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Love QYLD & JEPI? ADD CEFs to your High Income Portfolio! High Yield Closed-end Funds YYY RIV CEFD

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Conglomerate Berkshire Hathaway ( ), run by legendary investor Warren Buffett, liquidated its stake in Verizon Communications Inc. ( ) in the second quarter of 2022.

VZ had a challenging second quarter. The company's EBITDA and net income came in at $11.9 billion and $5.3 billion for the quarter, down 2.6% and 10.7% year-over-year, respectively. Also, its earnings per common share of $1.24 declined 11.4% year-over-year.

Given the recent performance and intense competition, VZ has been forced to revise its yearly guidance for adjusted EPS from $5.40-$5.55 to $5.10-$5.25. Such underwhelming prospects have probably prompted Berkshire to discard VZ from its holdings.

However, the telecom industry is well positioned to benefit from the substantial demand amid consistent digital transformations and hybrid lifestyles. Furthermore, increasing federal and corporate investments in 5G deployment should boost the industry's growth. According to a report by Precedence Research, the global telecom market is expected to reach $2.65 trillion by 2030, growing at a CAGR of 4.9% .

Thus, fundamentally strong and promising telecom stocks AT&T Inc. ( ), Ooma Inc. ( ), and Spok Holdings Inc. ( ) could be ideal alternatives to consider buying now.

T is a global provider of telecommunications, media, and technical services worldwide. The company operates through two segments: Communications; and Latin America. Its offerings include wireless communications, data/broadband, Internet services, video services, local exchange services, long-distance services, telecommunications equipment, managed networking, and wholesale services.

On August 8, T announced that it delivered 'FirstNet and Family,' a simplified experience that gives America's first responders the best of 2 networks - public safety of the FirstNet network and the AT&T commercial network - to keep their worlds connected. This should help T continue to witness growing demand from various agencies and organizations.

For its fiscal 2022 second quarter ended June 30, 2022, T's revenues from the Latin America segment increased 17.4% year-over-year to $808 million. Its operating expenses reduced 12.4% year-over-year to $24.69 billion. As a result, net income increased 142.1% year-over-year to $4.54 billion. The earnings per share attributable to common stock increased 154.5% year-over-year to $0.56 during the same period.

The stock has surpassed the consensus EPS estimates in each of the trailing four quarters, which is impressive. Over the past six months, the stock has gained 1.8%to close the last trading session at $18.06.

to access the additional ratings for T's Stability, Growth, Quality, Sentiment, and Momentum.

OOMA provides communications services and related technologies to businesses and residential customers in the United States and Canada. The company's offerings include Ooma Business, Ooma Office, Ooma Enterprise, and Ooma AirDial. It offers its products through direct sales, distributors, retailers, and resellers, as well as online.

This month, OOMA's Ooma AirDial solution focused on replacing obsolescent copper-wire phone lines was named Best Endpoint Product for 2022 in the prestigious UC Awards. This accolade is expected to boost sales in the coming months.

In May, OOMA announced the launch of Ooma Office Pro Plus, which would enable businesses of all sizes to quickly and affordably set up a simple call center, integrate with the Salesforce CRM platform, and provide hot-desking capability in their offices, and more. The new launch might accelerate the company's growth and profitability.

In addition, OOMA's non-GAAP net income came in at $3 million, representing an 8.5% year-over-year improvement. Its non-GAAP net income per share grew 9.1% from the year-ago period to $0.12.

Analysts expect the company's revenue to come in at $212.05 million for the fiscal year 2023 (ending January 2023), representing a 10.3% rise from the prior year. Also, the following year's consensus revenue estimate of $234.47 million indicates an increase of 10.6% year-over-year.

Furthermore, the company has surpassed the consensus EPS estimates in each of the trailing four quarters, which is indicative of its impressive earnings surprise history.

Over the past month, the stock has gained 14.1% to close the last trading session at $13.21.

OOMA's POWR Ratings reflect its bright prospects. The stock has an overall A rating, equating to Strong Buy in our proprietary rating system.

OOMA has an A grade for Growth and a B for Value, Stability, and Sentiment. It tops the list of 20 stocks in the Telecom - Domestic industry.

SPOK operates as a healthcare communication company in the United States, Europe, Canada, Australia, Asia, and the Middle East. Through its products and services, the company caters to three market segments: Healthcare; Government; and Large Enterprises.

On August 8, SPOK announced that 18 of the 20 adult hospitals and all ten children's hospitals named to U.S. News & World Report's 2022-23 Best Hospitals Honor Roll are all customers of SPOK. This reflects the company's strong position as an industry leader in critical communications.

In the fiscal 2022 second quarter ended June 30, SPOK's operating expenses decreased 16.2% year-over-year to $31.29 million. This has helped the company to report an operating income of $2.41 million for the quarter, compared to an operating loss of $1.61 million in the previous-year quarter.

Furthermore, SPOK's net income came in at $1.92 million compared to a loss of $719,000 in the same quarter of the previous year. The company's earnings per share came in at $0.10, versus a loss of $0.04 per share in the prior-year quarter .

SPOK's recovery is reflected in its POWR Ratings. The stock has an overall rating of B, which equates to a Buy in our POWR Ratings system. SPOK has an A grade for Growth. In the same industry, it is ranked #2 among 20 stocks.

to access the additional POWR Ratings for SPOK (Value, Momentum, Stability, Quality, and Sentiment).

VZ shares rose $0.01 (+0.02%) in after-hours trading Wednesday. Year-to-date, VZ has declined -13.06%, versus a -12.26% rise in the benchmark S&P 500 index during the same period.

About the Author: Mangeet Kaur Bouns

Mangeet's keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet's looks to help retail investors understand the underlying factors before making investment decisions. More...

More Resources for the Stocks in this Article

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VZ: Buffett Dropped This Telecom Giant... But You Should Consider Adding These 3 Buy-Rated Alternatives | StockNews.com

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Warren Buffett-led Berkshire Hathaway recently liquidated its stake in Verizon (VZ). The company has endured a rough year amid intense competition and lost significant market share to its peers, prompting Berkshire to let go of its holdings in the company. However, given the industry tailwinds, fundamentally sound telecom stocks AT&T (T), Ooma (OOMA), and Spok (SPOK) could be better alternatives.

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Get ready for charts, images, and tables because they are better than words. The ratings and outlooks we highlight here come after Scott Kennedy's weekly updates in the REIT Forum. Your continued feedback is greatly appreciated, so please leave a comment with suggestions.
We're bringing you the latest in inefficient markets. We're going to focus on preferred shares, and we will cover 8 of them in this article.

We start with 4 of them from the same REIT:

RITM-A (RITM.PA)

RITM-B (RITM.PB)

RITM-C (RITM.PC)

RITM-D (RITM.PD)

The comparison looks like this:

Which one has the weakest floating yield on price? RITM-A.

Which one has the least upside to call value? RITM-A.

If investors assume Rithm ( RITM) is going to call the shares on 8/15/2024, then they would rather have RITM-B for a significantly larger capital gain. If they assume RITM won't call the shares, then RITM-B still wins for the much higher yield after shares begin floating.

What if RITM only calls RITM-A but doesn't call RITM-B? In that scenario, RITM-B would probably start trading very close to $25.00. So while it wouldn't be a call, investors would probably have the opportunity to close out their position at a similar price. It's very unusual to see shares called at $25.00 while a very similar share trades materially below $25.00. What if it happened? Well, investors would still be getting a great yield on the shares of RITM-B.

Now what about the RITM-C and RITM-D? They take longer to float. However, RITM-C offers the biggest upside to call value. That's pretty nice for maximizing the potential gains. On the other hand, RITM-D has the biggest floating spread, which is great for income generation after the shares begin floating.

What if you assume rates will be high in 2024, then crash to 0 in 2026? You should probably be looking at fixed-rate shares then and there are some great opportunities in the fixed-rate shares as well. However, it is worth noting that even if you assume rates falling, RITM-D's spread of 6.223% is still pretty large. With shares trading below $22.50, investors are getting quite a few extra shares for their investment. If rates were near 0% and the investor's yield on cost was still around 7%, that would still be pretty good.

I was going to switch over to common shares here, but that section became so large it wasn't going to mix well with the preferred shares.

Instead, I want to highlight some more preferred shares:

NLY-F (NLY.PF)

NLY-G (NLY.PG)

NLY-I (NLY.PI)

The table is shown below:
Following this review, my top choices among the shares we discussed are RITM-B, RITM-C, RITM-D, and MFA-C.
The relative attractiveness is pretty similar now. The Price-to-buy column only spans from 93.8% to 95.8%. That's a difference of 200 basis points, which is reasonably small. However, the market hasn't always been so efficient.

You may notice that NLY-G was often the most expensive share to ride on the way in. Why is that? Because all 3 shares traded pretty close to $25.00 despite NLY-G having a materially lower floating spread. The gap between 4.172% and 4.989% is material and it warrants a difference in share prices. Today, investors could pick any of the 3 and be getting a pretty similar deal. Each is pretty good, but not great. In this environment, we can get much better discounts with other shares.

For investors willing to take on a bit more risk, I want to suggest MFA-C ( MFA.PC):

Shares have a substantial discount to call value and a substantial discount to our targets. The floating spread of 5.345% isn't too bad, though it isn't great either. However, when shares are trading near $20, it becomes much more attractive. The dividend rate is based on the $25 call value, so buying near $20 means investors are getting 25% more shares and therefore 25% more income. If short-term rates remain at the current levels, the yield on these shares (at the current price) would climb to 10.6%. That's materially higher than the 8.24% stripped yield today, though I find that 8.24% stripped yield to be a respectable return anyway.

RITM-A is offering a materially weaker risk/reward profile. The NLY preferred shares are cheap enough to be attractive, but we're still spoiled for choice. While they are attractive, they are clearly not quite as attractive as the other options.

The rest of the charts in this article may be self-explanatory to some investors. However, if you'd like to know more about them, you're encouraged to see our notes for the series.

Stock Table

We will close out the rest of the article with the tables and charts we provide for readers to help them track the sector for both common shares and preferred shares.

We're including a quick table for the common shares that will be shown in our tables:

Click to enlarge

Let the images begin!

Residential Mortgage REIT Charts

Note: The chart for our public articles uses the book value per share from the latest earnings release. Current estimated book value per share is used in reaching our targets and trading decisions. It is available in our service, but those estimates are not included in the charts below.

Commercial Mortgage REIT Charts

BDC Charts

Preferred Share Charts

Preferred Share Data

Beyond the charts, we're also providing our readers with access to several other metrics for the preferred shares.

After testing out a series on preferred shares, we decided to try merging it into the series on common shares. After all, we are still talking about positions in mortgage REITs. We don't have any desire to cover preferred shares without cumulative dividends, so any preferred shares you see in our column will have cumulative dividends. You can verify that by using Quantum Online. We've included the links in the table below.

To better organize the table, we needed to abbreviate column names as follows:

Price = Recent Share Price - Shown in Charts

BoF = Bond or FTF (Fixed-to-Floating)

S-Yield = Stripped Yield - Shown in Charts

Coupon = Initial Fixed-Rate Coupon

FYoP = Floating Yield on Price - Shown in Charts

NCD = Next Call Date (the soonest shares could be called)

Note: For all FTF issues, the floating rate would start on NCD.

WCC = Worst Cash to Call (lowest net cash return possible from a call)

QO Link = Link to Quantum Online Page

Ticker

Price

BoF

S-Yield

Coupon

FYoP

NCD

WCC

QO Link

P-Link
Click to enlarge

Second Batch:

Ticker

Price

BoF

S-Yield

Coupon

FYoP

NCD

WCC

QO Link

P-Link
Click to enlarge

Strategy

Our goal is to maximize total returns. We achieve those most effectively by including "trading" strategies. We regularly trade positions in the mortgage REIT common shares and BDCs because:

1. Prices are inefficient.

2. Long-term, share prices generally revolve around book value.

3. Short-term, price-to-book ratios can deviate materially.

4. Book value isn't the only step in analysis, but it is the cornerstone.

We also allocate to preferred shares and equity REITs. We encourage buy-and-hold investors to consider using more preferred shares and equity REITs.

Performance

We compare our performance against 4 ETFs that investors might use for exposure to our sectors:

The 4 ETFs we use for comparison are:

Click to enlarge

When investors think it isn't possible to earn solid returns in preferred shares or mortgage REITs, we politely disagree. The sector has plenty of opportunities, but investors still need to be wary of the risks. We can't simply reach for yield and hope for the best. When it comes to common shares, we need to be even more vigilant to protect our principal by regularly watching prices and updating estimates for book value and price targets.

Ratings: Bullish on RITM-B, RITM-C, RITM-D, MFA-C

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No gimmicks. We want you to try our service because we think you'll love it. You can cancel easily. It's only 3 mouse clicks. Yet we enjoy one of the highest retention rates on Seeking Alpha because we consistently deliver.

Click the link to get your two-week trial.

This article was written by

The #1 REIT Service For Those Targeting Strong Total Returns

You want to be on The REITForum because it is the #1 REIT research service on Seeking Alpha measured by returns. Period. See our Tipranks page. How did we get there? We did a better job of managing risk and discovering opportunities. We didn't jump into trashy high-yield equity REITs with the rest of the crowd. We cover securities for trading and securities for the buy-and-hold investor. We are clear about the difference and that enabled us to perform better since inception and better in 2020.

Securities for the buy-and-hold investor generally carry much lower risk. If we enter a high-risk position, we plan to capitalize on a change in the valuation. We monitor those positions very carefully, rather than hoping everything turns out well over the next several years. That's why we have so few losses in our investing.

We post our portfolio for you. You also get real-time alerts on every trade we place. Our reasoning for placing a trade is explained in clear English. You can even see the exact trades with the images we include from our stock accounts. We don't offer you several different "portfolios", instead, we show you exactly what we own, when we bought it, and how we are doing in that position. We make it simple for investors to follow our strategy.

You'll find several reports on The REIT Forum that don't get posted to the public side of Seeking Alpha. Many of our public reports are dramatically reduced versions of subscriber articles. If you enjoy our public articles, you'll love the content we keep for subscribers.

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Follow Get ready for charts, images, and tables because they are better than words. The ratings and outlooks we highlight here come after Scott Kennedy's weekly updates in the REIT Forum. Your continued feedback is greatly appreciated, so please leave a comment with suggestions. We're bringing you the latest in inefficient markets.

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La persistencia de la cotización del euro por debajo del dólar parece no ser una anécdota y puede convertirse en un problema para la economía europea. Ayer a media tarde con un euro solo se conseguía cambiar 0,99 dólares. Eso significa que comprar bienes y servicios en la moneda norteamericana es cada días más caro para los europeos. Ese mínimo se da, además, en un panorama con el precio de la luz disparado a su nivel máximo en España desde que se tomaron las medidas correctoras.

El suelo alcanzado ayer es el nivel más bajo al que cotiza la moneda común en 20 años. Desde los máximos de julio del 2008, cuando con un euro se obtenían más de 1,5 dólares, ha habido un desplome del 37%. "Si bien por la paridad del poder adquisitivo el dólar debería estar en el nivel de 1,5, es la superior determinación de la Fed en subir tipos de interés respecto al BCE lo que hace apreciar el dólar", reflexiona Jaume Puig, director general de GVC Gaesco Gestión. Luis Benguerel, socio de Anattea Gestión, añade que "la situación de Alemania no ayuda", especialmente después del aviso del Bundesbank de que puede entrar en recesión y de que persista la inflación. "Al final todo parece indicar que EE.UU. va a salir antes de la crisis", matiza.

Lee también Carmen del Riego

Desde AFI, el analista de divisas José Manuel Amor señala que la pérdida de la paridad es la culminación de un proceso que arrancó en el 2021. No ve una revalorización de la moneda común en el corto plazo y sitúa como principales causas "el diferencial de tipos entre las dos economías, las elecciones en Italia o los precios del gas".

Ayer esos precios siguieron al alza al situarse en 276 euros por megavatio, después de que el lunes se disparase ante el anuncio de Rusia de cerrar el gasoducto Nord Stream 1 durante tres días por "mantenimiento" a partir del 31 de agosto. Precisamente la continua subida de esos costes energéticos ha llevado a que hoy en España el precio de la luz se sitúe en los 436,24 euros el megawatio hora. Es el mayor nivel desde que la Comisión Europea aceptó poner un tope al precio del gas que fija el de la luz el 15 de junio en la península Ibérica.

Amor señala que desde el servicio de análisis de AFI creen que el euro se moverá en un rango de entre los 0,97 dólares y los 1,03. Ayer mismo, a lo largo de la jornada las divisas fueron saltando de la paridad continuamente. Para los analistas, perder el nivel de un dólar por un euro es algo anecdótico y avisan que los riesgos hace meses que están en el mercado. Puig recuerda que al final "las masas de dinero de los inversores compran aquellas divisas fuertes que remuneran más". Benguerel tampoco ve un rebote del euro en el corto plazo porque las condiciones son las mismas por el lado europeo.

Esta semana el Bundesbank alertó que "la probabilidad de que el PIB disminuya en el semestre de invierno ha aumentado significativamente" y añadió que esperaba que la tasa de inflación alcanzara "nuevos máximos en otoño", cuando las subidas de precios en el país podrían alcanzar "el orden del 10%", informa Europa Press.

Lee también Eduardo Magallón

La semana pasada, la representante alemana en el directorio del Banco Central Europeo (BCE), Isabel Schnabel, reconocía que los signos que apuntan a una desaceleración del crecimiento de la zona euro abren la puerta a que la economía de la región entre en recesión técnica, mientras que probablemente tardarán algún tiempo en disiparse las presiones inflacionistas. De este modo, de cara a la reunión del Consejo de Gobierno del BCE del próximo mes de septiembre, Schnabel se mostraba favorable a que la entidad vuelva a actuar con decisión.

En el caso de Estados Unidos, a finales de esta semana se reúnen en Jackson Hole representantes de la Reserva Federal de Estados Unidos y de otros bancos centrales. Está por ver si se toman medidas adicionales en el mercado estadounidense. Los mercados están muy pendientes de ese encuentro.

Ayer el Ibex se dejó un 0,71% en la sesión con fuertes subidas en Acerinox (+3,82%), Repsol (+3,63%) o Arcelormittal (+3,15%). Mientras, destacaron las pérdidas de Cellnex (-3,59%), Grifols (-3,15%) y Rovi (-2,79%). En este escenario, principales mercados del Viejo Continente cerraron con un comportamiento mixto. El Ftse 100 de Londres cayó un 0,61%, el Cac 40 de París un 0,26% y el Dax de Frankfurt un 0,26%, mientras que el Ftse Mib de Milán ha subido un 0,97%.

