As 2019 comes to a close, J Mintzmyer, the founder of Value Investor’s Edge, is totting up the numbers in a year that has cemented his position as one of shipping’s top analysts. Value Investor’s Edge’s model portfolios are up 71% this year versus the market being up 24% and the shipping ETF up just 26%.
Research prices are set to jump by $1,000 next week so Splash readers keen to get in on the action for what promises to be a bumper year for shipping investments ought to sign up fast for a free trial now with Value Investor’s Edge.
Looking back on the past 12 months, Mintzmyer says the year stated out with shipping in a period of “irrational panic”.
“Sell side analysts were losing their jobs left and right. This setup offered a unique, perhaps generational, opportunity to invest in shipping stocks due to extreme pessimism which outweighed actual fundamentals,” Mintzmyer reflects.
At the start of 2019 shipping was experiencing rising rates in almost all sectors, coupled with near record-low ship valuations, near record-low stock valuations, and what Minyzmyer describes as a “promising pending regulation” in the form of IMO 2020.
The global sulphur cap – from a shipping investment play – is “massive”, Mintzmyer says, explaining: “It bifurcates the entire global fleet between modern eco tonnage and older ships with higher fuel burns.”
Furthermore, the opportunity to install scrubbers offers companies a chance to profit from the surging spreads between compliant VLSFO fuel and the legacy 3.5% bunker fuel HSFO.
“I expect IMO 2020 to continue to contribute to strong rates both due to increasing off-hire for retrofitting as well as slow steaming due to surging fuel costs,” Mintzmyer predicts. “Additionally, if rates show sustained weakness later in the year or into 2021, I expect demolition of older tonnage to surge as these ships will be clearly uneconomic.”
As for next year, the analyst is most optimistic for crude tanker and VLGC rates. Mintzmyer also has some hope for LNG carriers. “Sentiment has also turned incredibly sour in the LNG space, which I believe offers some very interesting opportunities for investors with longer-term time horizons,” Mintzmyer says.
When pressed by Maritime CEO for stock picks, in the crude tanker space, Mintzmyer believes Euronav is the most attractively priced at the moment, while in the LNG sector, he chooses Golar LNG and Flex LNG. We’ll be checking in regularly with this American analyst in the coming months to see how his predictions pan out.