We recently compiled a list of the 8 Best Marine Shipping Stocks to Invest In. In this article, we are going to take a look at where Genco Shipping & Trading Limited (NYSE:GNK) stands against the other marine shipping stocks.
The Maritime Freight Transport industry plays a significant role in global trade as it handles about 90% of it. The expansion of seaborne trade is benefiting consumers worldwide by providing competitive freight rates. According to Mordor Intelligence, the industry is projected to grow from approximately $381.69 billion in 2024 to around $471.81 billion by 2029, at a compound annual growth rate (CAGR) of 4.33%.
The Evolution of Shipping in a Changing World
According to a KPMG report posted in May, the global shipping industry is on an upward trend despite challenges like vessel accessibility, labor shortages, and geopolitical instability. Around 83% of the world fleet consists of small to medium-sized ships, with small vessels making up 38% by number but only 1% by tonnage. Increasing container ship availability is expected to stabilize freight rates and restore the supply-demand balance.
Port delays and logistical bottlenecks are expected to ease, but geopolitical conflicts, especially in Ukraine and the Middle East have disrupted some important shipping routes, which have led to longer, costlier voyages. The industry faces a potential shortage of maritime officers by 2026 and women make up only 2% of the workforce.
Despite these challenges, global economic growth of 3% annually will support seaborne trade expansion. Freight rates have returned to pre-pandemic levels, as tanker demand remains strong due to a 1.9% fleet growth in 2023. Additionally, LNG demand is expected to stabilize the market, while container freight rates are recovering due to voyage restrictions and reduced vessel availability.
Trends Shaping the Industry
According to the above-mentioned KPMG report, the shipping and port industries are experiencing transformative trends that are influenced by decarbonization, digitalization, and evolving supply chains. Despite 6% of post-COVID stimulus efforts targeting greenhouse gas (GHG) emission reductions, rising fuel prices due to the Russia-Ukraine conflict pose challenges, as the maritime sector accounts for 2.8% of global GHG emissions, with over 40% of marine cargo being fossil fuels.
Digital adoption is on the rise, with the smart ports market expected to grow from $1.9 billion to $5.7 billion at a CAGR of 24.3% from 2022 to 2027. The pandemic has highlighted supply chain vulnerabilities, which has prompted the companies to diversify sourcing and rethink logistics.
Our Methodology
For this article, we used stock screeners to identify 25 marine shipping stocks with a market cap of above $50 million. We narrowed our list to 8 stocks most widely held by hedge funds, as of Q2 2024. The 8 best marine shipping stocks to invest in are listed in ascending order of their hedge fund sentiment.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A close-up of a large cargo vessel in the open sea, its sails billowing in the wind.
Genco Shipping & Trading Limited (NYSE:GNK)
Number of Hedge Fund Holders: 21
Genco Shipping & Trading Limited (NYSE:GNK) is known for the global transportation of dry bulk cargoes as it operates a diverse fleet to meet the demands of various industries. It has a focus on transporting important materials like iron ore, grains, coal, and steel products. The company serves a wide range of clients, including trading houses, commodity producers, and government entities. It is 5th on our list of the best marine stocks to invest in.
The company operates a fleet projected to comprise 41 vessels, featuring 15 Capesize, 15 Ultramax, and 11 Supramax carriers. The fleet has a total capacity of approximately 4.3 million deadweight tons. The average age of its vessels is around 11.9 years, striking a balance between seasoned operational experience and opportunities for modernization through targeted upgrades.
Referring to the second quarter, CEO John C. Wobensmith emphasized the successful execution of a fleet renewal initiative aimed at enhancing operational efficiency. The company has been proactive in selling older vessels at favorable prices and reinvesting in newer, more advanced ships. Recent transactions, including the sale of two Capesize vessels, Genco Maximus and Genco Claudius, along with planned sales of Genco Warrior and Genco Hadrian, show this commitment. It helped generate significant cash inflow and will help it in avoiding $5 million in upcoming drydocking expenses, positively impacting overall profitability.
On September 10, Genco Shipping (NYSE:GNK) announced a notable adjustment to its dividend calculation methodology. By removing drydocking capital expenditures from the formula, the company aims to increase the cash available for distribution to shareholders starting in the third quarter of 2024. It has established a voluntary quarterly reserve of $19.5 million under this new approach, which provides flexibility in cash flow management while prioritizing shareholder returns.
In the second quarter, 21 hedge funds had stakes in Genco Shipping (NYSE:GNK), with total positions worth $81.3 million. As of June 30, Renaissance Technologies is the largest shareholder in the company and has a position worth $22.376 million.
Overall GNK ranks 5th among the best marine shipping stocks to invest in. While we acknowledge the potential of GNK as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is promising and trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.