There is much allure to investing now in the shipping sector.
It is a basic industry that plays a vital role in global commerce. Many of the stocks are trading at very low prices due to the impact of The Great Recession. Some still pay big dividends. Legendary investors like Wilbur Ross are buying. But the best stock to profit from the rebound in the shipping sector is with a company that operates from dry land.
Expeditors International of Washington (NASDAQ:EXPD) provides logistic services to shippers and others for transportation needs in the United States and internationally from its Seattle headquarters. It is far superior to shipping companies for growth, value and income investors.
For growth investors, Expeditors International is expanding operations. The earnings-per-share (EPS) growth trend is very bullish. As the table below shows, it is much healthier than the EPS trends for Frontline Ltd. (NYSE:FRO), DryShips Inc. (NASDAQ:DRYS), Nordic American Tanker Ltd (NYSE:NAT), and Teekay Tankers Ltd. (NYSE:TNK).
|Metric||Expeditors International||Frontline||DryShips||Nordic America Tankers||Teekay Tankers|
|Previous 5-Year EPS Growth||11.14%||(43.83%)||(64.46%)||(73.04%)||(55.61%)|
|EPS Growth Rate Year||12.80%||(428.85%)||(134.46%)||(8720.83%)||(140.58%)|
|Projected 5-Year Growth Rate||12.50%||5.00%||(9.90%)||0.00%||10.00%|
As shippers, these companies were hit hard by falling business falling charter rates due to the impact of the Great Recession. Before The Great Recession hit, there was tremendous overbuilding. As a result, the share price of each has plunged. Frontline was trading at over 70 in 2008 and is now around $3.60. In 2007, DryShips was over $120 a share and now is under $2.20. Around $45 in 2007, the stock of Nordic American Tankers is about $8.70. Now under $2.90 a share, Teekay Tankers was over $24 in 2008. By contrast, in February 2008, Expeditors was trading beneath $40 a share. At present, it is going for around $43 a share.
In addition to the way the company avoided much of the carnage of The Great Recession from not overbuilding and then being decimated by plunging rates, value investors should find the clean balance sheet of Expeditors International of Washington to be attractive, too. Of great appeal is that Expeditors International has no debt. The chart below shows how larded up the balance sheets of Frontline, DryShips, Nordic American Tankers, and Teekay Tankers is with debt. That high level of debt combined with a falling EPS growth rate could take these companies under. That makes these shipping companies value traps, rather than value plays.