When Occupy Wall Street mounted a substantial West Coast protest last week, it wasn't a bank or government office they sought to disrupt, but Oakland's shipping port, the fifth busiest in the country. Also targeted were ports in Los Angeles and Long Beach, which combined receive 40% of the country's waterborne imports.
And it wasn't Iran's saber rattling over sanctions at the United Nations which spiked oil prices last week, rather the country's plans to hold military drills that would close the Strait of Hormuz, through which 19% of the world's crude passes.
A healthy global economy requires trade, including the physical transport of goods over water. Our gas stations, garages, driveways and department stores brim with items and commodities which comes to this country via ocean transport. Even in an age of instantaneous electronic communication, there's simply no substitute: You can't email a tanker full of methanol.
And although many of the shipping stocks I've highlighted in recent months have weakened as global macroeconomic fears have risen, a small minority have powered higher. We're optimistic about every trade, but realistic in that we know only a small handful will actually perform. To that end, one's "favorite" stocks shouldn't be those with the best earnings announcements or fundamentals , but those whose price action is actually confirming our outlook and positions. We pick stocks. The market itself picks the winners. Our objective should be to simply hang on for the ride.
Golar LNG Partners LP (GMLP)
Japan's devastating March earthquake, which has continued to disrupt many of the region's nuclear power plants, has bolstered the shipping rates for liquid natural gas, along with the company's shares. Looking further out, usage of the gas is expected to rise nearly 7% a year through 2020. Shares of Golar recently nipped a new all-time-high, suggesting a bullish trend remains intact.
While the stock doesn't pay a dividend, shareholders aren't complaining after a year which included record results, revenues near $1 billion and operating margins in excess of 20%. The stock, which recently re-eclipsed its 2008 levels, remains well-bid in the market and has risen over 40% year-to-date.
Textainer Group (TGH)
Much as many former homeowners now find it more financially feasible to rent, financially strained shippers have opted to lease containers rather than buy them, boosting demand for Textainer and leading to near record utilization rates. The company has raised its dividend, now 5.3%, every quarter since the middle of 2009.
Jonathan Hoenig is managing member at Capitalistpig Hedge Fund LLC At the time of writing, Hoenig's fund owned shares in all the companies mentioned.