The Baltic Dry Index, a leading economic indicator used by market insiders to gauge gloobal demand for goods, is up 300 percent, quadrupling in value. Does it have more room to run and what does it say about the overall economy? Doug Mavrinac, head of maritime research at Jeffries, shared his insights.
“The index is a relatively good predictor and indicator of where the economy is,” Mavrinac told CNBC.
“Based on where rates are today, it’s not oversupplied and the increase that we’ve seen today is primarily due to the Chinese importing record levels of iron ore and of coal. So it’s fairly indicative of what’s going on globally.”
Mavrinac said the dry bulk shipping stocks still have more room to run.
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“It’s important to make the distinction between the container shipping companies and the dry-bulk shipping companies,” he said.
“The container shipping industry is one where it is plagued by overcapacity…But in the dry-bulk shipping market, it’s a much different market.”
Recommendations:
Mavrinac is “overweight” the Dry Bulk Shipping sector and has a “buy” rating on Diana Shipping , Genco Shipping , and a “hold” rating on Dryships .
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Disclosures:
Mavrinac does not own any shares of DSX.
Within the past 12 months, Jefferies and/or its affiliates received non-investment banking, securities relates compensation for client services it provided to GNK.
Jeffries makes a market in DRYS.
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