We recently compiled a list of the 8 Best Marine Shipping Stocks to Invest In. In this article, we are going to take a look at where Ardmore Shipping Corporation (NYSE:ASC) stands against the other marine shipping stocks.
The Maritime Freight Transport industry plays a significant role in global trade as it handles about 90% of it. The expansion of seaborne trade is benefiting consumers worldwide by providing competitive freight rates. According to Mordor Intelligence, the industry is projected to grow from approximately $381.69 billion in 2024 to around $471.81 billion by 2029, at a compound annual growth rate (CAGR) of 4.33%.
The Evolution of Shipping in a Changing World
According to a KPMG report posted in May, the global shipping industry is on an upward trend despite challenges like vessel accessibility, labor shortages, and geopolitical instability. Around 83% of the world fleet consists of small to medium-sized ships, with small vessels making up 38% by number but only 1% by tonnage. Increasing container ship availability is expected to stabilize freight rates and restore the supply-demand balance.
Port delays and logistical bottlenecks are expected to ease, but geopolitical conflicts, especially in Ukraine and the Middle East have disrupted some important shipping routes, which have led to longer, costlier voyages. The industry faces a potential shortage of maritime officers by 2026 and women make up only 2% of the workforce.
Despite these challenges, global economic growth of 3% annually will support seaborne trade expansion. Freight rates have returned to pre-pandemic levels, as tanker demand remains strong due to a 1.9% fleet growth in 2023. Additionally, LNG demand is expected to stabilize the market, while container freight rates are recovering due to voyage restrictions and reduced vessel availability.
Trends Shaping the Industry
According to the above-mentioned KPMG report, the shipping and port industries are experiencing transformative trends that are influenced by decarbonization, digitalization, and evolving supply chains. Despite 6% of post-COVID stimulus efforts targeting greenhouse gas (GHG) emission reductions, rising fuel prices due to the Russia-Ukraine conflict pose challenges, as the maritime sector accounts for 2.8% of global GHG emissions, with over 40% of marine cargo being fossil fuels.
Digital adoption is on the rise, with the smart ports market expected to grow from $1.9 billion to $5.7 billion at a CAGR of 24.3% from 2022 to 2027. The pandemic has highlighted supply chain vulnerabilities, which has prompted the companies to diversify sourcing and rethink logistics.
Our Methodology
For this article, we used stock screeners to identify 25 marine shipping stocks with a market cap of above $50 million. We narrowed our list to 8 stocks most widely held by hedge funds, as of Q2 2024. The 8 best marine shipping stocks to invest in are listed in ascending order of their hedge fund sentiment.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A tanker filled with petroleum products, sailing through a calm sea.
Ardmore Shipping Corporation (NYSE:ASC)
Number of Hedge Fund Holders: 20
Ardmore Shipping Corporation (NYSE:ASC) is actively engaged in the transportation of petroleum products and chemicals across the globe, establishing itself as a player in the maritime sector. The company operates a fleet of mid-size product and chemical tankers, delivering essential shipping services through various arrangements, including voyage charters, time charters, and commercial pools.
Noteworthy vessels in its fleet include the Ardmore Seafarer, Ardmore Exporter, Ardmore Explorer, and Ardmore Enterprise. With an average vessel age of 9.8 years, it has one of the more modern fleets in the industry, which is a key advantage in maintaining operational efficiency and regulatory compliance. It occupies a spot on our list of the best marine shipping stocks to invest in.
As of June 30, the company’s operational fleet consisted of 26 vessels, including four chartered-in ships. The fleet is made up of 20 MR tankers, which range from 45,000 to 49,999 deadweight tonnes (dwt), as well as six Eco-Design IMO 2 product and chemical tankers, which range from 25,000 to 37,800 dwt. The combination of vessels positions it to effectively meet diverse shipping demands while building its service capabilities.
Ardmore Shipping (NYSE:ASC) reported a net income of $100.2 million for the first half of 2024. This translates to earnings of $2.41 per basic share and $2.39 per diluted share, significantly up from $66.9 million, or $1.63 per basic share and $1.60 per diluted share, in the same period of 2023. The growth in profitability highlights the company’s ability to capitalize on market opportunities and optimize its operations.
Looking ahead to the third quarter of 2024, it expects that 95% of its revenue days for MR tankers will be utilized in the spot market, with the remaining 5% under time charters. As of July 31, the company had already fixed approximately 45% of its total spot revenue days for the quarter at an average spot time charter equivalent (TCE) rate of about $34,300 per day. This includes Eco-Design MR tankers averaging $33,700 per day and Eco-Mod tankers at $38,600 per day. Such proactive management of charter agreements positions the company to benefit from favorable market conditions while securing revenue stability.
Aristotle Capital Boston, LLC stated the following regarding Ardmore Shipping Corporation (NYSE:ASC) in its Q2 2024 investor letter:
“Ardmore Shipping Corporation (NYSE:ASC), a product and chemical transportation company focused on modern mid-sized vessels, appreciated amid global refinery shifts and geopolitical factors, boosted voyage lengths and demand for product tankers. We maintain a position, as we believe the company continues to operate from a position of strength, driven by recent shareholder-friendly capital allocation decisions, strong operating performance, and a favorable industry supply-demand backdrop.”
Overall ASC ranks 8th among the best marine shipping stocks to invest in. While we acknowledge the potential of ASC as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is promising and trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
Read Next: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.
Disclosure: None. This article is originally published at Insider Monkey.
