Stop Trading!: Are Shipping Stocks Sunk?
Fears of a U.S. recession spread through the global markets Monday as international exchanges registered sizable one-day declines. But just how valid are these concerns? Street Signs host Erin Burnett and Mad Money's Jim Cramer teamed up to ask Eagle Bulk Shipping CEO Sophocles Zoullas how his company was faring.
A drop in dry-shipping spot rates might offer clues about whether or not people are expecting a major slowdown, Burnett noted, but Zoullas said he didn't see it. The CEO admitted the Dry Bulk Shipping Index was down, but commodity pricing for trading ships is up: Iron ore's spot price is 70% to 100% above contract price, he pointed out.
"We're at a seasonally slow period," Zoullas said, "but the market is fundamentally very healthy."
But "the stocks cannot simply be this wrong," Cramer rebutted, adding that there's "some chink" in Zoullas's story. How can most of the dry bulk shippers -- except for Diana, whose CEO expressed some concern during a Mad Money appearance -- be so bullish when their own stocks are cutting cut in half?
It's all about "positioning and the durability of companies," Zoullas replied. Dry-bulk shipping is new to U.S. investors, he said, and only now are they realizing "all dry-bulk companies are not created equal." Some shippers deal in the more volatile big ships, others, like Eagle, do business with the more conservative small ships.
It's an emotional market, Zoullas admitted, and "I would say, 'Don't throw the baby out with the bath water."
"You have to look at the specifics," he said.
Over 95% of Eagle's revenues comes from outside the U.S., Zoullas said, so Eagle isn't feeling the crush the way U.S. businesses might be.
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