It’s Time to be a “Vulture Investor”
By Justin Spittler
Vultures are despicable creatures.
They’re ugly. They’re nasty. And worst of all, they’re scavengers. They eat what other animals kill.
But if you can look past that, it pays to be a vulture…
After all, it’s much easier to eat a dead animal than to track one down and kill it yourself.
Now, I’m not saying you should dig your next meal out of a dumpster.
I’m saying you should be a vulture investor.
• Vulture investors buy assets other investors don’t want…
At first, this might sound like a dumb strategy.
But when you think about it… it’s actually genius.
If you buy something most investors hate, you’re probably going to get a bargain. You might even get the chance to buy a dollar’s worth of assets for pennies.
Legendary investors like Baron Rothschild, Sir John Templeton, and Warren Buffett made billions of dollars doing this. Casey Research founder Doug Casey has also made a killing as a vulture investor.
And you, too, can make big money this way. That’s because there’s a huge “vulture investing” opportunity staring us in the face right now.
• The dry bulk shipping industry has been left for dead…
Dry bulk shipping companies transport raw materials like coal and iron ore.
From 1999 to 2008, these companies were red-hot investments. That’s because shipping rates were soaring.
The Baltic Dry Index (BDI)—which measures the cost to ship raw materials by sea—surged more than 14-fold during that period. Business was booming.
Then the global financial crisis hit.
• Global trade practically came to a screeching halt…
The BDI plunged 94% in just seven months. It still hasn’t recovered.
Just look at the chart below.
Last February, the BDI hit an all-time low of 290. That’s 98% below the all-time high it set back in 2008.
• Low shipping rates killed shipping companies…
Industry profits dried up. At least a half-dozen dry bulk shipping companies went bankrupt between 2008 and 2010. And several shipping stocks plummeted 90% or more.
After the crash, a lot of investors gave up on shipping stocks. But not us.
We knew shipping companies would inevitably rebound. Why?
Water covers two-thirds of the planet. Unless global trade stops completely, companies will continue to use ships to move goods and raw materials around the world.
In short, it was never a question of if shipping stocks would rebound. It was a question of when.
This is why we’ve been stalking the shipping industry for over two years. We’ve been waiting for the right opportunity to pounce. And that time has come.
• The shipping industry is finally recovering…
If you read the Dispatch on March 1, you know what I’m talking about.
If you missed that issue, here’s a quick recap…
Shipping rates are soaring. This month, the BDI jumped an incredible 54%. It’s now up 357% since last February. It’s trading at its highest level since November 2014.
Shipping stocks have taken off. Several shipping stocks have more than doubled over the past year. A few have tripled.
After a run like that, you might think shipping stocks would cool off.
But they’ve just kept rallying.
Star Bulk Carriers Corp. (SBLK), one of the shipping stocks I talked about in that issue, is up 19% since March 1. Golden Ocean Group Limited (GOGL), another shipping stock I profiled, is up 11%.
Star Bulk is now up 288% since last March. Golden Ocean is up 161% over the same period.
• Those are massive gains for such a short period…
But don’t worry. You didn’t miss your chance to buy shipping stocks.
Remember, shipping stocks have been beaten to a pulp. Many are still down more than 90%.
These stocks could double and they would still be 80% off their old highs.
In short, the rally in shipping stocks could just be getting started.
• Morgan Stanley thinks shipping stocks are ready to rip…
Morgan Stanley (MS) is one of the largest U.S. investment banks.
Earlier this week, it upgraded its ratings for six shipping stocks. It more than doubled its price target for all of them. It raised Star Bulk’s price target from $3.00 to $15.00 per share.
Morgan Stanley turned bullish on shipping stocks for the same reasons we did.
It thinks the dry bulk shipping market has bottomed.
Here’s a quote from its newest research note:
The dry bulk market has passed through its cyclical lows and is headed toward profitability.
Most importantly, Morgan Stanley said the “recovery is still not priced in.”
• Shipping stocks spiked on the news…
Star Bulk Carriers popped 19%.
Safe Bulkers jumped 12%.
Golden Ocean jumped 9%.
DryShips gained 7%.
These are big gains. But these stocks could rise another 100% or even 200% before this rally ends.
In other words, we could be looking at a serious moneymaking opportunity.
But there are a couple things you should know before you load up on shipping stocks:
The shipping industry still has big problems. Despite the recent rally, shipping rates are still near record lows. And the industry still has too much debt and too many ships. The good news is that these problems aren’t nearly as bad as they were a couple years ago.
Shipping stocks are extremely volatile. They can swing 10% or even 20% in a day. If you can’t stomach those kinds of violent moves, this might not be the opportunity for you.
In short, you shouldn’t treat shipping stocks like an investment. They’re a high-risk speculation.
• Here are three ways you can manage risk…
Be smart about position size. Don’t bet your retirement on shipping stocks. Only speculate with money that you can afford to lose.
Limit your downside. You can do this with stop losses. These will automatically sell a position if it falls below a certain point. With something as volatile as shipping stocks, we recommend a 50% trailing stop.
Spread your risk. Don’t buy just one shipping stock. Buy a basket of them.
Here are three of our favorites:
➢ Navigator Holdings Ltd. (NVGS)
➢ Star Bulk Carriers Corp. (SBLK)
➢ Golden Ocean Group Ltd. (GOGL)
These simple strategies will give you a shot at monster returns without exposing you to huge losses.
Delray Beach, Florida
March 31, 2017
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