Ayer se publicaron los índices compuestos de gestores de compras (PMI). El PMI para la zona euro mostró que el deterioro de la actividad del sector privado en la región se ha intensificado en agosto.

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El euro toca mínimos en 20 años en medio de las dudas sobre Europa

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La persistencia de la cotización del euro por debajo del dólar parece no ser una anécdota y puede convertirse en un problema para la economía europea. Ayer a media tarde con un euro solo se conseguía cambiar 0,99 dólares. Eso significa que comprar bienes y servicios en la moneda norteamericana es cada días más caro para los europeos.

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Golden Ocean Group (NASDAQ: GOGL) is now the largest listed owner of large-size dry bulk vessels, with an average age of approximately 6.4 years. Considering GOGL's new and young vessels, we can expect to see the company will catch up with other dry bulk carriers soon and report better financial results in the future. However, recent geopolitical issues and macroeconomic policies affected the iron ore demand during the last few months. Notwithstanding a well-performed performance, my evaluation indicates that Golden Ocean is worth around $12 per share and thus, is a hold.

1Q 2021 highlights

In its 1Q 2022 financial results, GOGL reported total operating revenues of $265 million, compared with 1Q 2021 total operating revenues of $158 million, up 68%. GOGL's net income increased by 421% to $125 million, or 62 cents per diluted share in 1Q 2022. The company reported an adjusted EBITDA of $149.4 million for the first quarter of 2022, compared with $54.6 million for the first quarter of 2022, up 174%. In 1Q 2022, the asset turnover of GOGL increased by 72% to 0.079, and its gross margin increased by 3700 bps to 39%.

"Throughout 2021, Golden Ocean actively grew and renewed its fleet, disposing of several older vessels and acquiring or placing orders for 25 modern vessels. The company is the largest listed owner of large-size dry bulk vessels, with an average age of approximately 6.4 years, including newbuildings,"

GOGL's board of directors explained. Moreover, Golden Ocean has seven 85000 dwt Kamsarmax vessels on order, which are expected to be delivered in 2023. Thus, new and young vessels will improve Golden Ocean's asset turnover and gross margin. The CEO commented that the main driver of SBLK's growth will remain limited fleet growth and environmental regulations, which create a competitive advantage for the company.

The market outlook

Due to COVID-19 lockdowns, China's economy contracted by 2.6% QoQ in the second quarter of 2022. Because of geo-political tensions driven by the war in Ukraine, disruptions in China due to COVID-19, and increased interest rates in the United States & Europe to combat inflation, iron ore demand has been decreasing in the past few months. According to the MMI daily iron ore index report, published on 8 August 2022, total iron ore inventories at China ports increased from about 120 million tonnes on 1 June 2022 to around 132 million tonnes on 1 August 2022 (see Figure 1). On the other hand, total China iron ore import volumes increased from more than 90 million tonnes in May 2022 to less than 90 million in June 2022 (see Figure 2).

Figure 1 - Total iron ore inventories at china ports

Figure 2 - Total china iron ore import volumes

Moreover, Chinese rebar and hot-rolled coil production decreased in the last few weeks (see Figure 3). We can see that Chinese rebar and hot-rolled coil consumption in July 2022 are below their levels in July 2019, 2020, and 2021. Looking at the Baltic Dry Index, we can see that after a significant rise from the beginning of the year to mid-May, the index dropped by more than 50% to below 1600 (see Figure 4). Thus, the short-term outlook for the iron ore market is not as strong as six months ago.

Figure 3 - Chinese steel consumption and production

Figure 4 - The Baltic Dry Index

However, the long-term is different. According to a report by MMI, the investment in iron ore mining has increased rapidly. For example, from January to June 2022, the growth rate of investment in the ferrous metal mining and dressing industry increased by 76.1% year on year. Also, Despite the weak outlook for iron ore demand in the following months, on average, bulk carrier freight rates in July 2022 were higher than in the first quarter of 2022 (see Figure 5). Furthermore, as a result of environmental regulations, increased shipbuilding costs, and limited shipyard capacity, global fleet growth will be slow in the upcoming years. Based on the information on the dry bulk market and the company's quarterly financial reports, I estimate a 2Q 2022 TCE per day of $27800 for the company. Also, I estimate a 2Q 2022 adjusted EBITDA of $170 million for Golden Ocean. Finally, I estimate a TTM adjusted EBITDA of $793 million for the company in the third quarter of 2022. However, I estimate the company's full-year 2022 adjusted EBITDA to be below $650 million.

Figure 5 - Bulk carrier freight rates for iron ore

GOGL performance outlook

To show a picture of the company's profitability, GOGL's net profit margin showed impressive growth and sat on 0.44 at the end of 2021 compared with its amount of (0.23) in 2020 when the pandemic started. Also, its TTM amount increased by 9% to 0.48. Moreover, across the board of return on assets, the ROA ratio in TTM shows that 18.7% of the company's net earnings is related to its assets. Golden Ocean's return on assets boosted impressively during 2021 and sat on 15.2% versus its previous level of (5.06) % at the end of 2020. Both net profit margin and ROA amounts in TTM are well above the amounts before the pandemic started. Thus, Golden Ocean's profitability ratios provide a good perspective of its ability to generate income relative to the revenue and assets (see Figure 6).

Figure 6 - GOGL profitability ratios

Moreover, we can analyze GOGL's coverage ability across the board of its interest-coverage ratio and cash-coverage ratio. Its ICR in TTM indicates that 44 times the company is able to pay its interest expenses on its debt with its operating income. GOGL's interest coverage ratio in TTM has improved impressively compared to its amount of 17.82x at the end of 2021. Also, as a conservative metric to compare the company's cash balance to its annual interest expense, GOGL's cash-coverage ratio in TTM has increased to 8.20x versus its previous level of only 6.91x at the end of 2021, rising 18%. In a word, Golden Ocean's coverage ratios represent that the company is able to pay its obligations easily (see Figure 7).

Figure 7 - GOGL coverage ratios

GOGL stock valuation

To estimate Golden Ocean's fair value, I investigated its EBITDA growth during the last five years. The company's EBITDA grew impressively in recent years, but in 2020 when the pandemic started. Also, its net debt increased by over 5.75%, on average, in the previous years. Based on my estimation, GOGL is expected to generate an adjusted EBITDA of circa $793 million in 3Q 2022 (TTM). According to the net debt in TTM and EV/EBITDA ratio in TTM, Golden Ocean's fair value is around $12 per share. The stock thereby is a hold (see Table 1).

Table 1 - GOGL stock valuation

Summary

In sum, analyzing the TCE rate and Golden Ocean's overall performance during the previous quarters, I estimate a 3Q 2022 (TTM) adjusted EBITDA of $793 million for GOGL. Moreover, notwithstanding a relatively high net debt amount, Golden Ocean's very healthy profitability and coverage ratios indicate that the company can generate income relative to its revenue and assets and thus can pay its obligations easily. Furthermore, I do not expect the iron ore market to be as strong as in the first half of 2022. All was said and done; I estimate that the stock is worth around $12 per share. Hence, I believe that it is a hold.

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Golden Ocean: A Short-Term Hold Due To Weak Iron Ore Demand Outlook

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Golden Ocean Group (NASDAQ: GOGL) is now the largest listed owner of large-size dry bulk vessels, with an average age of approximately 6.4 years. Considering GOGL's new and young vessels, we can expect to see the company will catch up with other dry bulk carriers soon and report better financial results in the future.

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ZIM Integrated Q2 Earnings: Double-Digit Yield, Uber-Profitable & Undervalued

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ZIM Integrated reported fab Q2 earnings and is offering a juicy dividend. Check out why we consider ZIM stock as undervalued right now.

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ZIM invests $5.5M in tracking solutions provider Hoopo (NYSE:ZIM)

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ZIM Integrated Shipping Services (ZIM) has invested $5.5M in tracking solutions provider, Hoopo Systems. The shipping firm participated in a Series A financing round, alongside both...

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sbayram

Get ready for charts, images, and tables because they are better than words. The ratings and outlooks we highlight here come after Scott Kennedy's weekly updates in the REIT Forum. Your continued feedback is greatly appreciated, so please leave a comment with suggestions.
Just a few notes today.

1. New Residential (NRZ) is now Rithm Capital (RITM). However, thanks to Google Finance still using NRZ, I'm still going to use NRZ in our charts. I know you hate the name Rithm. Pretty much everyone does. However, I'll deal with a dumb name to make money.

2. About a week ago, I said NRZ / RITM was looking attractive under $10.00. On Wednesday, I picked up more shares of NRZ / RITM just under $10.00. I closed my position in common shares of PMT to fund the purchase (shares entered our neutral range). These shares are in a tax-advantaged account and I'm playing this for a short-term capital gain on a recovery in the price-to-book ratio.

3. Dynex Capital (DX) carries a higher price-to-projected book value than their agency mortgage REIT peers. That's hilarious.

Okay, you're probably wondering how point 3 is so funny. Allow me to share the $100k chart, which shows the amount invested on any prior day (with dividend reinvestment) to reach $100K today:

DX is the black line. See how it tends to be near the bottom? Do you know why that is? Because they refrained from obliterating book value. They took far less risks and it paid off in a huge way. Across the board, shares for these mortgage REITs will rarely trade above 1.1x book value or below 0.75x book value. Some will tend to be higher in that range than others, but it's rare to see them cross outside that range.

Today, using our projected book values the range for price-to-current-book (using BV estimates as of last Friday) runs from .92 to 1.07. That's a material gap, but the point I want to make is that the connection between share prices and book value remains. So, when DX outperformed in the $100k chart, it was a reflect of protecting book value better than most peers throughout that period.

The top 4 lines in the chart from the start of 2016 through the start of 2020 are TWO, ARR, CHMI, and ORC. If investors began their holding period prior to the start of 2020 and simply sat there with dividends reinvested, any of those 4 REITs would've materially underperformed. If a buy-and-hold investor bought DX or EFC on any day between January 1st, 2016, and January 1st, 2020, they would still be sitting on a positive total return. Those are the only two REITs in the batch where we can make that statement. Prices are down compared to early 2016, but for those REITs the dividends easily overcame the decline in share price.

Why are investors ignoring DX? Is it because they've outperformed over the last year and investors think they should get something with more "bounce back potential". I've got news for you, when the book value gets destroyed, it's destroyed. Think it will recover? Another mortgage REIT could buy equivalent positions and have the same potential for recovery. The $100k chart is useful for spotting recent deviations in performance and in evaluating long-term performance. To really make sense of it, you've got to recognize which mortgage REITs destroyed book value. For instance, one might have lost less than 10% of book value while another lost 30% or so. When that's the case, the one that lost 30% deserved to fall much harder.

Investors can take this lesson one of two ways:

Recognize that it's very strange for investors to bid a higher price-to-book ratio for REITs with a history of weaker decisions.

Claim book value doesn't matter and continue to throw their money away chasing yield.

A Bold Prediction

Starting from today, I predict that over the next 12 months we will see a better total return performance (change in share price + dividends) for DX than for ORC, ARR, CHMI, or NLY.

I think the odds of DX beating all 4 is pretty good. The odds of DX beating the average of that group is excellent.

For the one guy who failed out of math class and came up with his own method for calculating "returns", I'll demonstrate how that works.

Imagine if DX delivered 11% while ORC, ARR, CHMI, and NLY delivered 4%, 7%, 1%, and 10%, respectively.

DX would have beaten all four and smashed the average of 5.5%.

Why would I say something so blatantly obvious? Because high yield articles will always get one or two readers who think "all four" means "4% + 7% +1% + 10%".
I think there's a strong chance ORC announces a new share issuance soon. I wouldn't blame them. They really should at this price.
How can I make such a prediction? Let's use ORC for an example. At $3.26, ORC trades at 1.07x our estimate for book value. ORC should really be looking to issue new shares ASAP because that's a nice premium. At $16.48, DX trades at only .92x our estimate for book value. If these two equalized out to each trade at 1.0x book value, it would give DX about 8% to 9% upside while it would be nearly 7% downside for ORC.

For future reference, here are today's prices for the prediction:

If you think dividend yields are going to make the difference, think again. The 9.5% dividend yield on DX is materially lower than the dividend yields on the others, which range from 13% to 16.6%. Need a chart? Seriously, this series always has a chart. It's further down.

The amount a REIT paid out in dividends for the prior quarter doesn't tell you how much a share is worth. That's simply not how investing works. No, it's not. If you buy a sucker yield, that's on you. It's not on the board that reduced an obviously unsustainable dividend. It's on the investor who looked at the dividend yield and declared themselves the next Warren Buffett for coming up with an investing technique no other person had ever considered before. That sarcasm coming through clearly enough? You never know on the internet.

NLY also trades at 1.07x book value. However, NLY issued shares less than 2 weeks ago. If the price-to-book remains this high, they should see how soon they can do another offering.

Besides being bullish on DX, I'm also bullish on NRZ / RITM, which is probably pretty obvious since we just raised our position. Shares closed at $10.01 today, just to give investors an easy reference point.

Perhaps I should add in another chart that just lists the share prices so investors checking the article in the future can immediately see the price from the date of my comment? Let me know what you think in the comments. Overkill or a useful addition?

Why Don't You Talk About NRZ / RITM

Seriously, I did that in the last article. It was most of the article. I'm not going to repeat myself after only a week. I should wait at least ten days for that!

Why did we buy more? Big discount. Recent weakness relative to peers. Market may misunderstand name change and/or internalization.

One last note. We're waiting on PSEC to report and I don't have the values plugged in for GBDC yet. Consequently, those two BDCs won't have a price-to-book value ratio in the charts today.

The rest of the charts in this article may be self-explanatory to some investors. However, if you'd like to know more about them, you're encouraged to see our notes for the series.

Stock Table

We will close out the rest of the article with the tables and charts we provide for readers to help them track the sector for both common shares and preferred shares.

We're including a quick table for the common shares that will be shown in our tables:

Let the images begin!

Residential Mortgage REIT Charts

Note: The chart for our public articles uses the book value per share from the latest earnings release. Current estimated book value per share is used in reaching our targets and trading decisions. It is available in our service, but those estimates are not included in the charts below.

Commercial Mortgage REIT Charts

BDC Charts

Preferred Share Charts

Preferred Share Data

Beyond the charts, we're also providing our readers with access to several other metrics for the preferred shares.

After testing out a series on preferred shares, we decided to try merging it into the series on common shares. After all, we are still talking about positions in mortgage REITs. We don't have any desire to cover preferred shares without cumulative dividends, so any preferred shares you see in our column will have cumulative dividends. You can verify that by using Quantum Online. We've included the links in the table below.

To better organize the table, we needed to abbreviate column names as follows:

Price = Recent Share Price - Shown in Charts

BoF = Bond or FTF (Fixed-to-Floating)

S-Yield = Stripped Yield - Shown in Charts

Coupon = Initial Fixed-Rate Coupon

FYoP = Floating Yield on Price - Shown in Charts

NCD = Next Call Date (the soonest shares could be called)

Note: For all FTF issues, the floating rate would start on NCD.

WCC = Worst Cash to Call (lowest net cash return possible from a call)

QO Link = Link to Quantum Online Page

Second Batch:

Strategy

Our goal is to maximize total returns. We achieve those most effectively by including "trading" strategies. We regularly trade positions in the mortgage REIT common shares and BDCs because:

1. Prices are inefficient.

2. Long-term, share prices generally revolve around book value.

3. Short-term, price-to-book ratios can deviate materially.

4. Book value isn't the only step in analysis, but it is the cornerstone.

We also allocate to preferred shares and equity REITs. We encourage buy-and-hold investors to consider using more preferred shares and equity REITs.

Performance

We compare our performance against 4 ETFs that investors might use for exposure to our sectors:

The 4 ETFs we use for comparison are:

When investors think it isn't possible to earn solid returns in preferred shares or mortgage REITs, we politely disagree. The sector has plenty of opportunities, but investors still need to be wary of the risks. We can't simply reach for yield and hope for the best. When it comes to common shares, we need to be even more vigilant to protect our principal by regularly watching prices and updating estimates for book value and price targets.

Ratings:

Bullish on DX and NRZ / RITM

Neutral on PMT

Bearish on ORC, ARR, CHMI, and NLY

You should try our service. Unlike most services, our service is backed by a real portfolio. Not a "model" portfolio. Not hypothetical positions. Not 7 different portfolios we made up in Google Sheets so we can brag about the good one. None of that crap.

You get real-time alerts on every trade. See current and past positions. I'm sick of analysts who have to retroactively pick a "portfolio" or get creative about defining "returns". Beat the index or get out.

Ask your analyst to share their portfolio value each month so you can verify their returns. When they object, try us.

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Get ready for charts, images, and tables because they are better than words. The ratings and outlooks we highlight here come after Scott Kennedy's weekly updates in the REIT Forum. Your continued feedback is greatly appreciated, so please leave a comment with suggestions. Just a few notes today.

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Star Bulk Carriers Stock: More Potential Downside Coming (NASDAQ:SBLK)

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Our valuation model suggests that Star Bulk Carriers could underperform the market. See why we revise our rating on SBLK stock from Hold to Sell now.

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Beyond Meat se marchita: sus acciones podrían caer a cero

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Que una compañía del Nasdaq pierda más de un 40% este año apenas es noticia. Más de 150 firmas del Nasdaq Compuesto se encuentran en esa situación a día de hoy. Pero que lo haga una de las compañías que representaban el modelo de consumo responsable del futuro y algunos la sitúen al borde de la banc…

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simonkr

Get ready for charts, images, and tables because they are better than words. The ratings and outlooks we highlight here come after Scott Kennedy's weekly updates in the REIT Forum. Your continued feedback is greatly appreciated, so please leave a comment with suggestions.
New Residential (NRZ) is now trading under a new name and ticker: Rithm Capital ( RITM).

I'll update in our sheets when Google recognizes the new symbol. For the moment, I'm still showing them as NRZ until all formulas can work correctly with RITM. When that happens, I'll update references for all future articles (but not retroactively). In this article, I'll regularly use the old ticker.

We own shares of NRZ / RITM and shares of NRZ-D / RITM-D. Our positions in each share are greater than 5% of the total portfolio. That's greater than 10% combined. I believe we've got the analysis right and I put my money where my mouth is.

Why are we talking about NRZ? It's not just to make fun of the new name.

