rightfully considered as the life line of the global economy. Since the beginning of 2017, the shipping industry has been witnessing rapid growth. The momentum is expected to continue in 2018. This is primarily due to higher demand for commodities from the emerging markets of China and India as well as from Europe.

Despite concerns of a global trade war, both World Bank and the International Monetary Fund (IMF) have predicted strong global economic growth in 2018. This will eventually lead to higher volume of international trade benefiting the global shipping industry. Growth in world trade and newly-industrializing emerging economies are major catalysts driving the growth of shipping industry. At this stage, it will be lucrative to invest in shipping stocks with a favorable Zacks Rank and strong growth potential.

Robust Global Economy

In July, the IMF has reiterated its global growth projections for 2018 and 2019 at 3.9%. The IMF has maintained growth projections of large economies like the United States, Canada and China. Emerging countries like India and Brazil are also likely to grow at strong pace. 

In June, the World Bank has estimated that the global economic growth will remain robust at 3.1% in 2018. Activity in advanced economies is expected to grow 2.2% in 2018. Growth in emerging market and developing economies overall is projected to reach to 4.5% in 2018 and thereafter at 4.7% in 2019.

International Trade to Remain Strong

In May, the World Trade Organization (WTO) has estimated that global merchandise trade volume will grow 4.4% year over year in 2018. According to the WTO, world trade outlook indicator for the second quarter of 2018 was 101.8, higher than the baseline value of 100, which indicates growth in international trade.

The S&P Global Ratings forecasted that, in 2018, demand in the three main segments of the global shipping industry (dry bulk, tankers, and containers) will outpace supply for the first time in several years. Moody’s Investor Services estimated that demand will slightly outstrip supply in the dry bulk segment, while supply and demand are likely to be pretty evenly matched in the container shipping segment.

Our Top Picks

Even though the specter of trade related tensions threaten to disrupt the global growth story, both the IMF and World Bank have decided to maintain its global growth projections for 2018 and 2019. Tax cuts and higher export demand is likely to benefit shipping industry. Consequently, it will be prudent to invest in good shipping stocks.

We narrowed down our search on four such stocks. Each of these stocks currently carry either a Zacks Rank #1 (Strong Buy) or 2 (Buy) with strong growth potential. You can see the complete list of today’s Zacks #1 Rank stocks here.

The chart below shows price performance of our four picks in the last three months.

Star Bulk Carriers Corp. (SBLK - Free Report) is a global shipping company providing seaborne transportation solutions in the dry bulk sector. It sports a Zacks Rank #1. The company has expected earnings growth of 1,914.3% for current year. The Zacks Consensus Estimate for the current year has improved by 10.4% over the last 60 days.

KNOT Offshore Partners LP (KNOP - Free Report) is engaged in owning, acquiring and operating shuttle tankers, designed to transport crude oil and condensates from offshore oil field installations to onshore terminals and refineries. It sports a Zacks Rank #1. The company has expected earnings growth of 15.9 % for current year. The Zacks Consensus Estimate for the current year has improved by 14.4% over the last 60 days.

Diana Shipping Inc. (DSX - Free Report) is a global provider of shipping transportation services. The company specializes in transporting dry bulk cargoes. It carries a Zacks Rank #2. The company has expected earnings growth of 107.6 % for current year. The Zacks Consensus Estimate for the current year has improved by 200% over the last 60 days.

Navios Maritime Partners L.P. (NMM - Free Report) is an international owner and operator of dry cargo vessels providing seaborne transportation services of dry bulk commodities. It carries a Zacks Rank #2. The company has expected earnings growth of 31.3 % for current year. The Zacks Consensus Estimate for the current year has improved by 16.7% over the last 60 days.

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