Given the financial turmoil in Greece as the country has said no to deeper austerity measures being imposed on it by creditors in a resounding vote today, there is fear over how the situation will impact many of the Greece-based shipping container companies, who could be forced to up and leave the country (and have threatened to do so, if the Greek government removes some of its concessions for the industry amid its economic crisis). Is it a good time to get out of these stocks as a result? It’s an interesting questions, as although prospects for the shipping industry predominantly look glum as well, amid a supply glut of container ships, according to a recent survey by the London-based law firm Norton Rose Fulbright, maritime transporters of oil products have seen the strongest activity for the first half of the year since 2009. In fact, a very recent example of the smart money interest in the industry is the activity of Joel Ramin‘s 12 West Capital Management. The fund acquired some 427,900 shares of Diana Containerships Inc (NASDAQ:DCIX), taking its total stake to 19.29 million shares. The holding represents about 26.1% of the company’s outstanding stock. Other companies in the segment manifesting increased demand from investors include Costamare Inc (NYSE:CMRE), Diana Shipping Inc. (NYSE:DSX), and Tsakos Energy Navigation Ltd. (NYSE:TNP). Let us take a closer look at them and the hedge funds that have cashed in on their success.
First let’s consider the uptrend in Costamare Inc (NYSE:CMRE). The $1.38 billion company’s stock appreciated by almost 5% in the first half of the year, even though the shares are down by nearly 23% over the last year. The Greece-based company has a fleet of 67 containerships that it charters to liner companies. Among the funds that we track, James Dinan‘s York Capital Management is the largest stockholder of the company with 1.5 million shares valued at $26.42 million. Diana Shipping Inc. (NYSE:DSX)’s stock has appreciated by about 8.5% so far this year while being down by more than 35% over the past year. 12 West Capital Management and Tiger Veda, which is managed by Manish Chopra is the largest shareholder of Diana Shipping Inc. (NYSE:DSX) within our database, with respective holdings of 3.27 million shares valued at $15.83 million and 5.59 million shares valued at $15.83 million.
The largest gainer on our list is Tsakos Energy Navigation Ltd. (NYSE:TNP), as its shares have surged by more than 33% on a year-to-date basis and about 35% over the past year. The $802.23 million provider of transportation services for oil and petroleum products has benefited from the increased activity in its industry segment owing to the prevalent low oil prices that have resulted in a rise in demand. An idea of the boom in the business can be drawn from the rates for transporting Saudi Arabian crude to Japan, which is the industry’s benchmark and is at its highest level since 2009. While almost 44% of the company’s shares are held by institutions, there was little enthusiasm shown by the hedge funds that we track in Tsakos Energy Navigation Ltd. (NYSE:TNP)’s future prospects. At the end of the first quarter 16 funds had positions in the company valued at $103.35 million as opposed to 15 firms with $85.21 million at the end of last year. Shares rose by 20% during this period. Brian Taylor’s Pine River Capital Management is the largest stockholder of Tsakos Energy Navigation Ltd. (NYSE:TNP) among the company’s investors that we track, holding about 4.69 million shares valued at $38.34 million.
It’s possible the smart money was betting on a resolution in Greece, which has not happened, or the improvement of the shipping industry, which has not entirely happened yet either, so there is clear strength in some segments. Given that most of the Greek shipping companies are well off their 1-year highs and there is some bullish hedge fund sentiment swirling around them, we feel it may a decent time to make a contrarian bet and take stakes in some of these seemingly downtrodden shippers.
An everyday investor does not have the time or the required skill-set to carry out an in-depth analysis of equities and identify companies with the best future prospects like a fund with the knowledge and resources of Visium can. However, it is also not a good idea to pay the egregiously high fees that investment firms charge for their stock picking expertise. Thus a retail investor is better off to monkey the most popular stock picks among hedge funds by him or herself. But not just any picks mind you. Our research has shown that a portfolio based on hedge funds’ top stock picks (which are invariably comprised entirely of large-cap companies) falls considerably short of a portfolio based on their best small-cap stock picks. The most popular large-cap stocks among hedge funds underperformed the market by an average of seven basis points per month in our back tests whereas the 15 most popular small-cap stock picks among hedge funds outperformed the market by nearly a percentage point per month over the same period between 1999 and 2012. Since officially launching our small-cap strategy in August 2012 it has performed just as predicted, beating the market by over 84 percentage points and returning over 144%, while hedge funds themselves have collectively underperformed the market (read the details here).
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