NRZ's Q2 2022 book value came in at $12.28. That's down 2.2% from Q1 2022. It was a slightly larger decrease than The REIT Forum's projection of $12.50, but that's still close. Remember that many mortgage REITs are reporting huge swings in book value. Being within 2% this quarter is great.

However, NRZ's dip in book value per share was better than dips by most mortgage REITs. Remember that NRZ internalized management. As part of his update on earnings for NRZ/RITM, Scott Kennedy wrote:

So, while I correctly projected NRZ/RITM would very likely report one of the least severe BV decreases out of the 20 mREIT sector peers that I/we cover, the company slightly underperformed my expectations regarding this specific metric during the second quarter of 2022.

I would also point out this quarterly BV decrease includes NRZ's/RITM's recent termination fee of ($400) million paid to the company's former external manager, Fortress Investment Group. Net of taxes, this negatively impacted BV by approximately ($0.70) per common share during the second quarter of 2022. When excluding this termination fee, NRZ/RITM would have reported a 3.3% increase in quarterly BV to approximately $12.98 per common share. When taking this into consideration, a pretty good quarter regarding NRZ's/RITM's BV fluctuation considering the modest-notable spread widening that continued to occur within agency MBS (which NRZ/RITM owns; contra-hedges) non-agency MBS, and residential whole loans.

Going over each income statement account/sub-portfolio, the majority of NRZ's/RITM's BV underperformance was spread amongst the gain-on-sale margins within the company's originations sub-portfolio, valuation fluctuations within the company's mortgage servicing rights ("MSR") sub-portfolio, and valuation fluctuations within its agency MBS/non-agency MBS/residential whole loans sub-portfolios. Along with reconciling NRZ's/RITM's quarterly BV variance, let us discuss some metrics within some of these underlying sub-portfolios.

The full update is a couple of pages, but I wanted to share a few paragraphs here.

There were good reasons for internalizing management:

Those are legitimate benefits. The savings represents about a 15% yield on the cost, which is a significant savings. Meanwhile, increasing institutional ownership could push the share price higher. Since this was reflected as an expense (rather than a buyout), the book value won't be inflated. Investors should expect NRZ to carry one of the higher price-to-book ratios in the sector. Currently, they don't. NRZ trades at one of the lower price-to-book ratios in the mortgage REIT sector today.

Shares rallied up to $11.00 on August 1st, 2022. That was just before the name change and the Q2 2022 earnings rel ease. They dipped since then and are down to $9.87 as of today. Are investors that disappointed with the results? They were only slightly below our expectations. Book value came in about 1.75% below our projection. That could justify a dip of 1.75% quite easily, but not 10%. Maybe it's just that the sector is dipping? MORT (a sector ETF) is down 3.39% from 7/31/2022. That's just not as big as the dip in NRZ though.

How is NRZ protecting their book value so well while rates soar? The value of the MSRs (mortgage servicing rights) increased significantly:

They can value the MSR using the price relative to the outstanding balance of the loan (light blue bars) or as a multiple of the cash flow the MSR produces (dark blue line).

I like thinking about it in terms of the multiple. That gives us an idea for how many years the loan would stay outstanding to recover the value of the MSR. Since interest rates are higher, prepayments are down. Refinancing your home at this point isn't a good idea. However, some people will still be moving. If they sell the old property, they have to close out the mortgage. Unless they have a big cash position, they will also need to take out a new mortgage. Consequently, prepayments can't go to 0. However, they are down dramatically:

When prepayments are running around 11%, it justifies a pretty high multiple for MSRs.

Are all MSRs created equal? No. You'd be willing to pay a higher multiple for an MSR tied to a mortgage with a 3% interest rate than one with a 6% interest rate. Why? Because the borrower with a 3% interest rate is unlikely to get an attractive opportunity to refinance in the next several years. However, it's entirely possible that a borrower at 6% may get an opportunity to refinance at a better rate.

With NRZ trading down to $9.87, it's offering investors an attractive risk/reward profile. We see NRZ covering their dividends much better than many peers. The REIT Forum estimated range for NRZ's dividend in Q3 2022 is $.25 to $.30. The current quarterly rate is $25. So our estimate suggests the dividend would either be flat or be increased by as much as 20%. We give that estimated range a 90% probability, which is at the high end of our probabilities. What's better than a 10% dividend yield? A 10% yield that is more likely to be increased than cut.

While NRZ carries a 10% dividend yield (well, 10.1%), it's only paying out 8.3% on our estimated book value (estimate as of 7/29/2022). That's pretty low. It isn't the lowest in the sector, but it is clearly on the lower end of the scale. Remember that book value is what management is using to invest and generate the cash flow necessary to service that dividend. That makes the yield on book value a useful metric for a reality check. If you see that value at 15% or higher, you're probably looking at a sucker yield.

Why Is NRZ Down So Much?

You want a thesis for why NRZ is down so much? It could be the new ticker causing some investors to sell. However, I've got a theory I like even better. If the share price was $.70 higher, it would've been much closer to the sector performance. The entire cost of internalizing management was expensed. Investors who forgot about this cost flowing through the statement could be surprised. Alternatively, they could even be looking at GAAP earnings. Since the cost was expensed, it tanked GAAP earnings:

Investors who aren't paying close attention to the stock could be thrown off. With shares suddenly dipping, that price is looking attractive.

NRZ has one of the larger discounts in the sector, but they've joined the ranks of the internally managed mortgage REITs. That should demand a premium valuation, especially given NRZ's relatively strong history.

The rest of the charts in this article may be self-explanatory to some investors. However, if you'd like to know more about them, you're encouraged to see our notes for the series.

Stock Table

We will close out the rest of the article with the tables and charts we provide for readers to help them track the sector for both common shares and preferred shares.

We're including a quick table for the common shares that will be shown in our tables:
Note: Q2 2022 earnings are underway. We will update the layout soon to include charts for Q2 2022 book values.
Click to enlarge

Let the images begin!

Residential Mortgage REIT Charts

Note: The chart for our public articles uses the book value per share from the latest earnings release. Current estimated book value per share is used in reaching our targets and trading decisions. It is available in our service, but those estimates are not included in the charts below.

Commercial Mortgage REIT Charts

BDC Charts

Preferred Share Charts

Preferred Share Data

Beyond the charts, we're also providing our readers with access to several other metrics for the preferred shares.

After testing out a series on preferred shares, we decided to try merging it into the series on common shares. After all, we are still talking about positions in mortgage REITs. We don't have any desire to cover preferred shares without cumulative dividends, so any preferred shares you see in our column will have cumulative dividends. You can verify that by using Quantum Online. We've included the links in the table below.

To better organize the table, we needed to abbreviate column names as follows:

Price = Recent Share Price - Shown in Charts

BoF = Bond or FTF (Fixed-to-Floating)

S-Yield = Stripped Yield - Shown in Charts

Coupon = Initial Fixed-Rate Coupon

FYoP = Floating Yield on Price - Shown in Charts

NCD = Next Call Date (the soonest shares could be called)

Note: For all FTF issues, the floating rate would start on NCD.

WCC = Worst Cash to Call (lowest net cash return possible from a call)

QO Link = Link to Quantum Online Page

Second Batch:

Strategy

Our goal is to maximize total returns. We achieve those most effectively by including "trading" strategies. We regularly trade positions in the mortgage REIT common shares and BDCs because:

1. Prices are inefficient.

2. Long-term, share prices generally revolve around book value.

3. Short-term, price-to-book ratios can deviate materially.

4. Book value isn't the only step in analysis, but it is the cornerstone.

We also allocate to preferred shares and equity REITs. We encourage buy-and-hold investors to consider using more preferred shares and equity REITs.

Performance

We compare our performance against 4 ETFs that investors might use for exposure to our sectors:

The 4 ETFs we use for comparison are:

Click to enlarge

When investors think it isn't possible to earn solid returns in preferred shares or mortgage REITs, we politely disagree. The sector has plenty of opportunities, but investors still need to be wary of the risks. We can't simply reach for yield and hope for the best. When it comes to common shares, we need to be even more vigilant to protect our principal by regularly watching prices and updating estimates for book value and price targets.

Ratings:

It's time to try our service.
Don't make me write longer advertisements. I hate advertising. Read the reviews. See the happy customers. The customers who improved their investing. That's all the advertising any analyst should need. Click the link to get your two-week trial. Unlike Netflix, I'm not jacking up prices, removing content, restricting device usage, or making my paid customers listen to advertisements.

This article was written by

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RITM Stock With 10% Dividend Yield, Growth, Big Discount

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Follow Get ready for charts, images, and tables because they are better than words. The ratings and outlooks we highlight here come after Scott Kennedy's weekly updates in the REIT Forum. Your continued feedback is greatly appreciated, so please leave a comment with suggestions.

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Nuclear power could play an important role in decarbonizing the energy sector, but reactors are simply too expensive and complicated to roll out quickly. A new, smaller reactor could soon change that after receiving certification from the Nuclear Regulatory Commission last week.

As countries around the world race to replace fossil fuel power plants, the debate around whether nuclear power should play a role has been heated. While the technology can provide large and reliable amounts of carbon-free electricity, cost and safety concerns have held back its deployment as a solution to the climate crisis.

In recent years though, a crop of new companies have emerged promising to sidestep many of these concerns by shrinking reactors down. So-called small modular reactors (SMRs) are designed to be small enough to build in a factory before being shipped to wherever they're needed, which should significantly reduce costs. They are also designed to be much safer than existing reactors.

A reactor designed by Oregon-based energy company NuScale Power has become the first small modular reactor design approved for use in the US by the Nuclear Regulatory Commission (NRC), paving the way for new plants that utilize the reactor. The move wasn't exactly a surprise, because the design passed it s final safety evaluation back in 2020, but it is a crucial step towards actually deploying the technology in the field.

While some SMRs under development rely on exotic new designs that use molten uranium or thorium salts as a fuel, the NuScale reactor, which has been named VOYGR, is not dramatically different from traditional full-scale ones. It is based on a design developed at Oregon State University in the early 2000s called the "Multi-Application Small Light Water Reactor."

The design consists of a 76-foot-tall, 15-foot-wide cylindrical containment vessel that houses the reactor. Water is passed over a series of uranium fuel rods that generate heat through fission reactions. The heated water then rises up towards steam generators, which use the heat from the water to produce superheated steam. This is then used to drive a turbine that generates electricity.

Each module is designed to generate 50 megawatts of energy, but the company plans to combine up to 12 SMRs to achieve similar outputs to conventional nuclear plants. The SMRs come with novel safety features designed to prevent the kind of disasters that have hardened public opinion against nuclear power.

For a start, control rods used to stop the fission reaction by encasing the fuel rods are held above the reactor's core by an electric motor. This means that in the case of a power outage they will automatically drop into position under the force of gravity. The entire reactor is also bathed in a water pool, which can draw away excess heat in case of emergency. Also, by using smaller amounts of fuel, the total amount of heat produced is greatly reduced.

The hope is that these extra safety features-combined with reduced costs due to the ability to mass-manufacture these reactors in a factory rather than on-site-could lead to a renaissance in nuclear power. NuScale is working on a number of projects in the US, including one in Idaho that is scheduled to be completed by 2029.

But questions have been raised about whether SMRs will really live up to their billing as a cheaper, safer alternative to traditional nuclear power plants. A study published in Proceedings of the National Academy of Sciences in May found that contrary to the claims of SMR makers, these smaller reactors are actually likely to produce more radioactive waste than conventional plants.

In an , nuclear power expert M.V. Ramana also points out that the cost of renewable energy like wind and solar is already lower than that of nuclear, and continuing to fall rapidly. In contrast, nuclear power has actually become more expensive over the years.

SMRs could cost more than bigger nuclear plants, he adds, because they don't have the same economy of scale. In theory this could be offset through mass manufacture, but only if companies receive orders in the hundreds. Tellingly, some utilities have already backed out of NuScale's first project over cost concerns.

Perhaps even more importantly, notes Ramana, SMRs are unlikely to be ready in time to contribute to the climate fight. Projects aren't expected to come online until the end of the decade, by which time the IPCC says we already need to have made drastic emissions reductions.

The technology has some powerful boosters though, not least President Joe Biden, who recently touted NuScale's "groundbreaking American technology" while announcing a grant for an SMR plant the company will build in Romania. Engineering giant Rolls-Royce also recently announced a shortlist for the location of its future SMR factory, which will be used to build 16 SMRs for the UK government by 2050.

Whether SMRs can deliver on their promise remains to be seen, but given the scope of the climate challenge facing us, exploring all available options seems wise.

I am a freelance science and technology writer based in Bangalore, India. My main areas of interest are engineering, computing and biology, with a particular focus on the intersections between the three.

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The First Small Modular Nuclear Reactor Was Just Approved by US Regulators

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Nuclear power could play an important role in decarbonizing the energy sector, but reactors are simply too expensive and complicated to roll out quickly. A new, smaller reactor could soon change that after receiving certification from the Nuclear Regulatory Commission last week.

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InfinitumProdux

Thesis

Star Bulk Carriers Corp. (NASDAQ: SBLK) is due to report its Q2 earnings release on August 4, following SBLK's recent collapse to its July lows. Even though it traded at relatively "cheap" valuations at its June highs, the market still sent it tumbling. As a result, SBLK fell nearly 37% to its July bottom.

Notwithstanding, SBLK has recovered remarkably from its steep collapse, which sent it into medium-term technically-oversold zones. However, we don't encourage investors to join the current rally, as we believe SBLK could underperform moving ahead. Therefore, we posit that the recent recovery is unsustainable and view it as a short-term rally from an oversold bottom.

Our valuation analysis suggests that investors should be patient and wait for a steeper fall before considering adding exposure. Our price action analysis indicates that a potential bull trap (indicating the market could decide to deny further buying upside) could form at the current levels. Therefore significant caution is warranted.

Hence, we believe investors sitting on massive gains can consider cutting more exposure. New investors considering adding can wait for a steeper retracement first.

As such, we revise our rating on SBLK from Hold to Sell, with a medium-term price target (PT) of $20 (implied downside of 23%).

The Market Is Adjusting For SBLK's Peak Growth

Recessionary worries and potential demand destruction have upended SBLK's robust uptrend from its March 2020 COVID bottom. However, Star Bulk Carriers has continued to report robust results through Q1. However, we urge investors to look forward, as Star Bulk's growth could continue to slow.

The consensus estimates (bullish) indicate that Star Bulk Carriers' growth could have peaked in FY21 and could continue to slow dramatically through FY23.

As seen above, the company is projected to report revenue growth of 25.1% in FQ2, with an adjusted EBIT growth of 35.5%, demonstrating its inherent fixed costs leverage.

However, that same advantage could also reverse markedly if topline growth slows markedly, resulting in deleverage. Consequently, SBLK's revenue growth is estimated to decline through Q2'23, reaching -34.9%. Moreover, its adjusted EBIT growth is expected to decrease further to -50.7%.

Therefore, we believe the market has adjusted its valuation dynamics to factor in potentially worsening metrics in SBLK's growth cadence.

SBLK - Market Rejected Further Buying At An FY24 FCF Yield of 19.4% In June

Note that the market rejected further buying upside in June at a free cash flow (FCF) yield of 19.4%. As a result, it also formed a double top bull trap on its medium-term chart, which can also be seen on its long-term chart.

That move by the market then sent SBLK tumbling nearly 37% to its July lows, forming its near-term support ($20.6). SBLK has recovered 23% from its July bottom but could encounter another bull trap (pending validation) at the current levels.

Hence, if the market rejects further buying momentum at this critical juncture, we believe it could set SBLK up for another steeper fall to re-test its near-term support.

We also encourage investors to pay attention to the Baltic Dry Index (BDI) closely as SBLK's June top corresponded with the BDI's top in June. Even though SBLK outperformed the BDI in 2022, we believe the recent price trends suggest a broad market de-rating that could impact SBLK and its peers.

SBLK's Valuation Suggests Market-Underperformance
SBLK reverse cash flow valuation model. Data source: S&P Cap IQ, author
Some investors voiced concerns over Star Bulk's debt levels and interest load given the rising rates environment.

However, we are not unduly concerned with that, as the company is still projected to generate significant free cash flow profitability moving forward.

However, our valuation model suggests that SBLK's current valuation has captured much of its upside potential over the next few years. Therefore, unless SBLK falls further, adding at the current levels could lead to potential market underperformance through FY26.

We applied a market-perform hurdle rate of 11% in our model. We also selected an FCF yield of 25%, which we think is appropriate based on the market's current dynamics.

Note that the market rejected further buying upside at an FY24 FCF yield of 19%. But, it stanched further selling downside in July at an FY24 FCF yield of 32%.

Accordingly, we require Star Bulk Carriers to deliver a TTM revenue of $1.68B by CQ4'26. However, we think SBLK is unlikely to meet our revenue target based on our hurdle rate and current valuation.

Therefore, the market is likely asking for much higher FCF yields to compensate for the risks of potential market underperformance with a much lower implied hurdle rate.

Is SBLK A Buy, Sell, Or Hold?

We revise our rating on SBLK from Hold to Sell, with a medium-term price target of $20 (a potential downside of 23%, as of July 28's close).

We urge investors sitting on massive gains to leverage the recent rally from its July lows to cut more exposure and rotate.

New investors should be patient and wait for a steeper fall before adding exposure. Therefore, we would monitor for a potential re-test of its $20 support level.

Do you want to buy only at the right entry points for your growth stocks?

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Star Bulk Carriers Stock: More Potential Downside Coming (NASDAQ:SBLK)

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Star Bulk Carriers Corp. (NASDAQ: SBLK) is due to report its Q2 earnings release on August 4, following SBLK's recent collapse to its July lows. Even though it traded at relatively "cheap" valuations at its June highs, the market still sent it tumbling. As a result, SBLK fell nearly 37% to its July bottom.

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tawatchaiprakobkit/iStock via Getty Images

ZIM Integrated Shipping Services () is a global cargo shipping company, which is one of the top 20 carriers. The company was founded back in 1945 and strategically chose the perfect time to IPO in January 2021. At that point shipping costs exploded, due to the demand shock of the economy reopening, which has been dubbed the "Cargo Crunch". According to a recent study by the IMF, Global Shipping costs are linked to increasing inflation. The study which spans 30 years' worth of data from 143 countries, shows some interesting correlation, here is a direct quote from the IMF Report:

We find that shipping costs are an important driver of inflation around the world: when freight rates double, inflation picks up by about 0.7 percentage point. - IMF (March 28th 2022.)

