The often-volatile Baltic Dry Index has at least one thing going for it: The shipping companies that constitute the index offer hefty dividend yields to shareholders. Britannia Bulk Holdings, which pays out 8.8%, is no different.
Admittedly, Britannia came public last week lower than its offering price and then dropped lower thanks largely to the Chinese government. (More on that in a bit.) But the company’s in its sector’s sweet spot, transporting materials – coal, crops and fertilizers – that are in high demand right now. Plus, Britannia has plans to add six more ships to its fleet, bringing in more revenue and most likely boosting the dividend and share price.
Returning to that China issue, the entire Dry Bulk Index took a hit after Chinese officials ordered a reduction in iron-ore stockpiles. Cramer insisted this was just temporary, though, lasting only three or four weeks. So the index should rebound, taking Britannia with it, especially if Cramer’s right about his expectation of supply-and-demand pressures.
Here’s a fun fact: While 15% of the bulk shippers' order book due to be delivered in China this year will be delayed, commodity demand is still expected to double over the next three years thanks to China and India.
The prospects for Britannia look good, making this stock a buy – though only under certain conditions. Don’t grab an entire position all at once. Use limit orders. Wait for a pullback. And don’t pay a penny over $13 for this stock. Anymore than that and you’re not getting a good deal, Cramer said.
Remember, this is a Speculation Friday pick, so proceed with caution. A little risk-taking makes investing fun, but here on Mad Money we believe in fully researched, calculated risks, not pin-the-tail-on-the-donkey stock-picking. Cramer did his homework for this segment, so take what he learned and build on that before you buy – if you decide that’s what you want to do.
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