That title is worse than it sounds. We need to talk about shipping:
For anyone who hasn't looked at a maritime shipping/bulker/tanker company: A) Good choice! B) The value of these companies is almost all assets. This is one of the few places you'll still see companies trade at/below book value. Star Bulker Carriers, for example, has $2.9 billion in ships, $1.5 billion in net equity, and a $1.2 Billion market cap. Frontline has $1.5 Billion in equity, $1.3 billion market cap. That doesn't mean you should go out and buy $SBLK or $FRO. The business is an asset heavy, miserably unprofitable commodity service. Everyone in the shipping industry waits around cutting their teeth until a shipping supercycle hits and they can actually profit. They have extreme sensitivity to interest rates, and extreme sensitivity to economic downturns.
You aren't getting $1 for $.90 buying these stocks. You're getting the expected future cashflows from $1 of net merchant ship, which the market ascribes an NPV of >$1.
I digress. Castor, as of 9/30, has $30 million in ships. Six 75,000 DWT bulkers, to be exact. A tiny fleet. They've now bought a Capesize and 2 LR2 tankers. Lets call that an extra $80 million. $110MM in ships. Their market cap, as of close, is $880MM. 8x price/assets for merchant ships! WHAT? It's not uncommon for this company's peers to trade at .3x price/assets!
That's... a bad investment. Quite possibly the worst investment opportunity I've ever seen. At least most bubbles have some "moonshot" potential; these guys buy boats. Sell. Run. This is the dumbest bubble I've ever seen.
TLDR: This is the top, lads.
Submitted February 12, 2021 at 12:48AM by thri54 https://ift.tt/3b23jkZ