I have plotted on the chart below the Baltic Dry Index (A benchmark for the price of moving the major raw materials by the ocean), indicated by the Blue line and overlaid the share price of ZIM integrated shipping (Orange line).

As you can see the pattern is remarkably similar, at the exact point when ZIM had its IPO, shipping costs and the stock price exploded in correlation. Now shipping costs have begun to normalize, due to slowing industrial demand, the stock price has also sold off by 46% from the highs. I have also noticed a large delay in the Baltic Dry Index Peak and ZIM Stock Price Peak of five to six months. As the Baltic Dry Index peaked in early October 2021 and ZIM's stock price peaked in mid-March 2022.

If I extrapolate this predictive delay out again for the "bottom" of the Baltic dry index which occurred at the end of January (31st) then that would mean the bottom for ZIM's share price should be sometime in July and it does seem to have found possible support recently, but then again this could also be a "bull trap" (which I discuss in the risks section).

Note: This is an insight I have recently discovered and the historical data is fairly limited, as ZIM only IPO'd in January 2021.

Thus, as an extra data point, the World Container Index peaked at a high of ~$10,000 at the end of September 2021. This has now slid down to ~$7,000 but is still substantially higher than pre-pandemic levels of $1,576 in February 2020. A study by McKinsey predicts that shipping rates will "Normalize" but still be "Above average levels seen in 2019".

Given all the data points above, it looks as though ZIM is still a strong stock, especially given the ocean carries 80% of the world's traded goods and the company is investing for future growth. In addition, the stock is trading at a low valuation relative to peers and itself historically. Let's dive into the Business Model, Financials and Valuation for the juicy details.

Solid Business Model

ZIM Integrated Shipping has over 4000 employees, 200 offices and ~27,000 customers. The company has strong presence across the major trade routes which include:

ZIM has ~137 vessels but runs a flexible asset light "charted in capacity model". In addition, management "Opportunistically" sources extra capacity in the secondhand market to complement its capacity. During the first quarter of 2022, ZIM has entered into charter agreements for 17 newbuilds, these include:

3 x 7,000 TEU LNG dual-fuel newbuild container vessels chartered from an affiliate of Kenon Holdings.

6 x 5,500 TEU wide beam newbuild vessels chartered from MPC Container Ships.

8 x 5,300 TEU wide beam newbuild vessels chartered from Navios Maritime Partners.

Note: TEU is a shipping industry unit which means twenty-foot equivalent unit. 20 Foot in length is the size of a traditional shipping container.

ZIM aims to be a "Global Niche Carrier" and is gradually building up shipping capacity around emerging market economies such as India, which can increase trade with Israel and Turkey. Asia-Africa as also niche routes where studies predict an increase in trade volume.

AI Investment

Despite being founded in 1945, ZIM's management is continually innovating and reinventing themselves. The shipping industry is an antiquated industry primed for technological disruption through Blockchain and AI. At the end of June 2022, ZIM's management took advantage of its cash flush position to provide $6 million in Venture Capital funding Data Science Consulting Group (DSG). DSG specializes in Artificial Intelligence (AI) has previously worked with ZIM on the creation of a "center of excellence" for the development of AI tools for the maritime industry. ZIM also plans to use these AI tools to improve business decisions. Now although $6 million is peanuts compared to the company's cash flow (~$3 Billion) it does offer potential "optionality" in the stock. In addition, if ZIM is spearheading the use of technology in the industry, they could increase efficiency and capacity prediction, which would give them a competitive advantage relative to peers.

ZIM Integrated's Strong Financials

ZIM produced some tremendous financial results for the first quarter of 2022. The company generated its "highest ever" quarterly Net Income of $1.7 billion and Revenues were $3.7 billion, up a blistering 113% year over year. However, it should be noted carried volume was 859 TEU (twenty-foot equivalent units) which was only up 5% year over year. Thus, as I alluded to in the intro, the primary boost in profitability has been driven by high freight rates. The average freight rate per TEU doubled year over year to $3,484.

A comparison of the Average Revenue Per TEU for the main carriers show ZIM (yellow bar) had the highest levels of any other carrier. With over a $3,500 per TEU rate in Q421 and $3,484 in Q122 (not shown on chart). This significantly higher rate is driven by ZIM's exposure to key East-West routes and its ability to "Opportunistically" take advantage of Spot rates.

ZIM also generated a strong Adjusted EBITDA of $2.5 billion, up by 209% year over year. In addition, Operating Income was $2.24 billion, up by a staggering 228% year over year. While Levered Free Cash Flow increased by over 700% from $393 million in Q122, to $3.2 billion in Q22.

Despite the gloomy outlook regarding shipping prices normalizing, it was interesting to see management increase its guidance for the full year 2022. The company is forecasting Adjusted EBITDA between $7.8 and $8.2 Billion range, which would represent at least 18% growth in Adjusted EBITDA year over year.

Data by YCharts

ZIM has a fortress balance sheet with $4.8 billion in cash and short-term investments and just $171 million in long term debt.

Monster Dividend?

The company paid a dividend of $342 million, or $2.85 per share which represents approximately 20% of first quarter net income. ZIM's management aims to build on this momentum and have a forward dividend yield of 22.78% which is stupendous. It should be noted this dividend is paid out quarterly and usually early in each month with the next payout being the 6th of August 2022.

Is ZIM Stock Undervalued?

ZIM is trading at a very low forward PE ratio of just 1, which is the cheapest the stock has ever traded at historically. In addition, the stock trades at a cheaper PE ratio than industry peers such as Navios Maritime Partners L.P. ( NMM) which trades at a PE (forward) Ratio = 1.3 and Danaos ( DAC) which trades at a PE (forward) Ratio = 2.6, at the time of writing.

Data by YCharts

Risks

Shipping Rates Normalize/Demand Falling

In my previous post on ZIM, one of my main risks was that Shipping Rates Normalize and the stock price falls as a result, due to the relationship I mentioned at the beginning. It seems this thesis is playing out, BoA has recently slashed its price target for ZIM to $40/share on weak demand. Thus, it's good to keep in mind that lower expectations should be set moving forward. In the words of the Legendary Investor Howard Marks, "Trees don't grow to the sky" and the "The Market Moves in Cycles", the shipping industry is notorious for this. In a McKinsey Study cited previously, the high shipping rates are not due to a lack of ships, but rather a lack of "effective ships" as port congestion was the main catalyst for increased rates.

Bull Trap?

A "Bull Trap" is where a downward trend looks like it is reversing, entices "Bulls" to buy and then "Traps" them with a decline. The stock price seems to have found some support at the ~$43/share price point, thus as investors it makes sense to look for a further bounce of that support and trend reversal before entering.

Deglobalization

We have previously been through decades of "Globalization" as businesses expanded internationally to take advantage of low-cost labor and specialization in regions. However, due to complex supply chains, high potential costs and geopolitical tensions, the trend is now towards "deglobalization" in that more manufacturing is positioned locally. For instance Intel ( INTC) has recently announced a new $20 Billion Ohio Factory. Although, this trend is still in the early stages, I do see signs of a world with less complex and vast supply chains moving forward.

Has the Ship Sailed?

ZIM is a tremendous company and in the short time they have been public, they have generated fantastic returns for shareholders. Management is smart, savvy and fast acting, which should help to mitigate the volatility of the shipping industry. Industrial demand is beginning to slowdown and shipping rates are starting to normalize (hence the price correction). The stock is trading at a very low valuation and the share price has hit support line but it may also be a possible "bull trap". The mammoth dividend is enticing for investors but caution should be taken, as there is still much uncertainty. JPMorgan has recently upgraded the stock to a "HOLD" rating and that matches my forecast also.

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ZIM Integrated Stock: 20% Dividend And Undervalued (NYSE:ZIM)

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ZIM Integrated Shipping Services () is a global cargo shipping company, which is one of the top 20 carriers. The company was founded back in 1945 and strategically chose the perfect time to IPO in January 2021. At that point shipping costs exploded, due to the demand shock of the economy reopening, which has been dubbed the "Cargo Crunch".

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Alexey_Lesik/iStock via Getty Images

As Iron ore demand decreased in the past few months, Star Bulk Carriers (NASDAQ: SBLK) stock price dropped by 30% in the last months. The increased interest rates in the United States and European countries to combat inflation, combined with high temperatures and heavy rains in China, caused iron ore demand to decrease in the past few months. However, the slow fleet growth and the increased coal imports into the EU support the dry bulk market. My valuation shows that SBLK is worth $24 per share. I rate the stock is a hold.

Quarterly highlights

In its 1Q 2022 financial result, SBLK reported voyage revenues of $361 million, compared with 1Q 2021 voyage revenues of $200 million. SBLK's TCE revenues increased from $156 million in 1Q 2021 to $305 million in 1Q 2022, up 96%. Star Bulk reported TCE per day of $27405 in the first quarter of 2022, compared with 1Q 2021 TCE per day of $156394. In 1Q 2022, SBLK's net income and adjusted EBITDA increased by 376% (YoY) and 167% (YoY), respectively. Due to the performance of the company in recent quarters, driven by high dry bulk charter rates, Star Bulk's cumulative adjusted EBITDA, adjusted net income, and dividend performance increased significantly. According to Figure 1, SBLK's cumulative adjusted EBITDA increased from $72 million in 2Q 2021 to $576 million in 1Q 2022. During this period, the company's cumulative adjusted net income increased from $129 million to $831 million. Moreover, from 31 March 2020 to 20 May 2022, Star Bulk's cash and liquidity increased by 306% to $532.6 million. Also, the company's adjusted net debt decreased from $1664.1 million on 31 March 2020 to $994.7 million on 20 May 2022, down 43%. However, it is worth mentioning that compared with the fourth quarter of 2021, SBLK's TCE per day decreased by 27% in 1Q 2022. SBLK's 2Q 2022 result will not be as strong as in 4Q 2021. However, I expect SBLK's financial results to be stronger than in 2Q 2021 (as the company's 2Q 2022 TCE per day will be higher than in 2Q 2021). "Looking to the next quarter, we have covered 74.3% of our available days for Q2 at a TCE of $29759 / day per vessel," the CEO commented. SBLK's TCE per day in 2Q 2021 was below $22927 (see Figure 2).

Figure 1 - Star Bulk's cumulative adjusted EBITDA, adjusted net income, and dividend performance

Figure 2 - SBLK's TCE per day

Market outlook

According to the MMI daily iron ore index report, published on 30 June 2022, total iron ore inventories at China ports decreased from more than 150 million tonnes in March 2022 to around 120 million tonnes in June 2022 (see Figure 3). On the other hand, total China iron ore import volumes increased from below 90 million tonnes in March 2022 to more than 90 million in May 2022 (see Figure 4)

Figure 3 - Total iron ore inventories at China ports

Figure 4 - Total China iron ore import volumes

Moreover, Chinese rebar consumption and production in the last few months are below their levels in the same period in 2019, 2020, and 2021 (see Figure 5). Also, Chinese hot-rolled coil consumption and production in June 2022 are below their levels in June 2019, 2020, and 2021.

Figure 5 - Chinese steel consumption and production

"Iron ore futures contract has been rebounding for five days in a row with the support of terminal steel demand and improving market sentiment rebound," SMM reported. On one hand, due to the recent relaxation of pandemic rules in China and falling finished products inventory, steel production in China may rebound (total China iron ore inventories at ports significantly dropped in recent months). On the other hand, high temperatures and heavy rains, harm China's steel demand. According to SMM data, Yunnan steel enterprises expect their construction steel output to decrease from 1.2 million mt in June to 720000 mt in July, down 30%. Besides extreme weather conditions in China, increased interest rates in the United States & European countries caused the global steel demand to decrease in recent months. Figure 6 shows that from 7 March 2022 to 1 July 2022, the iron ore price decreased from $159 to $118 per tonne. However, it is worth mentioning that the iron ore price is still higher than its level before the COVID-19 pandemic started.

Overall, due to the extreme weather conditions, China's iron ore imports will not increase in the next few months. Also, with normal weather conditions, the company's internal steel production can satisfy the country's needs in the short term. Increased interest rates in western countries caused their iron ore import to decrease, and with current fiscal and monetary policies to combat inflation, I do not expect the United States and European countries' iron ore demand to increase in the following months. Thus, dry bulk charter rates cannot reach their record highs in the short term.

Figure 6 - Iron ore price

However, despite the weak outlook for iron ore demand in the short-term, bulk carrier charter rates and freight rates are still high. Figure 7 shows that bulk carrier freight rates for iron ore is now higher than in January 2022. Also, bulk carrier time charter rates are still higher than in January. Because of slow fleet growth, the decreased iron ore demand did not cause bulk carrier freight rates and charter rates to drop yet. Due to the increased financing costs, new environmental regulations, and uncertainties in the market, fleet growth is expected to slow to 2.6% (YoY) and 2.5 (YoY) in 2022 and 2023, respectively. Thus, the slow supply growth is supporting the dry bulk market, despite the decreased iron ore demand in recent months. However, if the global demand for iron ore continues to fall, the demand for existing dry bulk vessels will fall to the levels that make charter and freight rates plunge. Thus, keep an eye on COVID-19 regulations in China, the weather condition in China, and United States monetary policies to combat inflation.

Figure 7 - Bulk carrier rates

Moreover, due to the recent natural gas problems in Europe, coal imports into the EU have increased. As the war in Ukraine continues, European demand for coal increases. Thus, despite decreased iron ore demand, the increased demand for coal from the European countries supports the dry bulk market. Figure 8 shows that the bulk carrier freight rates for coal have increased significantly since January 2022.

Figure 8 - Bulk carrier freight rates for coal

Valuation

Using the data provided in Table 1 and Competitive Companies Analysis (CCA), I evaluate SBLK. This method reflects the real-market data and is an appropriate way of analyzing SBLK due to the companies' relative stability. Based on market cap and financial operations, I selected the dry bulk peers and used common key ratios in a CCA method to illustrate the value of similar companies. Data was gathered from the most recent quarterly and TTM data. Comparing Star Bulk multiples with its peers shows that SBLK has an EV/sales ratio of 2.26x, 16.5% more than the peers' average of 1.94x. Also, SBLK's P/E ratio is 11.3% more than the peers' average of 2.74x. On the other hand, the company's EV/EBIT and EV/EBITDA ratios are lower than the peer's average EV/EBIT and EV/EBITDA ratios of 4.82x and 4.23x, respectively. According to these multiples, at its current price, SBLK is neither a better nor worse investment opportunity compared with its peers. I evaluate that the stock is worth $24 per share.

Table 1 - SBLK and its peers

Table 2 - SBLK stock valuation

According to the Wall Street price target, SBLK has a low price target of $22, a median price target of $34, and a high price target of $41. Moreover, according to Seeking Alpha quant rating, SBLK has a valuation grade of A+ and is a strong buy (see Figure 9). The reason behind the strong buy rating suggested by Seeking Alpha is that bulk carriers' multiples are significantly below the financial multiples of the industrial sector. However, as the market sentiments on dry bulk stocks are different compared to the rest of the market, with the current market condition, I do not expect the financial multiples of SBLK to increase to higher levels.

Figure 9 - SBLK valuation grade

Summary

The decreased iron ore demand did not cause bulk carrier freight rates and charter rates to drop to levels that make investing in dry bulk companies too risky. Why? Because the slow fleet growth and increased imports into the European countries support the dry bulk market. Thus, I expect the company's 1Q 2022 results to be stronger than in 1Q 2021. Moreover, in terms of valuation, the CCA method suggests that the stock is worth $24 per share. I rate SBLK a Hold.

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Star Bulk Carriers Stock: High Rates Despite Decreased Iron Ore Demand

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As Iron ore demand decreased in the past few months, Star Bulk Carriers (NASDAQ: SBLK) stock price dropped by 30% in the last months. The increased interest rates in the United States and European countries to combat inflation, combined with high temperatures and heavy rains in China, caused iron ore demand to decrease in the past few months.

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Miro Nenchev/iStock via Getty Images

Investment Thesis

The recovery of the global economy and a strong performance by China is expected to sustain robust global commodity markets and continue fueling the surge in demand for dry-bulk commodities such as coal, iron ore, grains, and other dry-bulk products over the next few years. This is at a time when the availability of shipping capacity is constricted by slow net fleet growth due to the historically low order-book for new ships. These market dynamics and dry-bulk fundamentals should help sustain charter rates at favorable levels.

Genco Shipping & Trading Limited (), the largest U.S.-based ship-owning and operating company, is well placed to gainfully exploit arising opportunities.

Supply of Dry-Bulk Shipping Capacity

The market for dry-bulk shipping services is highly competitive with approximately 2,300 independent dry-bulk carrier owners. Shipping capacity supply is mainly shaped by a matrix of factors including the number, size, age, condition, and specifications of vessels.

Recently, availability of shipping capacity has been constricted by higher port congestion (Covid-19 measures and poor weather slowed down port operations) and slow net fleet growth due to the historically low order-book for new ships. New shipbuilding deliveries were down 22% in 2021 YOY. For 2022-2024, there are 308 units of the 25,000 - 68,000 dwt range slated for delivery, a drop of 34% compared with the 2019-2021 period. New bulker orders are being blocked out by those for new container ships and gas carriers, with most slots in yards booked until 2025.

Further, uncertainty surrounding fuel technology options and environmental regulations implementation is making it difficult for owners to confidently place orders for new ships, leading to lower new building orders, and could result in increased scrapping and or slower vessel speeds, thus reducing ship supply. The world fleet is projected to grow by a 1.25% compound annual growth rate until the start of 2026, a slowdown from a 1.44% CAGR for the previous five years.

Demand for Dry-Bulk Commodities Shipping Services

Dry-bulk shipping rates and therefore revenues are largely driven by global economic activity levels. Global volumes of seaborne dry-bulk trade are comprised of 30% iron ore, 17% coal, 14% grains, and 39% others. World trade in dry-bulk commodities has grown considerably over the years. For example, world steel production increased from 129 million tons in 2010 to 1065 million tons in 2020. The Asia Pacific is the fastest-growing regional market due to an increase in iron ore and coal imports to China.

Following the gradual easing of Covid-19-related measures, the global economic activity rebounded in 2021 and is projected to remain fairly firm in the coming few years. The World Bank estimates that the world economy will expand by 4.1% in 2022 and by 3.2% in 2023. United States economy is projected to grow by 3.7% and 2.6% in 2022 and 2023 respectively. For China, estimates are 5.1% in 2022 and 5.3% in 2023. After expanding by 9.5% in 2021, global trade is expected to slow down to 5.8% in 2022 and to 4.7% in 2023, as demand moderates.

