We recently compiled a list of the 10 Best Shipping and Container Stocks To Buy. In this article, we are going to take a look at where Genco Shipping & Trading Limited (NYSE:GNK) stands against the other shipping and container stocks.
Before the invention of the intermodal shipping container, goods were shipped in various-sized boxes that workers had to load and unload from ships manually. This method was inefficient, expensive, and time-consuming, making it difficult to transfer cargo across different modes of transport. The introduction of the first standardized intermodal shipping container in the 1950s revolutionized world trade. Approximately 90% of globally traded goods rely on maritime transportation, and the volume of maritime trade is projected to triple by 2050 due to rising demand. With the growth of the world economy over the past decades, the volume of freight transported by ships has also increased. In 2021, about 1.95 billion metric tons of cargo were shipped globally, up from approximately 0.1 billion metric tons in 1980. Consequently, the global container fleet has expanded significantly. Between 1980 and 2022, the deadweight tonnage of container ships grew from about 11 million metric tons to roughly 293 million metric tons.
However, this growth comes with increasing risks to shipping. Due to its global nature, the shipping container industry is vulnerable to several natural phenomena, including tropical storms, inland flooding, sea-level rise, drought, and extreme heat. According to CNBC, citing a study by RTI, climate change impacts on ports—including damage and disruptions—could cost the shipping industry up to $10 billion annually by 2050 and up to $25 billion per year by 2100.
Over the past few months, global trade has faced setbacks due to disruptions in two crucial shipping routes. Attacks on vessels in the Red Sea region hindered traffic through the Suez Canal, the primary maritime link between Asia and Europe, typically handling around 15% of global maritime trade volume. Meanwhile, on the other side of the globe, a severe drought at the Panama Canal led authorities to enforce restrictions, significantly reducing daily ship crossings since October of last year. This slowdown has impacted maritime trade through another vital chokepoint, typically responsible for about 5% of global maritime trade.
According to the International Monetary Fund (IMF) high-frequency transit estimates, trade volume passing through the Suez Canal witnessed a 50% year-over-year drop in the first two months of the year, while trade volume using the Cape of Good Hope detour surged by an estimated 74% above last year’s level. Meanwhile, transit trade volume through the Panama Canal decreased by almost 32% compared to the previous year. Additionally, data indicates a 6.7% year-over-year decline in port calls to the 70 ports tracked in sub-Saharan Africa for January and February 2024. Similar declines were observed in areas such as the European Union, the Middle East, and Central Asia, with decreases of 5.3%. These reductions likely stem from the temporary effects of longer shipping times. Should these interferences persist, they could temporarily disrupt some supply chains and exert upward pressure on inflation in the affected countries.
That said, the global container shipping market, valued at $2.2 trillion, remains up for significant expansion in the coming years. According to a research report, the market is projected to reach $134.03 billion by 2029, demonstrating a compound annual growth rate (CAGR) of 3.11% from 2024 to 2029. In addition, the rise of e-commerce has underscored the importance of end-to-end supply chain visibility, prompting shippers to leverage technology for real-time tracking of cargo and tankers. This e-commerce boom is driving the demand for faster and more cost-efficient shipping solutions, with the global e-commerce logistics market expected to experience a CAGR of over 17.8% from 2022 to 2033.
Our Methodology
For our list of the best shipping and container stocks to buy, we selected the following names based on hedge fund sentiment toward each stock. We assessed the sentiment using Insider Monkey’s database of 919 elite hedge funds tracked as of the end of the first quarter of 2024. The list is arranged in ascending order based on the number of hedge fund holders for each firm. Why are we interested in the stocks that hedge funds pile into? The reason is simple, our research has shown that we can outperform the market by imitating the top stock picks of best hedge funds. Our quarterly newsletter’s strategy picks 14 small and large-caps every quarter and it has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A close-up of a large cargo vessel in the open sea, its sails billowing in the wind.
Genco Shipping & Trading Limited (NYSE:GNK)
Number of Hedge Fund Holders: 16
Genco Shipping & Trading Limited (NYSE:GNK) specializes in the global ocean transportation of dry bulk cargoes. The company’s fleet of dry bulk carrier vessels is chartered to various entities, including commodities traders and government-owned organizations.
In Q1 2024, Genco Shipping & Trading Limited (NYSE:GNK) reported a significant rise in net income to $18.8 million, or $0.44 per basic share and $0.43 per diluted share, a substantial increase from $2.6 million, or $0.06 per share, in the same period last year. This strong performance was driven by a robust 38% year-over-year increase in Time Charter Equivalent (TCE) revenue, reflecting effective fleet management and favorable market conditions. The company’s revenue for the quarter was $117.4 million, significantly exceeding analyst estimates of $81.24 million. On the other front, Genco Shipping & Trading Limited (NYSE:GNK) has maintained its strategic focus on shareholder returns, declaring a quarterly dividend of $0.42 per share, marking the company’s 19th consecutive payout.
According to Insider Monkey’s first quarter database of 2024, 16 hedge funds held bullish positions in Genco Shipping & Trading Limited (NYSE:GNK), with combined stakes valued at $45.3 million, the same as the previous quarter valued at $40.4 million. The positive hedge fund sentiment makes Genco Shipping & Trading Limited (NYSE:GNK) one of the best shipping and container stocks to buy.
Overall GNK ranks 7th on our list of the best shipping and container stocks to buy. You can visit 10 Best Shipping and Container Stocks To Buy to see the other shipping and container stocks that are on hedge funds’ radar. While we acknowledge the potential of GNK as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than GNK but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
