Why Shares of Safe Bulkers Are Sinking Today

Safe Bulkers' crash may not be justified.

Jan 10, 2014 at 3:34PM

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: Shares of dry bulk shipper Safe Bulkers (NYSE:SB) sank as much as 8.9% following one of the worst days for the Baltic Dry Index in months.

So what: The Baltic Dry Index represents the daily spot rate shippers can charge. All other things being equal, the change in rate affects the bottom line dollar for dollar. While the index represents four different-size ships, the largest ship, called the Capesize, saw its rates hit the worst, down 27.5% to $17,452 per day.

Now what: While declining spot rates are never considered good news for any dry bulk shipper, their impact on Safe Bulkers should be minimal at worst. Almost all of Safe Bulkers' fleet operates on fixed-rate contracts, which are largely unaffected by the fluctuations in the daily spot rates. In addition, Safe Bulkers only currently owns two Capesize vessels, both of which are locked in contract for many years to come at rates significantly higher than the spot rates.

Safe Bulkers expects to receive delivery of another Capesize ship in the first half of this year, but the contract for the rates is already fixed for the first 10 years, again completely unaffected by the daily spot rates.

Given the fixed-rated contracts, which are publicly disclosed, Safe Bulkers' financial performance is very predictable. Results rarely vary much from analyst estimates. For 2014, analysts expect Safe Bulkers to earn $0.87 per share on revenue of $184.4 million. These estimates shouldn't budge much, if at all, no matter how much volatility the Baltic Dry Index sees.

The sell-off for Safe Bulkers appears to be overdone. While many other dry shippers operate based on the daily spot rates and see their fortunes rise and fall with the Baltic Dry Index, Safe Bulkers is largely immune from such fluctuations.

Nickey Friedman has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

A Financial Plan on an Index Card

Keeping it simple.

Aug 7, 2015 at 11:26AM

Two years ago, University of Chicago professor Harold Pollack wrote his entire financial plan on an index card.

It blew up. People loved the idea. Financial advice is often intentionally complicated. Obscurity lets advisors charge higher fees. But the most important parts are painfully simple. Here's how Pollack put it:

The card came out of chat I had regarding what I view as the financial industry's basic dilemma: The best investment advice fits on an index card. A commenter asked for the actual index card. Although I was originally speaking in metaphor, I grabbed a pen and one of my daughter's note cards, scribbled this out in maybe three minutes, snapped a picture with my iPhone, and the rest was history.

More advisors and investors caught onto the idea and started writing their own financial plans on a single index card.

I love the exercise, because it makes you think about what's important and forces you to be succinct.

So, here's my index-card financial plan:


Everything else is details. 

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