Around 1.25 billion tons of coal was loaded on dry-bulk ships in 2021, up from 1.195 billion tons in 2020. The main recipient of this incremental coal was China which imported 285.8 million tons of coal in 2021, some 36.7 million tons higher year-on-year. China's appetite for seaborne coal surged by 16% in 2021. China, the largest importer of dry-bulk commodities globally, drives demand for iron ore, coal, and other cargoes that Genco carries and on which its business is substantially dependent.

China's import ban on Australian coal in late 2020 resulted in China importing more from other coal-exporting countries mainly from Indonesia, Russia, and the United States, while other coal-importing countries switched to importing more from Australia.

With the ongoing war in Ukraine, grain shipments from Ukraine have effectively stopped. Several countries have imposed sanctions on Russia with traders, particularly in coal and grain having to find alternative sources such as the U.S., Australia, and South America to help fill the supply gap. This has led to a re-direction of cargo flows, lengthening ton-miles.

Shipping Freight Rates

The rebound in world economies in 2021 and resultant surge in demand for dry-bulk commodities, coupled with rampant port congestion and slowed fleet growth reducing effective ship supply, contributed to a boom in dry-bulk freight rates peaking in October 2021. For Genco, the average Time Charter Equivalent (TCE) rates obtained by the overall fleet increased by 138.7% from $10,221 per day for the twelve months ended December 31, 2020, to $24,402 per day for the twelve months ended December 31, 2021, representing the company's highest annual TCE since 2010.

TCE rates obtained by the Company's fleet were $35,200 per day for Q4 2021 as compared to $13,167 per day for Q4 2020. Markets historically exhibit seasonal fluctuation in freight and charter rates which are typically stronger in the fall and winter months in anticipation of increased consumption of coal and raw materials during the winter months. As a result, revenues could be weaker during Q2 and Q3 and conversely, revenues could be stronger during Q4 and Q1.

Although freight rates have retreated from the high levels of Q4 2021, the earnings environment has remained robust with freight rates sustained at quite profitable levels from a historical perspective. Genco's average daily fleet-wide TCE for Q1 2022 was $24,093, 98% higher YOY and the company's highest first-quarter TCE since 2010. Based on the current period and spot fixtures, the company estimates Q2 2022 will yield a reasonable TCE of $27,596 for 68% of its owned fleet available days.

Genco had a remarkably strong year in 2021. In spite of a reduction in the average number of vessels from 51.8 in 2020 to 41.6 in 2021, and an accompanying drop in total fleet operating days from 19,204 in 2020 to 16,165 in 2021, the company recorded a$191.6 million or 53.9% jump in revenues from $355 million in 2020 to$547 million in 2021, primarily due to higher freight rates. The decrease in vessels was primarily due to the sale of nine vessels during 2020 and eleven vessels during 2021, partially offset by the delivery of seven vessels during 2020/2021. Revenues for Q1 2022 were $136.2 million compared to $87.6 million in Q1 2021 or a 55% improvement.

Net cash provided by operating activities for the years ended December 31, 2021, and 2020 was $231.1 million and $36.9 million, respectively. Net cash for Q1, 2022 was $52.6 million, a significant improvement from the $13.5 million achieved in Q1 2021.

Value Enhancement

Genco is executing a number of strategies - improving the quality of its fleet, building a cash reserve, reducing debt, lowering its cash flow breakeven levels, and strengthening management - to achieve a competitive advantage in terms of securing charters, better operating-efficiencies, improved financial performance and strengthening of its balance sheet.

The company has since 2020 divested 20 older, less fuel-efficient vessels and boosted the quality of its fleet through the acquisition of nine modern, high specifications, fuel-efficient vessels. The average age of its fleet is 10.2 years compared to the global average of 14 years for dry-bulk carrier vessels. Genco has been fitting its vessels with energy-saving devices and with exhaust-gas scrubbers enabling them to burn cheaper 3.5% sulfur fuel as opposed to expensive 0.5% sulfur fuel.

In September 2021, Genco formed a specialized joint venture company tasked with providing services in technical management, which company is expected to improve Genco's vessel operations and enhance efficiency. The utilization rate for Genco's diversified fleet of 44 wholly-owned dry cargo vessels remained high, increasing marginally from 97.1% in 2020 to 97.9% in2021.

Even after spending $66.2 million net on vessel acquisitions and disposals in the year 2021, and $203.2 million on debt repayments or approximately 45% of the beginning of the year debt balance, the company maintained a strong liquidity position with $120.5 million of cash while lowering net loan-to-value (LTV) to 15% as of December 31, 2021.

Consequently, net interest expense decreased by $6.2 million in 2021. Genco paid down an additional $48.75 million of debt during the first quarter of 2022, reducing debt to $197.3 million and bringing the net LTV to 12% as of May 3, 2022. The company says it has lowered its cash flow breakeven levels to among the lowest in the industry. As of March 31, 2022, the company had $49.1 million of cash on the balance sheet. The company is setting aside $10.75 million quarterly towards building a cash reserve to fund vessel acquisitions, debt repayments, and general corporate purposes.

The company recorded a net income of $182.0 million or $4.27 diluted net earnings per share for the twelve months ended December 31, 2021. This compares to a net loss of $225.6 million or $5.38 diluted net loss per share for the twelve months ended December 31, 2020. Net loss for the year 2020 included $208.9 million in non-cash vessel impairment charges. Excluding these items, adjusted EBITDA would have amounted to $252.9 million and $71.8 million for 2021 and 2020 respectively. EBITDA was $58.0 million during Q1 2022.

Riding on improved earnings, the company declared a $0.67 per share dividend for Q4 2021, a nearly 350% increase from the $0.15 per share dividend paid during Q3 2021, representing an annualized yield of 14% on Genco's closing share price as of February 23, 2022. It declared a $0.79 per share dividend for the Q1 2022, an increase of 18% compared to the previous quarter and representing an annualized yield of over 16% on Genco's recent closing share price.

The economic recovery and the newfound sector profitability have led to a sharp increase in steel and ship prices. For example, a 10-year-old Capesize vessel was worth about $33 million at end of the year 2021, i.e. 65 - 74% more than at the end of 2020 when values ranged between $19 - 20 million. The value of a new Capesize posted an increase of 18 - 20%, ending 2021 at around $59 - 60 million. Ship scrap prices rose by about 50%.

It is therefore likely that Genco may record significant asset value appreciation based on earnings potential, residual value, and scrap prices.

Conclusion

The recovery of the global economy and a strong performance by China is expected to sustain robust global commodity markets and dry-bulk products demand. Europe's need to replace Russian coal with coal from further afield is positive for ton-miles and particularly for the larger Capesize vessels.

While factors such as bad weather, Covid-19-related port congestion, and commodity prices that contributed to the huge spike in freight rates in 2022 are likely to be temporary and may wane in the coming periods, in the short to medium term, freight and charter rates and ship valuations continue to have a positive outlook on account of the favorable dry-bulk supply and demand balance, underpinned by the historically low fleet growth, amid an increasingly carbon-conscious environment.

The Baltic Dry Index which provides a benchmark for the price of moving bulk materials by sea was up 45.25% for the year as of May 13, 2022, after rising 178% year-on-year in 2021. Forward freight agreements pricing, time-charter rates, and ship valuations all point to continued strength.

Genco is well-positioned to gain from these favorable market dynamics and dry-bulk fundamentals. The company is already demonstrating its potential with the majority of available ship-days booked at over $27,500 per day for the second quarter of 2022, locking in attractive profit margins and securing cash flows. With every $1000 increase in TCE translating to about $16m of incremental annualized EBITDA or $0.37/share, the company is anticipating a strong financial performance for 2022 and 2033.

As the company's strategies pay off in terms of reducing loan exposure and the attendant reduction in interest and principal payments, attaining higher asset values and reduced chances of incurring impairment charges, and with no mandatory debt amortization payments due until 2026, the company can in the short to medium term expect to generate significant net cash flows to fund operations, build value and strengthen its dividend-paying ability.

In the long haul, however, the company can expect to incur significant capital expenditure on renewal and scaling up of its fleet as it seeks to dive deep for profit in the volatile sector.

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Genco: Recovery In International Trade Brings Good Tidings (NYSE:GNK)

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The recovery of the global economy and a strong performance by China is expected to sustain robust global commodity markets and continue fueling the surge in demand for dry-bulk commodities such as coal, iron ore, grains, and other dry-bulk products over the next few years.

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Protein-rich microalgae is already being used as a fish-free alternative to the fish feed commonly used in aquaculture operations. Taking things a step further, scientists are now looking at utilizing the plant-like organisms to replace the prawns eaten by humans.

Although prawns can be farmed, most are still caught in the wild by fishing trawlers pulling large nets through the water. Therefore, as is the case with other types of commercial fishing, the potential exists for both overfishing and the accidental bycatch of non-target species.

Seeking a more eco-friendly alternative, the ETH Zurich research institute's Dr. Lukas Böcker and Dr. Severin Eder are now looking to microalgae. Not only can the microscopic organisms be sustainably cultivated in ponds or bioreactors, but they're also a good source of various proteins, unsaturated fats, vitamins and minerals.

In order to replicate the taste and nutritional value of real prawns, the scientists are combining a certain type of microalgae with other plant-based protein sources such as soya and pea meal. The mixture is extruded through a specialized nozzle, to replicate the shape of actual prawns. That said, the current version of the mock prawns are described as looking and tasting "a little like jellified, salty gummy bears."

Not to be dissuaded, the researchers believe that by experimenting with other processing techniques, they will be soon able to better replicate the flavor and texture of the genuine article. In fact, it is hoped that a saleable product will be ready by the end of the year. Other products, such as microalgae-based imitation crab and scallop meat, could then follow.

"With the technology and the platform we've developed, we'll achieve not only an authentic taste and texture with a microalgae-based product but also the nutritional qualities you get with fish and seafood," said Eder.

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Eco-friendly algae-based prawn substitute could soon hit the market

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Protein-rich microalgae is already being used as a fish-free alternative to the fish feed commonly used in aquaculture operations. Taking things a step further, scientists are now looking at utilizing the plant-like organisms to replace the prawns eaten by humans.

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Aunque el Contrarian Investing no sea una estrategia quizás tan conocida por el gran público, es indudable que ha tenido grandes defensores durante muchos años.

De hecho, entre ellos se encuentran algunos de los mejores inversores del mundo.

Por este motivo, considero muy interesante conocer este estilo inversor y aprovechar aquellos aspectos que puedan resultar útiles dentro de la estrategia de inversión de cada persona.

En este artículo te explicaré de forma sencilla:

En qué consiste el Contrarian Investing.

Por qué funciona en la práctica.

Cuáles son sus principales ventajas e inconvenientes.

Y finalmente, compartiré contigo mi opinión personal sobre esta estrategia y si la considero o no adecuada para cualquier persona.

✅ Contrarian Investing: qué es y por qué funciona

Empecemos, pues, definiendo el concepto de Contrarian Investing, recordando a algunos de los célebres inversores que lo aplicaron a lo largo de los años y analizando brevemente los motivos por los que puede ser una estrategia exitosa.

➡️ #1. Definición

El Contrarian Investing es un estilo de inversión que consiste en operar en el sentido contrario a la tendencia dominante del mercado.

Lógicamente, esto no se hace por principio y en todo caso, sino en aquellos supuestos en los que el inversor considere que la tendencia no refleja una valoración adecuada del activo de que se trate.

Todo ello a partir de un proceso de investigación profundo y bien razonado.

Así, por ejemplo, si la cotización de una acción lleva meses bajando de precio, pero el inversor cree que su valoración debería ser más alta, puede invertir en ella aunque la tendencia siga siendo bajista durante algún tiempo.

De igual modo, si la tendencia general de un mercado es alcista, pero consideramos que se trata de una subida exagerada o injustificada, podríamos invertir en corto, apostando por futuras caídas.

Aunque el término "Contrarian Investing" se utiliza principalmente en bolsa, realmente se puede aplicar a todo tipo de inversiones:

Al fin y al cabo, todos los mercados reflejan tendencias y son susceptibles a errores de valoración.

Como te decía en la introducción, el movimiento Contrarian tiene y ha tenido famosos defensores, entre los que se encuentran algunos de los mejores inversores de la historia.

Así, por ejemplo, entre los que en algún momento adoptaron esta estrategia, destacan:

En este sentido, una de las citas más célebres atribuidas a Buffett es un buen ejemplo de filosofía Contrarian:

"Be fearful when others are greedy, and greedy when others are fearful.".

Es decir: "Sé temeroso cuando los demás muestren codicia, y codicioso cuando los demás tengan miedo".

A lo largo de la historia más reciente, los defensores del Contrarian Investing han demostrado que este enfoque estratégico puede ofrecer muy buenos resultados cuando se aplica bien.

Por tanto, esto significa que el mercado no siempre refleja el valor real o intrínseco de los activos. Algunas de las razones para que esto sea así son las siguientes:

Información errónea o insuficiente: es prácticamente imposible disponer de información 100% completa y veraz sobre el activo en el que se invierte o sobre la situación económica general. En consecuencia, es muy probable que se produzcan distorsiones entre el valor real y el percibido.

"Efecto manada": los seres humanos tenemos una tendencia natural a adoptar creencias o pensamientos por el simple hecho de estar generalizados en nuestro entorno. Así, por ejemplo, este es uno de los factores que influyen en la generación de "burbujas", al extenderse una idea errónea acerca del valor de un determinado activo o mercado, o de la situación económica en su conjunto.

Tendencia a sobrerreaccionar: se produce cuando los inversores reaccionan exageradamente ante el conocimiento de determinada información sobre un activo o mercado. Por ejemplo, cuando se publica un dato negativo sobre cierta empresa, produciendo fuertes bajadas en su cotización por el pánico de los inversores, llegando a valores que podrían ser muy inferiores al real.

De este modo, el Contrarian Investing puede funcionar muy bien cuando se producen estas distorsiones que justifican el invertir a contracorriente de la tendencia dominante.

Si conoces la filosofía detrás del Value Investing, verás que tiene mucho en común con el Contrarian Investing. Al fin y al cabo, el enfoque Value se basa en encontrar activos que el mercado está infravalorando, por lo que también iría en contra de la tendencia.

De hecho, hay quien considera que el Contrarian Investing sería un subtipo de la filosofía , ya que ambos se enfocan en localizar esas distorsiones de valoración.

Sin embargo, hay ciertas diferencias que no pueden pasarse por alto:

Interpretación del "sentimiento del mercado": aunque esto sea matizable, los defensores del Contrarian Investing no solo tienen en cuenta magnitudes como el PER y otros ratios financieros, sino que analizan el "sentimiento del mercado" para detectar sobrerreacciones, comportamientos de "manada", etc.

Plazo de inversión: con carácter general, el enfoque Value suele tener una orientación muy a largo plazo, independientemente de la tendencia del mercado. Por su parte, la filosofía más pura del Contrarian Investing iría en la línea de deshacer posiciones cuando el mercado muestre una clara tendencia que coincida con la posición del inversor Contrarian durante cierto tiempo. No obstante, esto también puede llegar a tener ciertos matices en la práctica.

En cualquier caso, es innegable que ambos enfoques comparten muchos puntos en común e, incluso, hay inversores (como Buffett) que pueden considerarse tanto Value como Contrarian.

Como ves, uno de los puntos más importantes para invertir haciendo Value Investing como Contrarian, es la información. Y para obtener esa información es necesario que domines ciertas herramientas.

Si no sabes cuáles son porque estás empezando o te interesa saber cuáles uso yo, aquí te explico cuáles son las mejores herramientas de inversión para mí.

✅ Ventajas e inconvenientes del Contrarian Investing

A continuación, veremos más en detalle las principales ventajas e inconvenientes que puede tener la filosofía del Contrarian Investing:

➡️ #1. Principales ventajas de invertir a contracorriente

Los mayores puntos positivos que hay que destacar en el enfoque Contrarian son los siguientes:

Encontrar oportunidades desaprovechadas: por su propia naturaleza, opuesta a las tendencias generalizadas, el inversor Contrarian suele encontrar opciones de inversión que otros no ven.

Gran potencial de rentabilidad: si se aplica bien, el Contrarian Investing puede conseguir resultados muy superiores a la media del mercado. Inversores como Ackman o Buffett lo han demostrado repetidamente.

Compatibilidad con otras estrategias: habrá ocasiones en que conviene seguir la tendencia en un determinado activo o mercado, mientras se adopta una estrategia Contrarian en otro u otros. Por tanto, no hay motivo para fundamentalismos, ni existe una receta universal para el éxito.

Como te decía al principio, la experiencia y resultados de muchos inversores dan fe del éxito de este enfoque de inversión a lo largo de los años y de la veracidad de estas ventajas que acabo de enumerar.

➡️ #2. Desventajas y peligros

Como no podía ser de otro modo, el Contrarian Investing también tiene ciertos inconvenientes, sobre todo para inversores poco experimentados.

Así, sus principales desventajas son las siguientes:

Riesgo elevado: en general, invertir a contracorriente es una estrategia arriesgada, ya que si la tendencia es muy fuerte y duradera, podría generarte elevadísimas pérdidas aunque, a largo plazo, acabase por darse la vuelta. Además, si inviertes mediante ventas en corto, los costes de préstamo de los activos pueden también llegar a ser muy altos.

Necesidad de información y conocimientos: para acertar en la aplicación del enfoque Contrarian, hay que dedicar mucho tiempo y esfuerzo a investigar los distintos activos y mercados, reuniendo datos que no siempre son fáciles de conseguir. Además, el inversor debe estar muy versado en la interpretación de información económico-financiera y contar con una amplia experiencia en los mercados.

Exige paciencia: el Contrarian Investing requiere saber esperar hasta que la estrategia dé resultado, pudiendo tener que soportar rentabilidades negativas durante largos períodos de tiempo.

Requiere autocontrol: el inversor Contrarian necesita mucha "sangre fría" y un buen control del factor psicológico para no tomar decisiones precipitadas en momentos difíciles.

Posibles errores: como es lógico, siempre está presente el peligro de equivocarse en la estimación del valor del activo y acabar acumulando grandes pérdidas.

Por tanto, aunque esta filosofía de inversión puede resultar muy tentadora por sus grandes posibilidades, considero que no debe adoptarse a la ligera. Te cuento más acerca de mi visión personal en la conclusión.

✅ [Conclusión] ¿Qué opino del Contrarian Investing?

