A good time to buy into shipping shares

THE timing is right to have a little bit of cash to spend in the shipping industry. Share prices are rocking wildly and markets are still in a jitter. Japan, the Middle East and other global calamities are distracting attention, and there are some companies sizing up potential public offerings.

A number of large shipowners — those with deep, gold-lined pockets — are believed to be on the prowl. Low share prices in competitors and partners may be too tempting to ignore.

There are also companies looking to offload non-core business units that can bring some cash as they look to spend elsewhere. The sale by DFDS of its tourist boat business in Copenhagen is one example.

Torm and Frontline have now been linked. Rumour has it that Fredriksen’s Frontline started to eye up Torm after selling off shares in Overseas Shipping Group last month.

Earlier in the year an analysis of the tanker markets by Lloyd’s List pointed to the continuing difficulties private operators could face.

But the world is full of ironies and I would happily pick up a few cheap tanker shares right now, because sooner rather than later the market will return. Well it might be later, but that’s even more suitable for my line of thinking.

We are out of the worst of the crisis, although the wheels of the wagon remain a bit wobbly. A number of tanker owners – Torm is not alone – are still operating below breakeven levels and may default if they can not raise some capital. The choice is to sell off ships, raise equity through a share sale or go for bonds.

With a sharp-eyed man like John Fredriksen rumoured to have his eyes on a shipowner such as Torm, it can only be good news for the Danish company.

For where Fredriksen looks, others tend to follow his gaze, under the self-effacing motto that opportunity can strike twice.

If I was a Torm shareholder now I’d be tempted to start the rumours myself if they were not true, given how Torm’s shares rallied on the rumour after reaching an eight-year low last week.

So, I have some cash stuffed under my mattress and I am looking for something to use it on. I don’t feel I
can put it back in a bank just yet — not safe enough and with no certainty of a return.

I could buy a dozen bottles of quality wine if I knew about wine. Or perhaps I should sow it where the earth looks most barren and wait to see what happens when the sun shines. Where there’s muck there’s brass — and oil is mucky stuff.