Friday, January 02, 2009
Shippers Get an End-of-Year Bounce
Friday, 02 January 2009
Amid scarce trading, shipping stocks are finding buyers on the last day of the year. There isn’t any news to speak of, and the analyst community is also quiet, with nary a significant note published on the sector. Market strategists attribute the buying to short-term traders scooping up shares after a steady bout of tax-loss selling, in anticipation of an early bounce in 2009 as investors begin to look at potential values. The shipping stocks were soundly thrashed in 2008, with major issues like Dryships Inc. and Eagle Bulk Shipping losing 88% and 78%, respectively, on the year.
When stocks perform that badly, often investors will engage in a bit of late-year selling in order to book tax losses. The shippers hit a low point in late November, rebounded a bit in mid-December, and have been unloaded again in the last several days. “The prices are reflecting that the end-of-the-year tax selloff is over with and they’re expecting a bounce,” says Paul Foster, market strategist at Flyonthewall.com. “It’s a trading play they’re anticipating here.”
Shares of Dryships gained 16%, and the stock was the second most-actively traded issue on the Nasdaq Stock Market, trailing only the Nasdaq-100’s tracking shares. Eagle Bulk Shipping rose 12.7% and Overseas Shipping rose 3%. Mr. Foster says similar action can be seen in other names, such as Dow component Alcoa, which is up 3.8%, having come into Wednesday’s action down 71% in 2008.
The recent dive in the price of crude oil would auger for improved shipping demand, though the action in the Baltic Dry Index does not suggest this yet. “These stocks probably got overdone and people are looking for stocks that might get that January bounce,” says William Lefkowitz, chief options strategist at vFinance Investments. “They’re hoping come Friday there’s only buyers, and they jump on a couple of these and make 20% to 30% in a couple of days, and then leave and go on vacation for 11 months and 3 weeks.”
As adapted from Wall Street Journal
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