Efectivamente, mi opinión personal es que, en general, considero preferible invertir siguiendo la tendencia del mercado, sobre todo si no eres un inversor experimentado y que pueda dedicar todo su tiempo al análisis e investigación.

Por tanto, para la mayoría de personas, lo ideal es utilizar instrumentos de inversión preferentemente pasivos, tales como ETFs o fondos indexados, e ir adaptando la estrategia de inversión a las condiciones del mercado.

De hecho, este es el enfoque que utilizo en mi estrategia ARALP o de Alto Rendimiento en Bolsa a Largo Plazo.

Y es que, aunque ser un contrarian investor puede ser muy rentable y satisfactorio, es también muy arriesgado y requiere de unos conocimientos y una dedicación que están al alcance de muy pocas personas.

En definitiva, espero que este breve análisis de la filosofía del Contrarian Investing te haya resultado interesante y enriquecedor. De este modo, aunque no vayas a adoptar este enfoque en la práctica, seguro que te ayuda a no fiarte ciegamente de la opinión general y a no seguir a rajatabla los impulsos del mercado.

Como siempre, me encantará leer tu opinión en los comentarios.

Hasta el próximo artículo, ¡te deseo unas muy felices inversiones!

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Contrarian Investing ✅ ¿Por qué invertir a contracorriente?

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Aunque el Contrarian Investing no sea una estrategia quizás tan conocida por el gran público, es indudable que ha tenido grandes defensores durante muchos años. De hecho, entre ellos se encuentran algunos de los mejores inversores del mundo.

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Get ready for charts, images, and tables because they are better than words. The ratings and outlooks we highlight here come after Scott Kennedy's weekly updates in the REIT Forum. Your continued feedback is greatly appreciated, so please leave a comment with suggestions.
In this article I want to help investors with an understanding how to pick between similar shares. However, first I know investors are going to want a handful of picks for shares that are currently looking pretty cheap. The NAV estimates I'm referencing when we highlight these picks are our estimates from late June, but they aren't reflecting the very end of the quarter. We take a little extra time to really drill in on the end-of-quarter values as part of our process for preparing for the earnings announcements.

Note: Prices are as of the July 4th weekend. On 7/5/2022 price movements were relatively small and do not change our outlook on any of these stocks. The three shares we mentioned all rallied, but it was only 2.33% for MFA and less than 1% for the two BDCs.

PSEC

Prospect Capital ( PSEC) is one of the higher-risk BDCs in our view, but it is cheap enough to be attractive. Shares trade at a price-to-NAV ratio of about .67 and a dividend yield of 10.3%. The BDC has gone in and out of favor with investors over the years. That resulted in some swings in the price-to-book ratio, but .67 is low enough to give investors some upside to go along with the yield. What about buying PSEC when the price-to-book ratio is high and just hoping for the best? I hate that idea. No. The risk/reward is only attractive at a big discount. Let's look at the historical range for price-to-trailing book value:

Does it make sense now? Is anyone still confused about the idea? Let me simplify it. Paying less than 70% of book value leads to gains. Paying around 90% of book value or more leads to much weaker returns. When shares travel from a .70x to a .90x ratio, assuming no change in book value, the share price would increase by 28%. That's a BIG increase to returns.

Some investors believe a falling share price indicates that book value is about to plunge. While plunging book value is one factor that can cause a share price to plunge, it sure hasn't been a good theory here:

Share prices simply have not been a great predictor of future book value. However, book value has been pretty effective at indicating a ceiling for share prices.

SLRC

SLR Investment Corp. ( SLRC) trades at a higher ratio, about .79 using our estimates. However, it carries a 10.9% dividend yield, and we find shares quite attractive at this valuation. They carry a bit less risk, which merits a higher price-to-NAV ratio. In SLRC's case, a .79 ratio is quite attractive.

As you can see from this chart, over the last 6 years SLRC usually traded at a higher price-to-book ratio than PSEC:

The current ratio is almost the lowest it has gone outside of March and April 2020.

MFA

MFA Financial ( MFA) also gets a quick reference. Price-to-estimated-book is around .66. That's higher than the .62 price-to-trailing book value. Since both formulas use the same share price, you can tell that our estimate for book value is clearly down on the quarter. To be clear, we are estimating declines in book value during Q2 2022 for most of the mortgage REITs. This was another hard quarter for the fundamentals, but it wasn't as bad for the fundamentals as it was for the share prices.

As of preparing this article, the major mortgage REIT ETFs are down about 20% year-to-date with about 75% of that decline occurring in Q2 2022 (April and June specifically). While we are projecting declines in BV, the projected declines are generally smaller than the price declines. That's important because it means a much lower price-to-book ratio.

Why are BVs down? Part of the hit to book value simply comes from rates moving higher quickly, but we also some widening of spreads. That's very favorable for reinvesting and it gives the mortgage REITs a much better position for performing on book value in the second half of the year. Ironically, when spreads are already wide and mortgage REITs can earn more from each dollar of book value, the price-to-book ratio is often lower. When spreads are tight, investors tend to pile in and push price-to-book ratios up too high. That's why you can see such a large swing in the valuation.

Due to MFA trading at such a large discount to projected NAV, shares carry a 15.8% dividend yield. That's absurdly high. However, the same dividend rate only represents a 10.5% yield on book value, which isn't uncommon. You can't expect a mortgage REIT to earn 15.8% on book value. However, doing around 10% to 11% is much more reasonable. That's part of why the difference between share price and book value is so important.

For anyone who reads that as "close your eyes and buy the biggest yield", go dollar cost average into an index. I am absolutely not advocating chasing yields. We approach these positions with careful due diligence, which is critical to our record of success.

The rest of the charts in this article may be self-explanatory to some investors. However, if you'd like to know more about them, you're encouraged to see our notes for the series.

Stock Table

We will close out the rest of the article with the tables and charts we provide for readers to help them track the sector for both common shares and preferred shares.

We're including a quick table for the common shares that will be shown in our tables:

Let the images begin!

Residential Mortgage REIT Charts

Note: The chart for our public articles uses the book value per share from the latest earnings release. Current estimated book value per share is used in reaching our targets and trading decisions. It is available in our service, but those estimates are not included in the charts below.

Commercial Mortgage REIT Charts

BDC Charts

Preferred Share Charts

Preferred Share Data

Beyond the charts, we're also providing our readers with access to several other metrics for the preferred shares.

After testing out a series on preferred shares, we decided to try merging it into the series on common shares. After all, we are still talking about positions in mortgage REITs. We don't have any desire to cover preferred shares without cumulative dividends, so any preferred shares you see in our column will have cumulative dividends. You can verify that by using Quantum Online. We've included the links in the table below.

To better organize the table, we needed to abbreviate column names as follows:

Price = Recent Share Price - Shown in Charts

BoF = Bond or FTF (Fixed-to-Floating)

S-Yield = Stripped Yield - Shown in Charts

Coupon = Initial Fixed-Rate Coupon

FYoP = Floating Yield on Price - Shown in Charts

NCD = Next Call Date (the soonest shares could be called)

Note: For all FTF issues, the floating rate would start on NCD.

WCC = Worst Cash to Call (lowest net cash return possible from a call)

QO Link = Link to Quantum Online Page

Second Batch:

Strategy

Our goal is to maximize total returns. We achieve those most effectively by including "trading" strategies. We regularly trade positions in the mortgage REIT common shares and BDCs because:

1. Prices are inefficient.

2. Long-term, share prices generally revolve around book value.

3. Short-term, price-to-book ratios can deviate materially.

4. Book value isn't the only step in analysis, but it is the cornerstone.

We also allocate to preferred shares and equity REITs. We encourage buy-and-hold investors to consider using more preferred shares and equity REITs.

Performance

We compare our performance against 4 ETFs that investors might use for exposure to our sectors:

The 4 ETFs we use for comparison are:

When investors think it isn't possible to earn solid returns in preferred shares or mortgage REITs, we politely disagree. The sector has plenty of opportunities, but investors still need to be wary of the risks. We can't simply reach for yield and hope for the best. When it comes to common shares, we need to be even more vigilant to protect our principal by regularly watching prices and updating estimates for book value and price targets.

Ratings:

Bullish on PSEC, SLRC, and MFA

Do you like when subscriptions regularly offer teaser prices that are only available to new members? I don't. If something is regularly on sale for 50% off, is it really 50% off? Or is the renewal price just a 100% markup?

No gimmicks. We want you to try our service because we think you'll love it. You can cancel easily. It's only 3 mouse clicks. Yet we enjoy one of the highest retention rates on Seeking Alpha because we consistently deliver.

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Follow Get ready for charts, images, and tables because they are better than words. The ratings and outlooks we highlight here come after Scott Kennedy's weekly updates in the REIT Forum. Your continued feedback is greatly appreciated, so please leave a comment with suggestions.

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El temor, cada vez más fundado, a una nueva recesión provocó ayer una nueva sacudida a los mercados mundiales, con los inversores tratando de ponerse a cubierto ante el escenario de la llegada de un nuevo ciclo negativo de la economía. El petróleo, que, al margen de especulaciones, actúa siempre como un indicador adelantado, cayó un 10%, el mínimo en dos meses, al cotizar la creencia de que la demanda se resentirá.

El Brent estaba anoche al borde de perder los 100 dólares el barril, influido también por un informe de Citigroup en el que decía que podía llegar a los 65 dólares en el caso de una contracción de la economía. En cambio, el West Texas, el petróleo de referencia en Estados Unidos, cotizaba por debajo de ese nivel ya desde media tarde.

Las apuestas a una recesión en Estados Unidos en el 2023 ya rondan el 40% de las posibilidades, según un informe de Bloomberg Economics. Anna Wong, su economista jefa para Estados Unidos, dijo ayer que "aunque los balances de los hogares y las empresas son sólidos, las preocupaciones sobre el futuro podrían hacer que los consumidores se replieguen, lo que a su vez llevaría a las empresas a contratar e invertir menos". Cuanto más se habla de una recesión, más posibilidades hay de que se produzca, de acuerdo a la teoría de la profecía autocumplida.

Los datos muestran que los bonos a diez años del Tesoro americano llevan días cayendo tras un rally impresionante en los meses previos. Ayer bajaron hasta el 2,8% porque el mercado anticipa que, tras los próximos movimientos de la Reserva Federal este año llegará la recesión y eso provocará bajadas de tipos ya el año próximo. Esa es la apuesta de los inversores ahora.

En Europa, que va rezagada en el ciclo económico, este escenario recesivo parecía más remoto hasta hace bien poco, pero ahora se acerca más y más. La agresión de Rusia a Ucrania se mantiene, la guerra no cesa y, para complicar más las cosas, la inflación golpea muy duro. Alemania ya ha iniciado su plan de ajuste y los datos parciales del PIB muestran debilidad.

Ayer salió un nuevo dato de actividad del sector servicios en España, que volvió a ralentizarse en junio. El aumento de la inflación sigue afectando a las empresas, lo que a su vez alimenta el pesimismo y el Índice de Gerentes de Compras (PMI) de S&P Global de las empresas de servicios, que representan alrededor de la mitad de la producción económica de España, se resiente. Cayó a 54 puntos el mes pasado desde los 56,5 de mayo.

Ante este panorama, las bolsas cayeron con mucha fuerza. En el caso del Ibex, perdió un 2,5% y este retroceso se llevó por delante los 8.000 puntos, una cota de las que se llaman psicológicas sin explicar lo que eso significa. Cerró en los 7.959 puntos, el mínimo desde el pasado mes de marzo. Casi todas las empresas terminaron la sesión en rojo. La petrolera Repsol fue la peor parada, con un descenso del 6%, seguida de CaixaBank, que cedió un 5,5%.

El resto de las bolsas europeas también sufrió las ventas masivas. La de Milán cayó un 3%, como la de Frankfurt, con la de París (-2,7%) no demasiado lejos. En todos estos casos, la dependencia del gas ruso es un factor clave en el impacto de la crisis energética en sus economías, las tres más grandes de la eurozona. Por su parte, la bolsa de Moscú se desplomó un 8%. Los emergentes tienen las de perder en un escenario de fuerte volatilidad como el que se está asentando.

Y llega el verano, una época propicia a los vaivenes, que este año tiene una cita en estrella en la reunión del Banco Central Europeo (BCE) del próximo 21 de julio. Ese día se marcará la hoja de ruta de las subidas de tipos de interés y del nuevo plan para asegurar una financiación barata a Italia, España y otros países vulnerables...

El mercado tiene claro que todo -la geopolítica, la economía, la política monetaria, la deuda- será extremadamente complejo a partir de ahora. Más aún. Y que Europa, que demostró una gran unidad en la covid y también, con matices, en la guerra de Ucrania, no lo tiene fácil. Tampoco el euro, que vuelve a estar en la diana de los especuladores. Ayer, la moneda única cayó hasta los 1,0235 dólares, mínimo en 20 años. La paridad con el billete verde está muy cerca, como ya sucedió el lunes con el franco suizo.

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Los inversores huyen de las bolsas por miedo a una recesión inminente

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El temor, cada vez más fundado, a una nueva recesión provocó ayer una nueva sacudida a los mercados mundiales, con los inversores tratando de ponerse a cubierto ante el escenario de la llegada de un nuevo ciclo negativo de la economía.

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LONDON, June 17, 2022 (GLOBE NEWSWIRE) -- Global Ship Lease, Inc. (NYSE: GSL) (the "Company") today announced that it has delivered a notice of redemption (the "Full Redemption") to the registered holders of its 8.00% Senior Notes due 2024 (the "2024 Notes") of $89,020,500 aggregate principal amount of 2024 Notes, representing the entire outstanding balance of 2024 Notes (the "Redeemed Notes"). Pursuant to the terms of the indenture governing the 2024 Notes, the Company has elected to effect the Full Redemption in advance of the maturity date, and the redemption price for the Redeemed Notes will be equal to 102% of the principal amount thereof (the "Redemption Price") plus accrued and unpaid interest to, but not including, the redemption date of July 18, 2022 (the "Redemption Date"). Interest on the Redeemed Notes will cease to accrue on and after the Redemption Date. All Redeemed Notes must be surrendered to the trustee to collect the Redemption Price plus accrued interest.

Upon completion of the Full Redemption, there will be no 2024 Notes outstanding and the 2024 Notes will cease trading on the New York Stock Exchange.
About Global Ship Lease
Global Ship Lease is a leading independent owner of containerships with a diversified fleet of mid-sized and smaller containerships. Incorporated in the Marshall Islands, Global Ship Lease commenced operations in December 2007 with a business of owning and chartering out containerships under fixed-rate charters to top tier container liner companies. It was listed on the New York Stock Exchange in August 2008.

As at May 17, 2022, Global Ship Lease owned 65 containerships, ranging from 1,118 to 11,040 TEU, with an aggregate capacity of 342,348 TEU. 32 ships are wide-beam Post-Panamax.

Adjusted to include all charters agreed, and ships contracted to be purchased, up to May 17, 2022, the average remaining term of the Company's charters as at March 31, 2022, to the mid-point of redelivery, including options under the Company's control and other than if a redelivery notice has been received, was 2.5 years on a TEU-weighted basis. Contracted revenue on the same basis was $1.76 billion. Contracted revenue was $2.00 billion, including options under charterers' control and with latest redelivery date, representing a weighted average remaining term of 3.1 years.
Safe Harbor Statement
This press release contains forward-looking statements. Forward-looking statements provide the Company's current expectations or forecasts of future events. Forward-looking statements include statements about the Company's expectations, beliefs, plans, objectives, intentions, assumptions and other statements that are not historical facts. Words or phrases such as "anticipate," "believe," "continue," "estimate," "expect," "intend," "may," "ongoing," "plan," "potential," "predict," "project," "will" or similar words or phrases, or the negatives of those words or phrases, may identify forward-looking statements, but the absence of these words does not necessarily mean that a statement is not forward-looking. These forward-looking statements are based on assumptions that may be incorrect, and the Company cannot assure you that the events or expectations included in these forward-looking statements will come to pass. Actual results could differ materially from those expressed or implied by the forward-looking statements as a result of various factors, including the factors described in "Risk Factors" in the Company's Annual Report on Form 20-F and the factors and risks the Company describes in subsequent reports filed from time to time with the U.S. Securities and Exchange Commission. Accordingly, you should not unduly rely on these forward-looking statements, which speak only as of the date of this press release. The Company undertakes no obligation to publicly revise any forward-looking statement to reflect circumstances or events after the date of this press release or to reflect the occurrence of unanticipated events.

Investor and Media Contact:

The IGB Group
Bryan Degnan
646-673-9701
or
Leon Berman
212-477-8438

Global Ship Lease Inc.

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Global Ship Lease Announces Full Redemption of its 8.00% Senior Notes Due 2024

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LONDON, June 17, 2022 (GLOBE NEWSWIRE) -- Global Ship Lease, Inc. (NYSE: GSL) (the "Company") today announced that it has delivered a notice of redemption (the "Full Redemption") to the registered holders of its 8.00% Senior Notes due 2024 (the "2024 Notes") of $89,020,500 aggregate principal amount of 2024 Notes, representing the entire outstanding balance of 2024 Notes (the "Redeemed Notes").

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8vFanI/iStock via Getty Images

If you're looking for a high yield investment that will benefit from rising interest rates, you should consider the business development company ("BDC") industry.

BDC's offer retail investors high yield exposure to private companies, and some of them, like Hercules Capital, Inc. (NYSE:HTGC) focus on companies which are already backed by venture capital firms. These other firms don't want to lose their investments, and will continue to support these companies. This has been crucial during the pandemic.

Profile:

HTGC focuses primarily on pre-IPO and M&A, innovative high-growth venture capital backed companies at their expansion (venture growth) and established stages in a broadly diversified variety of technology, life sciences, and sustainable and renewable technology industries.

HTGC site

HTGC holds a $2.41B portfolio, with a $2B-plus market cap, and $430M in liquidity.

HTGC site

Portfolio:

HTGC's debt investment portfolio has 94.7% in floating rate loans, with interest rate floors. Its debt investments have short-term amortizing maturities (36-48 months), and the majority of them also have warrants for potential additional total return.

Management estimates that a 100 basis point increase in the prime rate would add $.16/share to HTGC's EPS, while a 200 basis point increase would add $.35/share. The current prime rate is ~4.38%, vs. 3.25% a year ago.

HTGC site

92.2% of the portfolio is in debt investments, 6.2% in equity investments, and 1.5% in warrants:

HTGC site

There are 103 warrant holdings, showing an ~25% unrealized gain; and 76 equity holdings, showing an ~11.5% unrealized gain, as of 3/31/22.

