Wednesday, September 16, 2009

The infrastructure plays pop! And shipping is on deck!

Who says you can't get it up without a crane?

On April 29, I touted these plays:

And if CAT is doing that business, how about these as a cheap derivative play on the construction recovery?

United Rentals (URI 6.37)
Manitowoc (MTW 5.50)
Terex (TEX 13.47)
Did they move? Not at first. In fact, I recommended URI again on July 18 at 6 as Wall Street had driven these cheap stocks down even further.

But what happened the last two weeks?

MTW closed at 10.32, URI closed at 10.96, and TEX closed at 19.69! One again, truth in advertising!

Wall Street finally woke up to these names! Sometimes you have to wait out Wall Street's games!

So here's the next play, as Wall Street has set up the con perfectly for what's coming next. And it started last week with the Daily Mail, with this picture.

Oh my! Oh my! There is no business in the world. They've abandoned ship! And the story sounds compelling:

The tropical waters that lap the jungle shores of southern Malaysia could not be described as a paradisical shimmering turquoise. They are more of a dark, soupy green. They also carry a suspicious smell. Not that this is of any concern to the lone Indian face that has just peeped anxiously down at me from the rusting deck of a towering container ship; he is more disturbed by the fact that I may be a pirate, which, right now, on top of everything else, is the last thing he needs... It is so far off the beaten track that nobody ever really comes close, which is why these ships are here. The world's ship owners and government economists would prefer you not to see this symbol of the depths of the plague still crippling the world's economies.
Oh my. Singapore can't get it up with a crane! Just like Wall Street!

Then the ever loquacious, but never prescient Zero Edge, picked up on the story. And they did their "own work." Channel checks if you will. And this is what they came up with.

This is Qinhungadao, off of the Chinese coast. The red ships are idle. Oh My! Trade is collapsing!

Qinhungado is China's largest coal-transport port, yet coal prices are rising and stockpiles are dropping. Why would that happen? And didn't we just hear that China had its best shipping in July since September?

Or maybe, was it because there was an increase in coal that had been shipped by rail, and that the stormy seas had prevented ships from being loaded!

But that wouldn't fit in with Zero Edge's thesis of Armageddon. And neither did this, the action in the port of Gibraltar.

So Wall Street sets the bait, with the story in the Dail Mail, and Zero Hedge picks up on it, with their own spin. Dimwittingly, unwittingly, the anti-Wall Street blog, becomes their own pawn!

Meanwhile, the play is to ignore both stories, and especially ignore Zero Edge, and instead, buy the shipping stocks.

Because would Wall Street really tell you to buy these plays at the lows?

So once again, we have a play with Excel Maritime (EXM 7.52), Eagle Bulk Shipping (EGLE 5.76) and Paragon Shipping (PRGN 4.41) which has raised money previously with an ATM for 10 million shares at a $4.26 average price, and they could still work through another 10 million shares. The completetion of that would make the stock a wonderful play.

But what if shipping was as dead as the bears wanted to portray it? Wouldn't it then behoove you to buy at these depressed prices? Before the turn?

So either you buy at today's depressed prices, or you buy because the economy is turning upwards, as all the stock markets of the world indicate.

So why, then isn't Wall Street telling you to buy?

They won't.

Which is why I am.


Anonymous said...

Great post. Would you buy these over bcrx?

What about drys?

Anonymous said...

Cramer says no on EGLE on 9/16/09 light round. Not sure why.

china-invest said...

Infrastructure development benefited greatly from foreign investment in China.