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 Golden Ocean Group Limited (NASDAQ:GOGL) 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).
Astonishing view of a modern dry bulk vessel sailing on a serene sea.
Golden Ocean Group Limited (NASDAQ:GOGL)
Number of Hedge Fund Holders: 16
Golden Ocean Group Limited (NASDAQ:GOGL) is a Bermuda-based company that offers its services in the dry bulk shipping industry. It owns and operates a fleet that includes Newcastlemax, Capesize, and Panamax vessels. The company’s vessels transport essential commodities such as ores, coal, grains, and fertilizers, which makes it a significant link in the global supply chain.
With a fleet comprising 93 vessels, including one new building, the company has a total capacity of approximately 14.0 million deadweight tonnes (dwt). The fleet includes 84 owned vessels, consisting of 52 Capesize and 32 Panamax ships, as well as eight chartered-in Capesize vessels that come with long-term leases featuring profit-sharing arrangements. It is among the best marine shipping stocks to invest in.
As of now, Golden Ocean (NASDAQ:GOGL) has one Kamsarmax vessel under construction, with contractual commitments of $23 million expected to be settled by the fourth quarter of 2024.
The investment will be funded through the company’s committed debt financing. Demand for large vessels appears particularly strong, mainly due to rising Chinese demand for bauxite and the development of new iron ore export projects in the Atlantic Basin. These trends are likely to provide long-term support for the company’s operations.
On the supply side, the growth of the fleet is moderating, and increasing environmental regulations are anticipated to limit effective fleet capacity. The environment bodes well for the company, as it is well-equipped to generate strong cash flows, thanks to its fleet premium and industry-leading cash breakeven levels.
Golden Ocean (NASDAQ:GOGL) reported a net income of $62.5 million for the second quarter of 2024, with basic earnings per share at $0.31. While this reflects a slight decline from the first quarter’s net income of $65.4 million and earnings per share of $0.33, the company’s strong cash flow generation and solid market positioning remain evident.
Overall GOGL ranks 8th among the best marine shipping stocks to invest in. While we acknowledge the potential of GOGL 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.