Management's illustration of the potential warrant gains assumes that 50% will be duds, but, even so, the potential gains may run from $.47 to $1.06/share:

HTGC site

Drug Delivery, Software, and Internet Consumer & Business Services form 81% of the portfolio's industry exposure, much more concentrated than other BDC's we've covered:

HTGC site

Ratings:

A key factor in volatile times is the quarterly rating of a BDC's underlying holdings - i.e., the private companies that it lends to. BDC's management uses a 1 to 5 scale, with 1 being the healthiest grade and 5 being the lowest.

Highest grades 1 & 2 formed 73% of the portfolio, as of 3/31/22, vs. ~80% a year ago, with grade 3 rising from 19.5% to 26.4%. There were no investments rated Grade 5, the lowest tier, in Q1 '22.

HTGC site

Earnings:

While total Investment Income fell -5% in Q1 '22, NII rose 3.56% vs. Q1 '21, due to lower net operating expenses. NII/share was flat, at $.30, and NAV/share was down -4.75%, due to a portion of the distribution coming from previously undistributed assets.

HTGC had a lower weighted average cost of borrowings comprised of interest and fees, of 4.0% in Q1 '22, vs. 5.5% for Q1 '21, with interest expense dropping 21%. The decrease is primarily due to the refinancing completed in 2021 and early 2022 and higher utilization of the lower cost SBA loans.

Q1 '22 Realized gains were -2.38M, due to a non-recurring loss on debt extinguishment of $3.7M.

2021 total investment income fell -2%, with NII falling -4.5%, and NAV/Share ~flat. Interest expense fell -8.7% in 2021:

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This chart from management shows HTGC having a history of out-sized returns vs. its BDC peers over the past several years:

HTGC site

New Business:

HTGC has had 3 companies complete their IPOs so far in 2022, and 5 companies that have registered for their IPOs or have entered into agreements to go public via merger or SPAC transactions.

HTGC had record total gross new debt and equity commitments totaling $615.2M and gross new funding totaling $351.6M in Q1 '22. This record Q1 originations activity was driven by HTGC's technology and life sciences teams. HTGC funded capital to 26 different companies in Q1, of which 10 were new borrowers.

Realized early loan repayments were $84.9M, which, along with normal scheduled amortization of $11.3M, resulted in total debt repayments of $96M, which was well below guidance of $150 to $250M, and down vs. $426M in Q4 2021. Although this hampered NII somewhat, it led to a record net debt investment portfolio increase of $190.7M.

HTGC site

Dividends:

HTGC has a history of paying supplemental distributions, in addition to its base payouts. It has paid $.36 in these extra distributions over the past quarter, with the Q2 amount being $.15.

HTGC's regular dividends yield 9.82%, while its supplemental dividends yield an additional 4.46%, for a total yield of 14.28%. It should go ex-dividend next on ~8/10/22. Management usually declares the August distribution in late July, so it'll be awhile before we know if they'll pay another supplemental payout.

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Coverage for the regular Dividend of $.33 was below 1X in Q1 '22, at .91X, but has averaged 1X in the trailing 4 quarters. The $.03 shortfall, and the $.15/share supplemental payout were covered by UNII. HTGC had undistributed earnings spillover of over $171 million or $1.39/share, as of 3/31/22.

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Profitability & Leverage:

ROA and ROA were relatively stable, but a bit below BDC averages, while Debt/NAV of .99X is slightly lower than average. HTGC's EBIT margin of 75.78% was much higher than average for its industry.

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HTGC's EBIT/Interest coverage of 4.09X is among the higher ratios that we've seen in the BDC industry, while its Asset/Debt ratio is in line.

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Debt & Liquidity:

Management uses a diverse array of debt sources for HTGC's capitalization - ~50% in Equity, 37% in Institutional Notes, 6.5% in SBA loans, and ~5% in credit facilities. Its debt is rated Baa3 by Moody's.

HTGC site

Its debt looks well-laddered into the future, with its 1st maturity of $105M in Notes, coming due in 2024:

HTGC site

HTGC had $430M in liquidity, as of 3/31/22.

Performance:

It's a mixed bag for performance - HTGC has outperformed the BDC industry and the market over the past month but has trailed them over the past quarter and year. It has outperformed the market so far in 2022, but has trailed its industry, most likely due to its higher concentration in Tech - the Tech sector is down ~30% in 2022.

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Valuations:

At its 6/29/22 $13.44 closing price, HTGC was trading at a 24.2% premium to its Q1 NAV/Share of $10.82, vs. the BDC industry average of -3%. However, since NAV is affected by dividends, and doesn't always tell the whole story, Price/NII must also be researched.

HTGC is actually selling at a much lower P/NII of 10.42X, vs. the 13.17X BDC industry average. Its supplemental dividends also give it a higher dividend yield:

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HTGC has a history of selling at a premium to NAV over the past several years - its 2017 - 2021 average premium to NAV is ~1.30X, ranging from 1.11 to 1.47X.

HTGC site

Analysts' Price Targets:

At its 6/29/22 closing price of $13.44, HTGC was 18.5% below analysts' lowest price target of $16.50, and 27% below the $18.44 average price target.

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Parting Thoughts:

We consider HTGC a long-term BUY - it's ~6% above its 52-week low, and, of course, could go lower from here, but its relative P/NII undervaluation, and its UNII cushion for its dividends give us confidence in its long-term prospects as a worthy high yield investment vehicle.

If you're interested in other high yield vehicles, we cover them every weekend in our articles. All tables furnished by Hidden Dividend Stocks Plus, unless otherwise noted.

Our Marketplace service, Hidden Dividend Stocks Plus, focuses on diverse, undercovered, undervalued income vehicles, and special high yield situations.

There's currently a 20% discount, and a 2-Week Free Trial on offer.

We publish exclusive articles each week with investing ideas for the HDS+ site that you won't see anywhere else.

We offer a range of income vehicles, many of which are selling below their buyout and redemption values. Find out how our portfolio continues to beat the market by a wide margin in 2022.

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Hercules Capital Stock: Benefits From Rising Rates (NYSE:HTGC)

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Hercules Capital is below Wall Street’s average price target, and is selling at much lower earnings multiple. Why do we consider HTGC stock a long-term BUY? Find out.

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SPECIAL EDITION - Picks of the Month for Passive Income PT2: U.S. Market | Ep.28 July 2022

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ipuwadol/iStock via Getty Images

Introduction

The major problem I had in the past was having a simple method to determine daily price changes to yearly historic price. I'm not the type of person to sit at a computer watching daily price changes all day. I have better things to do with my time. The problem I had was never being sure which stock is oversold or overbought in my portfolio of stocks.

I can research past financial results and pick good stocks. The final results always come down to the price I pay for the investment. I have recently solved this conundrum with software to automatically determine the psychology of the market and stocks I currently own.

In this article I present June 16, 2022, market decline where most of my stocks went into oversold territory. I received Email alerts during that day and took advantage of multiple purchases. Since that day the market has recovered, including my holdings.

The trade signals are based on the RSI (momentum indicator) and price Z-score (standard deviation), see Appendix-A for more information. Both indicators are calculated from a year's worth of price data.

Market Perception

It's not easy to change the perception of price gains as being good, and price declines as being bad. The way I got around this perception is from the dividends hitting my account each month. We are programmed to expect price gains as the only method of success, but I'm here to tell everyone there is another way to evaluate market performance.

Receiving something from a purchase is how we shop for food, utilities, cars, homes, wants and needs. We know how to do this value hunting and the stock market is no different!

We need to stop thinking the stock market is some kind of magical entity only professional investors play in. Price declines are no more than getting more dividend shares at a lower cost. June 16th was a great day to increase my yearly dividends.

Current Holdings

BDC ( Business Development Company)

mREIT ( mortgage Real Estate Investment Trust)

CEF ( Closed-End Funds)

All companies listed above are RIC (Regulated Investment Company) stocks.

They are pass-through companies that avoid double taxation. The income tax is passed to shareholders as ordinary income most suitable in a tax shelter. When using these types of investments in IRA/ROTH accounts the portfolio will grow very fast over time.

Portfolio Alerts, June 16th

Figure-1

Figure-1 shows the chart display of my current portfolio with a yield of 11%. On June 16th there were 19 of 20 holdings indicating oversold status. The purple bars indicate both RSI and Z-score entered the buy zone. The one orange bar indicates the Z-score was triggered, but not the RSI.

Figure-2

Figure-2 is a new chart I can tell where any of my stocks reside in the over-sold and over-bought range.

I received many oversold alerts June 16th and took advantage of three ABR, BRMX and PMT. I also added ECC (very close to full buy alert). All four are under allocated in my portfolio, I went shopping for value.

Profitable Trade Email Alert

The transcript for PMT (PennyMac Mortgage Investment Trust) reaffirmed their dividend for the rest of the 2022 year, but the book value declined because of an accounting change this year. See the following quote from the latest transcript.

Our forecast for PMT's taxable income and liquidity continues to support the common dividend at its current level of $0.47 per share through the remainder of 2022.

...book value decreased at $17.87 from $19.05 at the end of the prior quarter. The decline in book value per share is outsized relative to PMT's performance this quarter as a recent accounting change beginning in 2022 required us to reclassify the portion of PMT senior notes that are exchangeable for PMT common shares...

The PMT stock moved decisively into the Over-Sold zone with an RSI of 16 well below my 30-limit. I received an E-mail indicating this event during the day, see Figure-3 below for the actual Email I received.

Figure-3

Figure-3 shows the Email I received at 12:49 PM mountain time to purchase PMT. Notice in the Email the RSI was below 30 four days in a row. I purchased shares at $11.99 that day.

The price Z-score is negative 3 standard deviations below its mean. This is an extreme measurement along with the RSI at 16 well below the 30-trigger level.

I don't guess at price but instead wait until I see massive selling. This type of action always happens, the criterion for this method requires patience and time to take advantage. We will see more market declines the remainder of the year.

In the portfolio listing below, notice how high the stock yields are. Look at ABR with a price standard deviation of -5.4 and RSI at 15. This was a time to pick up some shares.

Figure-4

Figure-4 is my actual portfolio sent 10 minutes before the market closed, June 16th. PMT is down over 8%, second column, price of $11.90 third column, Yield of 15.8% forth column, price Z-score -3.3 fifth column, RSI of 16 in the sixth column.

The last column with the "Buy-S" indicates a strong-buy because both the RSI and Z-score have exceeded their trigger levels.

During that day I was not home watching price for PMT, but instead was notified by Email of this event while running errands. I'll continue to use this method to add income shares for the rest of the year.

Figure-5

The yellow cells were the stocks purchased June 16, 2022 and added to my portfolio. The table above illustrates the importance in purchasing stocks based on technical analysis when investors are racing to the exit. Just the RSI and price Z-score is all I need to indicate possible good entry points. In just 8 days you can see the price gains in 19 out of 20 stocks.

Conclusion

The S&P 500 declined 3.2% Thursday June 16, 2022, and PMT declined 8%, because investors were raising cash. As a matter of fact, my purchase price was $11.99 June 16th and on Thursday June 30th the price was $13.83, a 15% gain in 8 trading days. Using indicators to buy stock provides a margin of safety that will improve total return along with dividend income.

It must be noted this year will be challenging with high inflation taking a bite out of many stocks and the stocks in my portfolio will move lower. I'll be ready to add more shares when this happens. Good luck to income investors.

Joe HYCF.

Appendix - A, POT Indicators Explained

I have outlined the following Buy-Signals used by the TEA/POT software I currently use to enhance my trading experience.
RSI (Relative Strength Index)
The RSI number goes from 0 to 100 indicating oversold and overbought conditions. Every price quote taken during the day re-calculates the RSI level and notifies the investor of any meaningful change.

A good definition is from Investopedia: "The relative strength index (RSI) is a momentum indicator used in technical analysis that measures the magnitude of recent price changes to evaluate overbought or oversold conditions in the price of a stock or other asset. The RSI is displayed as an oscillator (a line graph that moves between two extremes) and can have a reading from 0 to 100."

Oversold and Overbought trigger points are user selectable in the POT application and initiate an email notification.

An RSI of less than or equal to 30 is suggested as oversold. This provides a quick evaluation of a possible purchase.

An RSI over 70 indicates the stock may be overbought and a possible trimming is in order.
Z-score, Price Standard Deviation
The diagram in Figure-1 demonstrates a normal distribution of data values. They can represent any dataset sorted from minimum to maximum. For the Z-score calculation I use one year's worth of price data.

The percentage in Figure-1 is a range, based on the dataset of prices for each individual stock. To interpret a normal distribution in Figure-1 the stock's price will remain in the blue shaded area 68.2% of the time within +-1 standard deviation. Visually you can see that when the Z-score becomes more negative, the price is entering an oversold condition.

Figure-1; bell curve

It must be noted the data representing price is not an absolute normal distribution, because price is very volatile. We can still use price representing a normal distribution that allows comparative results with other stocks. A single daily stock quote gives a good indication where price fits on the bell curve range.

When looking at the bell curve Figure-1 diagram, the center value is the price mean. The calculated Z-score can vary above and below the mean to tell us how far away from the mean price has moved when receiving a quote. For my trigger point I use "-1" to signal an alert telling me the price has deviated from the mean. The larger the negative value, the greater the chances for a possible purchase after examining the rest of the technical parameters.
50 SMA and 200 SMA (Simple Moving Average)
An explanation is outlined by Investopedia, using Moving averages to detect directional changes:

"Another strategy is to apply two moving averages to a chart: one longer and one shorter. When the shorter-term MA crosses above the longer-term MA, it's a buy signal, as it indicates that the trend is shifting up. This is known as a " golden cross." Right arrow in the chart.

"Meanwhile, when the shorter-term MA crosses below the longer-term MA, it's a sell signal, as it indicates that the trend is shifting down. This is known as a " dead/death cross." Left arrow in the chart.

Left arrow indicates the 50-day SMA just went below the 200-day SMA, (death cross). Right arrow indicates the 50-day SMA went above the 200-day SMA (golden cross).

Both signals indicate a change in direction.

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Chasing 15% High Yield Is Great In A Bear Market, My Portfolio Update

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The major problem I had in the past was having a simple method to determine daily price changes to yearly historic price. I'm not the type of person to sit at a computer watching daily price changes all day. I have better things to do with my time.

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Hill Street Studios/DigitalVision via Getty Images

Co-produced with Treading Softly
Few things in life last forever.

Every car has an expected expiration date. Blue jeans only last so long before they fall apart. We can often be heard saying that "they just don't make things like they used to" and I would agree. Many items are more effective at completing the task required but lack the strength to complete the task nearly as long as the tools we used to use.

With tighter clearances, lighter materials, and the focus on mass production vs. hand-fitting components, longevity is hard to find.

So when it comes to the market, it is no surprise to see the average holding period of an investor has declined as well.

As this image shows, the average holding time of investors has fallen below a year. Yup, most of us don't hold on to an investment for 365 days. This is a massive contrast to when investors held for nearly a decade.

So when I say that we aim for at least 2-3 years for our investments, we're tripling the holding time compared to many. No wonder commenters think one week later is a good time to evaluate results! However, that is not our method or focus, we are long-term investors.

It is an even rarer occurrence when I can say I have some investments in my portfolio which will outlast me. They will be fought over by my heirs and hopefully their heirs as high-quality income investments.

These can be owned, held, passed down, and continue to provide an excellent level of high-quality income "forever".

Let's dive in.

Pick #1: RLJ-A - Yield 7.5%

Investors often try to divine the "whys". Like staring at a Rorschach test, investors will stare at price movements and see various different shapes. Ask a dozen gurus, you'll get a dozen different answers. Should you buy? Should you sell? Will the market fall more? Will there be a reversal?

On any given day, I can find very well-respected investors with very respectable track records that are on different sides of these questions. Which one should you believe?

Well, if your plan is to sell next month, I recommend consulting a Magic 8-Ball. The market will go up, or it will go down, it will probably bounce around. It will reverse, reverse again, dive off a cliff, climb a mountain, do a few loops, and through all of this ultimately end up higher.

Some might call me a "perma-bull". I invest in the market because, at its core, it represents the economic production of the world. Economic production trends up in the long run. That's why we aren't all still living in caves and hunting for a living. Are people going to be wealthier next year? That's a difficult and complex question. Are people going to be wealthier 20 years from now? The answer is an absolute yes with very little doubt. If I didn't believe that, I wouldn't put my hard-earned funds in the market.

Now I've lived through a lot of recessions, and even a few depressing ones. Well, I wasn't depressed, but I saw many around me who were as their portfolios were down 20, 40, 60%+. What keeps my spirits up? My income.

At all times, I have core holdings that I know I can absolutely count on to maintain their dividend through thick or thin. Among those, I count RLJ Lodging Trust, $1.95 Series A Cumulative Convertible Preferred Shares ( RLJ.PA) - paying $1.95/year in income rain or shine. RLJ is a hotel REIT.

If I were to construct an apocalyptic scenario for hotels, it might look a lot like a global virus that led to entire sectors of the economy being shut down. Travel would be severely restricted, international border crossings would decline to near zero as people were told to shelter in place and to go nowhere they absolutely didn't need to go.

Crazy Sci-fi movie stuff right? Certainly, if I had predicted that in 2019, folks would have called me a nut, but would have agreed that was about a worst-case scenario as could be imagined for RLJ.

Well, it happened. What happened to RLJ-A in 2020? $1.95 per share, deposited into my portfolio in quarterly installments, and not one dividend was even a single day late.

RLJ inherited RLJ-A through the acquisition of a weaker peer, Felcor, that was negatively impacted by the Great Financial Crisis. Felcor survived, but was forced to do some reverse splits. When RLJ bought out the company, it inherited RLJ-A, which is a convertible preferred with no call option. RLJ can't call it, and conversion into common shares can't be forced unless RLJ common is trading above $115.82/share. Unlikely to happen, but if it does, we probably won't mind owning RLJ common anyway because something is going really right!

The bottom line is that RLJ has no way to get rid of RLJ-A, other than trying to buy it in the public markets. It is one of those rare preferred that you can buy and hold forever.

When it comes to hotel REITs, RLJ is the cream of the crop. What matters most for the preferred shares, is their very strong balance sheet and conservative debt profile. ( Source: NAREIT Presentation)

RLJ has $480 million in cash on hand, and no debt maturities larger than that until 2024. Including its undrawn line of credit, RLJ has $1.1 billion in liquidity.

Along with this strong balance sheet, RLJ's operations are recovering, aided by an ADR (average daily rate) 15% higher than it was in 2019.

