Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shipping stocks soared today, as a wave of bullish sentiment swept the industry. Among the winners were Dryships (DRYS), up 21%, Eagle Bulk Shipping, up 27%, Excel Maritime, up 29%, as well as other small bulk shippers.
So what: This industry has long been plagued by a supply glut, and was a victim of the global financial crisis, because the stocks are highly sensitive to the overall economy. Today's gains appear to be a response to a turnaround in the Baltic Dry Index, which measures raw-material shipping prices, and many analysts believe that the index will continue to move higher during 2013. After falling more than 30% in December, the index has bottomed out, and made some gains over the past week. Industry tycoon John Fredriksen also put in an order for as many as 14 capesize ships, potentially indicating a bullish outlook for the industry as a whole.
Now what: It's definitely too early to call this a full-on comeback for the industry, but it's certainly good news for investors. Dryships has been one of the more volatile stocks on the market, so today's gains could just as easily disappear. Keep an eye on the shipping index, which should portend any comeback in the industry. Rates will need to increase before these companies can return to profitability.
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