DryShips Inc. (DRYS), Diana Shipping Inc. (DSX), Navios Maritime Holdings Inc. (NM): Should You Invest in Shipping Companies?

Diana Shipping Inc. (NYSE:DSX) recently signed a term-loan facility with the Bank of China worth $30 million. Proceeds from the cash inflows will be used to finance acquisition cost of its new drybulk carriers. The management has focused more on operations rather than adjusting its balance sheet, thus giving it more operational flexibility.

Brand reputation

Navios Maritime Holdings Inc. (NYSE:NM) has its competitive strength rooted in low capital-cost structure and brand reputation. The company is vertically integrated, which gives it better control over operations resulting in operational efficiency. Its alliances with huge names like HSH Nordbank and Japanese ship owners provide the company with a strong financial backing.

When all the industry players took a more conservative approach to expansion, Navios Maritime Holdings Inc. (NYSE:NM) made a $130 million investment in its fleet operations. In the most recent earnings announcement, the company beat analyst estimates both on top and bottom line.

Risks faced by the participants

At the moment, developed economies are going through recession or extremely low-growth phases. As a result, the shipping industry has been performing poorly in the last few years. Furthermore, the “shale revolution” in the US meant a decline in the country’s oil imports. China has so far shown a disappointing response as the Chinese economy has also failed to maintain its high-growth figures. Lastly, the declining freight rates are not expected to pick up in the next 12 months, leaving the shipping companies in the worst possible state.

Conclusion

Patience is the key word while investing in the shipping companies. The stocks are at all-time lows and have the ability to yield attractive returns if investors are willing to be patient. I believe above mentioned companies are on the right path and we will see substantial increases in stock prices over the next 18-to-24 months. The global economy is making a slow but steady recovery and the pace should increase over the next two years. We are seeing a slight support in charter rates, which will be further improved once the economic recovery gathers pace.

Ishtiaq Ahmed has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

The article Should You Invest in Shipping Companies? originally appeared on Fool.com.

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