Stock Picker: Baltic Dry Index Still a Good Indicator

The Baltic Dry Index, a leading economic indicator used by market insiders to gauge global demand for dry commodities, is up over 20 percent in the past month. While some critics have claimed that the index is an inaccurate measure, Omar Nokta, head of research for marine transport at Dahlman Rose, said it still remains reliable.

“There’s been a lot of arguments that the BDI isn’t going to be as reliable of an index to judge the health of the global economy,” Nokta told CNBC.

“But we still think it’s very relevant because it gives the real sense of demand for raw materials from the developing world.”

Nokta said he likes companies with good management teams and balance sheets. His favorites include Genco Shipping and Diana Shipping .

“Diana Shipping is debt-free and they have the ability to consolidate the market,” he described. “There’s been a lot of distressed markets out there and if you’ve got a clean balance sheet, you can jump on those opportunities.”

Meanwhile, Nokta noted that pirates have been a rising issue for shippers.

“Going around East Africa, travel time has taken an extra couple of days just to line up a caravan with an escort,” he explained. “It's not a major thing in our models right now, but it’s a growing concern.”

  • Watch Nokta's Previous Appearance on CNBC (Jan. 29, 2010)

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Eagle Bulk Shipping

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Nokta does not own shares of DSX or NM.

Dahlman Rose & Company has investment banking clients who own shares of GNK.