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 ZIM Integrated Shipping Services Ltd. (NYSE:ZIM) 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 fleet of vessels docking at a busy harbor, signaling the company’s presence in global marine shipping.
ZIM Integrated Shipping Services Ltd. (NYSE:ZIM)
Number of Hedge Fund Holders: 26
ZIM Integrated Shipping Services Ltd. (NYSE:ZIM) is a prominent name in the container shipping industry, recognized for its innovative approach and extensive global reach. The company’s operations span over 90 countries and services that touch approximately 300 ports worldwide, which has helped it create a diverse customer base of more than 32,000 clients.
The broad network supports its mission to provide efficient and reliable shipping services on key trade routes, including the Pacific, Latin America, Atlantic, Cross-Suez, and Intra-Asia. It takes its place among our best marine shipping stocks to invest in.
A significant part of the company’s competitive edge is in its agile fleet management and deployment strategy. The company is in the middle of a substantial fleet renewal initiative, featuring a modern lineup of 46 new container ships, of which 28 are powered by liquefied natural gas (LNG).
As of mid-May, ZIM Integrated (NYSE:ZIM) had already received 30 of these vessels, with the remaining 16 scheduled for delivery by the end of 2024. Once this fleet renewal program is completed, over half of its operated capacity will consist of these newbuild ships, with the rest of the portion being LNG-powered.
In the second quarter, the company showed strong performance, evidenced by a nearly 11% year-over-year increase in carried volume. The growth resulted in a remarkable 48% rise in revenue, reaching $1.93 billion.
Furthermore, net income climbed by 46% to $19 million, both figures surpassing analysts’ expectations. CEO Eli Glickman credited the success to a strategic increase in the company’s exposure to the spot market, which allowed it to capitalize on elevated rates that have persisted longer than anticipated.
Glickman is confident about ZIM Integrated’s (NYSE:ZIM) performance in the second half of 2024. He sees improved results driven by ongoing supply pressures from the Red Sea crisis, alongside favorable demand trends.
Overall ZIM ranks 4th among the best marine shipping stocks to invest in. While we acknowledge the potential of ZIM 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.
