The fleets
Dry bulk ships are classified based on the amount of deadweight tonnage, or DWT, they are capable of carrying. The smallest (and most common) are handysize, which have a carrying capacity of roughly 15,000-35,000 DWT. The largest group of ships are of the capesize variety, built to handle cargo loads of over 80,000 DWT.
Diana Shipping Inc. (NYSE:DSX)’s fleet consists of 33 ships. The average age of the fleet is 6.4 years and the average carrying capacity is 3.7 million DWT.
The fleet of Safe Bulkers, Inc. (NYSE:SB) is 26 ships strong. With an average age of 5.1 years, it has one of the younger fleets in the industry. The combined average carrying capacity of the fleet is approximately 2.37 million DWT.
Not surprisingly Star Bulk Carriers Corp. (NASDAQ:SBLK) has the smallest fleet of the group, currently comprised of 13 ships with a combined average carrying capacity of 1.3 million DWT. With an average age of 10.7 years, Star Bulk Carriers Corp. (NASDAQ:SBLK) also has the oldest fleet of the bunch.
Note that the descriptions above don’t account for the fact that each company is planning to grow its fleet in the coming years.
Diana Shipping Inc. (NYSE:DSX) expects to have added five ships to its fleet by 2016. Safe Bulkers, Inc. (NYSE:SB) intends to grow its fleet by eight ships within two years. And Star Bulk Carriers Corp. (NASDAQ:SBLK) recently commenced a backstopped equity rights offering in which it plans to raise $75 million, primarily for the purpose of purchasing fuel-efficient dry bulk vessels.
Given how manufacturers of ships went way overboard in recent years, now seems like a smart time for shippers to expand their fleets.
Foolish bottom line
The dry bulk sector was one of the hardest hit by the great recession. Several of the weaker shippers have been forced to declare bankruptcy. But as survival of the fittest dictates, only the best will emerge from the wreckage.
Seeing as how the majority of dry bulk shippers are trading at a discount to book value, those that can manage to survive should deliver satisfying rewards to shareholders.
It appears the Baltic Dry Index has bottomed out. And while it isn’t exactly smooth sailing ahead for these companies, it appears the darkest days are behind them.
Investing in this sector isn’t for the faint of heart. But investors with high tolerance for risk might want to consider adding a dry bulk shipper to their portfolios. The ideal time to do so would be before Wall Street starts paying them any attention again.
The article Is It Time to Invest in the Dry Bulk Shippers? originally appeared on Fool.com.
Fool blogger Ryan Palmer owns shares of Star Bulk Carriers. The Motley Fool does not recommend or hold a position in any of the companies mentioned. Ryan is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.
