This Multibagger ETF Still Looks Like a Buy: Here's Why
A multibagger stock is an equity stock which offers a return of more than 100%. The term came to fame in 1988 with Peter Lynch’s book One Up on Wall Street, per Wikipedia. This year’s one and only regular multibagger ETF is Breakwave Dry Bulk Shipping ETF BDRY, which has jumped more than 260% this year.
The fund, which gives exposure to the Capesize 5TC Index, Panamax 4TC Index & Supramax 6TC Index, measures rates for shipping dry bulk freight, is a clear winner of the year, which makes us think if there is further run left. Let’s delve a little deeper.
Upbeat Sector Strength
About 90% of the world’s trade is carried by sea, making maritime shipping an important area. Sonicshares’ research from various sources revealed that the advancement in online retail has turned the world more connected, resulting in the necessity for efficient global supply chains in order to cater to the e-commerce giants. The COVID-19 outbreak made it more effective.
The very research shows that global economic recovery from the pandemic is expected to gain pace through 2021 and continue through 2024. The International Monetary Fund is projecting global economic growth of 6.0% in 2021, 4.4% in 2022 and 3.3% in 2023-2024. This should boost the demand for ocean shipping services. Container shipments are expected to expand at least in line with GDP.
A commodity boom is driving the prices as demand for shipping is high. Ultra-easy monetary and fiscal policies are driving global economic growth and the demand for goods. “Inefficiencies and port congestion could also contribute to increasing shipping costs,” per some analysts. This is happening because ships are getting held by COVID-19 quarantines.
Mark Williams, managing director of Shipping Strategy, a maritime consultancy does not see this as a super cycle but believes that “it has the potential to become one,” as quoted on CNBC. He said that rates for capesize vessels — the largest category of ships that carry dry cargo and raw materials such as grain, iron ore and coal — are hovering around the levels seen in mid-2019. Reuters recently noted that the average daily earnings for capesizes were $31,880 — a jump of more than 10 times from February last year, if we go by the CNBC article.
The future of the industry seems rosy. Fleet sizes are not expected to grow significantly in the next few years, per industry watchers, as noted by the CNBC article. No addition of new ships and the phasing out of certain older vessels should keep the fleet size low and freight rates higher.
Any More Player in the Space Apart from BDRY?
If investors think that BDRY is too pricey to buy now, they can bet on SonicShares Global Shipping ETF BOAT. The SonicShares Global Shipping ETF (BOAT) offers a pure-play exposure to the global maritime shipping industry. BOAT is an indexed ETF that looks to provide performance results that correspond, before fees and expenses, to the Solactive Global Shipping Index.
The index consists of global shipping companies engaged in the maritime transportation of goods and raw materials, including consumer and industrial products, vehicles, dry bulk, crude oil and liquefied natural gas. The fund charges only 69 bps in fees.
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Breakwave Dry Bulk Shipping ETF (BDRY): ETF Research Reports
SonicShares Global Shipping ETF (BOAT): ETF Research Reports
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