Once a hot topic, dry bulk shippers have taken the back seat recently to other hot industries.  This has created a nice buying opportunity for many of the top shippers.

The environment for dry bulk is as good as ever.  Demand is strong as developing countries such as China need a massive influx of iron ore and other raw materials for construction.  Supply remains low as there simply are not enough charters available to move the amount of dry bulk demanded.  Since building new vessels takes years and the global growth of developing nations will persist for decades, we have a nice long term story here.

Here’s some of the players in the game to check out:

Genco Shipping (NYSE: GNK) - Between now and December 2009, Genco is expecting the arrival of 5 new Capesize vessels.  These would amount to about an estimated $91M bump in revenue in 2010.  Given total revenue for 2007 was $65M (with only 4 capesize vessels), earnings and revenue growth in the near future will be massive. GNK has its vessels locked up in long term contracts, taking advantage of a favorable rate market now, and shielding itself from the uncertainty of spot rate shipping. GNK currently trades at a P/E of about 17, with a forward PE of under 10 and a PEG of 0.25 (!!!).  Top it all off with a $50M stock buyback and a 5% dividend and this effingbull thinks Genco is a buy.  

Dryships (NAS: DRYS) - Dryships is the largest dry bulk shipper in the space, pulling in $582M in revenue in 2007 from their fleet of 38 ships.  DRYS is also expecting to take delivery of 4 new ships between now and December 2009.  The majority of DRYS fleet is operating on short term spot rates, so DRYS revenue can fluctuate depending on the daily spot shipping rates.  Recently DRYS has entered into an agreement to acquire an offshore drilling company (Ocean Rig ASA) - which to this effingbull is a red flag (similar to Blockbuster buying Circuit City).  Regardless, with an estimated revenue of $18 per share, DRYS is trading at a favorable PE of 6.  An industry leader at a reasonable price, but I’d be cautious of the foray into drilling.

Navios Maritime (NYSE: NM) - In terms of future growth, NM has a lot of upside.  Currently the company charters only four Capesize vessels, but has nine under contract for delivery between now and Q1 2010.  NM typically charters its vessels, so revenues are more predictable.  NM trades at a current PE of 4.5 with a PEG of 0.14.  NM also pays a decent dividend of 2.4%.  NM has a large float, hence the lower per share price - but still very attractive from a valuation standpoint.

Other notable shippers to pay attention to: Excel Maritime (EXM), Frontline, LTD (FRO)

DISCLAIMER - This EffingBull owns GNK at the time of this posting.