We all check daily on the BDI and BHSI and much stress is generated by daily changes when reality MAY be somewhat disconnected. Each shipping company posts their contracts usually for at least 3 to 6 months (a quarter or two) in advance so in reality the indexes are not controlling their current quarter financials or until after their forward contracts come up for renewal. Am I missing something in this logic?
Yes...you are ignoring the fact that stock prices today are reflective of their future earnings potential usually over at least a 5 year period.
The BHSI and its trend are indicative of where those future earnings are likely to be headed. Technical indicators are important checkpoints along the trend; the situation is that they are currently being tested in very short timescales and that is cause for increased caution. Wider market indicators also play an important role.
FREE's stated strategy has been exposure to the spot market; certainly more than others in its sector. And all this means we're at a potential INFLECTION POINT for FREE stock irrespective of what charters they have now or covering the next 3 months or covering the next 6 months. Analysts for investors (not traders) are trying to look way beyond the next few quarters.
Irrespective of whether or not FREE turn in a good couple of accounting quarters, the stock price still may not reflect these results. If this weren't true FREE's stock would already be trading at or above book value.
Regarding book value of FREE. IMO the fact the banks lowered the LTV requirement to 100%, indicates to me that the FMV of the ships approximated the outstanding balance on the FREE loans. Especially since the LTV requirement, if my recollection is correct, simply goes up to 110% for the next 12 months.
I believe FREE's price reflects the lower value of the ships in this current economic climate. However, starting with a price near $1.20, the pay down of debt each year (so long as depreciation is also covered) will add a significant percentage to the value of the stock, and, if the value of the ships rises as well, the returns could be very good.
So long as FREE's revenues can cover all costs, debt service and depreciation, it will continue to rise in value. I don't expect the stock to rise a great deal until others are comfortable with the company being almost entirely in the spot market, many investors in this area prefer a high percentage of long term charters,especially after the dramatic fall in rates last year.
Since I don't yet have all the shares I want to eventually hold at my target entry prices, I'm content for the stock to drift sideways or down for the time being. :)