Occupancy is still slightly lower at 98% of 2019 levels but is stabilizing. Overall, RLJ expects EBITDA will be higher in 2022 than it was in 2019.

When we invest in fixed-income, what we are really looking for is the security of knowing that our dividend will come in no matter what. COVID put hotels to the harshest test imaginable, and RLJ-A didn't miss a beat. It's hard to imagine an even worse scenario, but even if the world conjures up something we can't imagine right now, RLJ-A is backed by a high-quality portfolio, high-quality management, and a strong balance sheet.

For these reasons, when RLJ-A starts trading near $25, I snag a few more shares. Someday, a recession will come, and when it does, I'm confident RLJ-A will be paying me $1.95/share every year.

Pick #2: CEQP-, Yield 9.2%

Crestwood Equity Partners LP, 9.25% Preferred Partnership Units ( CEQP.PR) is one of my favorite preferred shares on the market. Why?

CEQP- is a preferred investment that was developed by institutional investors when the market for natural gas was really tough. As a result of these tough negotiations, CEQP- has numerous protections that are not typically seen in preferred shares available to retail investors. These include:

No call provision: CEQP- is convertible but the company cannot force conversion until the common shares close above $136.91 for 20 out of 30 consecutive days. CEQP- is a "busted" convertible due to a reverse split.

Voting rights: Preferred shareholders often do not get to vote on most issues. CEQP- preferred shareholders get to vote on everything the common shareholders do. What is especially crucial is that preferred investors get to vote as a separate class on changes of control. This ensures that if CEQP is ever acquired, it will be at favorable terms for the preferred.

Missed distribution penalties: Many preferred are "cumulative" in that if a distribution is not paid, it accumulates and has to be paid in full in the future before the common units can receive distributions. CEQP- goes a step further and implements a penalty. If a single distribution is missed, the distribution immediately increases 22% to $0.2567/quarter. Plus, any accrued and unpaid distributions will be increased 2.8125% each quarter. These penalties ensure that management has a very strong incentive not to miss a distribution.

What does this mean in practical terms? It means that we can buy and hold CEQP- indefinitely, as the company cannot call it. The only option Crestwood ( CEQP) has is to buy the shares in the open market. Too bad for CEQP, I'm not selling.

It also means that preferred shareholders can't be unexpectedly ambushed with a sale of the company. If CEQP decides to sell the company, preferred shareholders get to vote after seeing what compensation they will receive, this is a rare benefit.

Finally, CEQP has a lot of incentive to stay current on the distribution. A distribution cannot be made to the common units unless the preferred payments are made in full. If CEQP suspends the preferred for even a single month, that obligation increases and starts accruing a penalty. For an MLP, paying a common distribution is quite important. So we don't believe that CEQP would ever suspend the distribution lightly, but if we ever are inconvenienced and a payment is missed, it is nice to know we'll be well compensated for the inconvenience.

Of course, this is all just theoretical, CEQP is firing on all cylinders right now. CEQP has a well-diversified portfolio of assets providing storage and logistics for their customers. ( Source: Investor Presentation)

CEQP also has a solid base of fixed-fee contracts, ensuring stability even when events like COVID happen.

U.S. gas, NGLs, and oil are all taking a prominent role in the global energy shortage. U.S. production will continue to increase as demand is robust locally and abroad.

One crucial difference is that companies are being a lot more careful with their expansion today than they were during the shale boom. Energy investors remember the shale boom, and the following bust when commodity prices collapsed.

Today, we are seeing commodity prices as high as they were during the shale boom from 2011 to 2014. We are not yet seeing the kind of reckless expansion we saw back then. This means that prices are likely to remain elevated for an extended period. The world needs more oil, gas, and NGLs, but nobody is in a hurry to kick production into high gear. Instead of hot burning growth, we're seeing a more methodical expansion, which will benefit CEQP for a long time because it will be far more sustainable.

CEQP has been expanding through several acquisitions over the past year. This has been beneficial for common unit investors, and with the expansion that CEQP is likely to enjoy in the coming year, we can't blame anyone who wants to invest in the common.

With a yield of 9.2%, fantastic investor protections, and an option that can be held forever, we prefer to be first in line with the preferred. Buy it, store it away, and collect the income "forever".
Note: Each broker has its own ticker symbol for the Crestwood preferred. Crestwood issues a K-1 tax form which can create UBTI tax consequences if CEQP- is owned in a retirement account. More details here.

Conclusion

The unique nature of RLJ-A and CEQP- combined with the quality of their underlying companies provides a stable means to have excellent long-term income.

It's also the type of holding that retirees can pass on down the line to their loved ones, or not have to worry about their significant other having to buy or sell after they've gone on before them. These are excellent antithetical holdings to the market norm. When buying them, plan to hold for the long term, not under a year. As bulls run and bear roar, you'll enjoy the reliable and steady income from these two forever-type investments.

That's my kind of income investment, and I think it's the type a great number of us will enjoy for decades to come.

If you want full access to our Model Portfolio and our current Top Picks, feel free to join us at High Dividend Opportunities.

We are the largest income investor and retiree community on Seeking Alpha with over 6000 members actively working together to make amazing retirements happen. With over 40 individual picks yielding +8%, you can supercharge your retirement portfolio right away.

We are currently holding a limited-time sale with 25% off your first year!

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Co-produced with Treading Softly Few things in life last forever. Every car has an expected expiration date. Blue jeans only last so long before they fall apart. We can often be heard saying that "they just don't make things like they used to" and I would agree.

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narvikk/E+ via Getty Images

Investment Thesis

As the relatively new kid on the block, ZIM Integrated Shipping Services Ltd. () has proven to be a force to be reckoned with, given its stellar execution and excellent dividend yields. Therefore, we are not surprised by the stock price appreciation of 232.16% since its IPO. Given its more-than-healthy order book and elevated long-term contract rates, ZIM would report an excellent FY2022 indeed. In addition, we may expect to see an upwards rerating moving forward, once the Ukraine and Chinese ports reopen sometime in FY2023.

Nonetheless, given the bearish market condition and weakening stock price action in the past few months, we may expect to see a further retracement for ZIM, as its fundamentals are decoupled from its valuations. Such an event has already been observed post ( excellent ) FQ1'22 earnings call when the stock fell 5% on 18 May 2022 and then remain sideways, prior to the market-wide correction in March 2022.

ZIM Is Growing To Be A Force To Be Reckoned With

It is evident that ZIM has done exceptionally well in the past few quarters, given the impressive increase in its top and bottom lines. The company reported revenues of $12.7B and gross margins of 67.4% in the last twelve months (LTM), representing a tremendous increase of 384.8% and 52.6 percentage points from FY2019 levels. In addition, ZIM also recorded an excellent net income of $5.76B and net income margins of 45.4% in the LTM, representing massive growth from net incomes of -$0.02B and net income margin of -0.6% in FY20109 levels.

These have directly contributed to ZIM's robust generation in Free Cash Flow (FCF) of $5.8B with FCF margins of 45.7% in the LTM, representing an exceptional increase of 1657.1% and 35 percentage points from FY2019 levels. As a result, it is evident that the company's war chest of cash and equivalents has also grown to an outstanding sum of $2.73B in the LTM, representing tremendous growth of 1516.6% from FY2019 levels.

It is also evident that ZIM had taken up more total debt in the LTM at $4.31B, with an interest expense of $0.17B in the LTM and $45.3M by FQ1'22. The company also decided to expand its net PPE assets to $5.44B and increase its capital expenditure to $1.05B in the LTM, representing an increase of 449.5% and 5250% from FY2019 levels. Nonetheless, we expect these to be top and bottom line accretive eventually, thus, not an issue for now.

These have also directly contributed to ZIM's increased operating expenses of $1.2B in the LTM, though we are not overly concerned, since it constitutes only 9.46% of its revenue and 20.6% of its FCF then.

ZIM is expected to report an apparent deceleration of revenue and net income growth over the next three years. Nonetheless, investors need not fret since it still represents a massive revenue growth at a CAGR of 20.28% from FY2020 to FY2024.

For FY2022, consensus estimates that ZIM will report revenues of $13.56B, representing an excellent increase of 26.4% YoY and 339.8% from FY2020 levels. In addition, the company is expected to report excellent net incomes of $5.22B and net income margins of 38.4% in FY2022, representing a tremendous increase of 1023.5% and 25.4 percentage points from FY2020 levels. Analysts will be closely watching its FQ2'22 performance with consensus revenue estimates of $3.86B and EPS of $13.98. We shall see.

ZIM's Guidance For FY2022

However, we do not expect to see much impact from the perceived " slowdown in freight traffic" as stated by J.P. Morgan analysts, since ZIM was able to secure 5% more long-term contracts at $3.84K/TEU in FQ1'22, reflecting a doubled rate YoY, thereby improving its future sales. In addition, with a growing order book and operating capacity through 2024, it is evident that the company is relatively insulated from the 1.8% contraction of market-wide demand in FQ1'22. As a result, we may potentially see an upwards rerating to ZIM's order book and consequently, contract rates, upon the ceasing of China's Zero COVID Policy and the Ukraine war.

ZIM Could Be A Strong Dividend Stock In The Future
ZIM 1Y Share Price (adj) and Dividend Yield
Despite its recent IPO in January 2021, ZIM had started its dividend payouts very early on by H2'21, with an outstanding dividend of $22.35 and a yield of 51.44% in the LTM. Compared with its peers, such as Star Bulk Carriers Corp. ( SBLK) at a dividend payout of $5.6 and yield of 22.52%, Golden Ocean Group Limited ( GOGL) at $2.45 and 23.89%, and old-timers such as A.P. Moller - Maersk ( OTCPK:AMKBY) at $351.37 ( estimated ) and 10.7%, it is evident that ZIM has delivered well for this segment.

However, we do not expect a replay of ZIM's massive dividends in March 2022, given the projected moderation in its revenue and net income, therefore, reduced FCF. Nonetheless, we still expect the company to retain its steady dividends payouts, though at a lower yield moving forward. Speculatively, we may also see ZIM commence its share buyback programs in the far future, assuming a robust FCF profitability.

So, Is ZIM Stock A Buy, Sell, or Hold?
ZIM 1Y EV/Revenue and P/E Valuations
ZIM is currently trading at an EV/NTM Revenue of 0.41x and NTM P/E of 1.30x, lower than its 1Y mean of 0.72x and 2.24x, respectively. The stock is also trading at $47.10, down 48.3% from its 52 weeks high of $91.23, though at a premium of 39.7% from its 52 weeks low of $33.71. Nonetheless, despite the recent correction and bearish market sentiment, it is apparent that ZIM has also performed well since its IPO, with a price appreciation of 232.16% and a 1Y price total return of 49.1%.
ZIM 1Y Stock Price
Nonetheless, despite the attractive buy rating from the consensus estimates with a price target of $77.43, we do not advise adding now, since there is a moderate possibility of stock retracement in the short term. In fact, ZIM as with other shipping stocks, has been on a downwards spiral since March 2022 and already lost half of its pandemic gains as well.

As a result, we encourage investors to wait for a more attractive entry point before adding more exposure, given the recent concerns on the Baltic Exchange's main sea freight index. Nonetheless, speculative investors with a higher tolerance for volatility may choose to nibble here, since the current stock price offers a 64.39% upside, made even sweeter by its high dividend yield.

Therefore, we rate ZIM stock as a Hold for now.

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ZIM Integrated: Charting New Territories For Growth, Do Not Add

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As the relatively new kid on the block, ZIM Integrated Shipping Services Ltd. () has proven to be a force to be reckoned with, given its stellar execution and excellent dividend yields. Therefore, we are not surprised by the stock price appreciation of 232.16% since its IPO.

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AlbertPego/iStock via Getty Images

Introduction

Following a difficult and largely lackluster decade for the shareholders of Star Bulk Carriers Corp. (NASDAQ:SBLK), the booming operating conditions of 2021 saw massive dividends that if continued would see a yield of 25.42%. Despite these immense rewards, sadly they came at the expense of deleveraging and thus risk leaving a severe future headache, as my previous article highlighted. Since half a year has subsequently elapsed, it now seems timely to provide a follow-up analysis that reviews how they stand to fare in this different macroeconomic outlook, which disappointingly sees them unprepared for higher interest rates.

Executive Summary & Ratings

Since many readers are likely short on time, the table below provides a very brief executive summary and ratings for the primary criteria that were assessed. This Google Document provides a list of all my equivalent ratings as well as more information regarding my rating system. The following section provides a detailed analysis for those readers who are wishing to dig deeper into their situation.

Author

*Instead of simply assessing dividend coverage through earnings per share cash flow, I prefer to utilize free cash flow since it provides the toughest criteria and also best captures the true impact upon their financial position.

Detailed Analysis

Author

After seeing a very strong cash flow performance during the first nine months of 2021, this continued throughout the fourth quarter and then into the first quarter of 2022, with operating cash flow of $292.4m and $229.2m respectively. Thanks to their variable dividend policy, as outlined within my previously linked article, their dividends surged even higher with payments of $204.8m during the first quarter of 2022 almost equaling their total payments of $230.2m for the entirety of 2021. Despite being very impressive, when looking ahead, risks are sitting on the horizon, with talk of a recession at the same time as higher interest rates.

Whilst shareholders are lining their pockets right now, it should be remembered that the broader shipping industry is notoriously volatile. The past twelve months have been wonderful, although this did not result from a permanent change within their industry but rather fiscal stimulus and supply chain upheaval following the Covid-19 pandemic, and, more recently, the Russian invasion of Ukraine rerouting the trade of dry bulk commodities as Western sanctions clamp down upon the former.

Since no one can see the future, it obviously remains to be seen exactly how much a recession would impact demand for the seaborne trade of dry bulk commodities such as iron ore and coal, which comprise large portions of the market. Although it would almost certainly pose a significant headwind as demand for these commodities is normally tied with economic expansions. This makes it probable that a recession or, at minimum, an economic slowdown would see their booming operating conditions end, thereby sending their cash flow performance plunging and thus leaving higher interest rates burdensome, with the vast majority of their debt carrying variable interest rates, as per the quote included below.

"All of our bank loans bear interest at LIBOR plus a margin except for DSF $55.0 million Facility described above."

- Star Bulk Carriers 2021 20-F.

It can be seen that only a relatively insignificant $55m of their debt is not exposed to a variable interest rate based upon the LIBOR rate. After plunging during 2020 as the Covid-19 pandemic swept the globe, the LIBOR rate has surged higher during 2022 at the fastest pace in the last decade as central banks rush to tighten monetary policy, as the graph included below displays.

MarketWatch

Whilst the $10.4m of interest SBLK paid for the first quarter of 2022 was easily dwarfed by their operating cash flow of $229.2m, thereby only amounting to the equivalent of circa 4.50%, this could quickly change within the next twelve months. Given that inflation is sitting at the highest level since the 1980s and the Federal Reserve is expected to make multiple further 50bpts to 75bps interest rate hikes during the coming months, likely followed by other central banks, the LIBOR rate appears very likely to continue climbing higher and soon surpass its decade-long peak during 2019.

Even if a recession or economic slowdown only pushed their operating cash flow back to the $170.6m they saw during 2020, which was actually still a solid performance historically, this would still make these higher interest rates burdensome. Despite the rock-bottom LIBOR rates during 2020, they still paid $61.6m of interest, thereby sitting at the equivalent of circa 36% of their operating cash flow. Phrased another way, if not for their debt, their operating cash flow would have been roughly 36% higher during 2020. This is already undesirable, but given the outlook for interest rates to continue climbing to levels not seen in over a decade, possibly even longer, they will likely see an even larger burden placed upon their operating cash flow, which could consume 50% or more of what otherwise would have been their result.

Apart from further hindering their dividend prospects, this also highlights the first of the two ways they are unprepared for higher interest rates outside of these booming operating conditions due to their lack of deleveraging.

Author

When moving to their capital structure, it shows that their net debt currently sits at $1.066b. This is down 13.39% versus its previous level of $1.231b when conducting the previous analysis following the third quarter of 2021. It was expected to see their net debt remain unchanged when conducting the previous analysis, but they instead elected to actually repay more of their periodic maturities with cash rather than issuing new debt, unlike throughout the first nine months of 2021 preceding my previous analysis. Even though this modestly lower net debt helps, realistically, it does not go nearly far enough. As also subsequently discussed, it should cease during the remainder of 2022 and the first half of 2023.

Author

It was not a surprise to see their modestly lower net debt translate into modestly lower leverage on the back of their continued very strong financial performance, which now sees their net debt-to-EBITDA and net debt-to-operating cash flow sitting at 1.19 and 1.24, respectively. Despite representing an improvement versus their previous respective results of 1.71 and 1.96 when conducting the previous analysis following the third quarter of 2021, the change is only minimal because they still remain within the low territory of between 1.01 and 2.00.

Whilst low leverage does not sound problematic, especially given their interest coverage of 17.55 during the first quarter of 2022, this ignores that their leverage is being suppressed by their booming operating conditions and the resulting very strong financial performance. If utilizing their cash flow performance from 2020, which as a reminder was still historically solid, their net debt-to-operating cash flow on their current net debt would surge back to circa 6.25. This once again would see their leverage sitting well above the threshold for the very high territory of 5.01, as was the case before these booming operating conditions, and thus displays the downside of their massive dividends that came at the expense of deleveraging.

Their ability to service their debt would also plunge to distressed levels even if they only saw this same modest downturn back towards their 2020 levels. Despite the rock-bottom interest rates during 2020, they only saw an interest coverage of 1.36, and given the previously discussed outlook for higher interest rates, this would very likely drop well below 1.00, thereby leaving their financial position overburdened and thus highlighting the second of the two ways they are unprepared for higher interest rates.

Author

When looking elsewhere, their already strong liquidity further improved slightly with their respective current and cash ratios increasing to 2.13 and 1.36 versus their previous respective results of 1.81 and 1.20 when conducting the previous analysis following the third quarter of 2021. Despite being positive, this does not help ease the pressure from higher interest rates, and depending upon the severity, length and timing of a potential future downturn, it could also be drained as their operating cash flow plunges.

When looking at their debt maturities, they face nothing until 2023, as the tables included below display. In fact, even during 2023, they are not facing any debt maturities until the third quarter, as per slide six of their first quarter of 2022 results presentation. Whilst this supports their liquidity for the next twelve months, it also means that they are unlikely to deleverage any further, as mentioned earlier, and thus leaves them unprepared for higher interest rates at the same time as a downturn.

Star Bulk Carriers 2021 20-F

Conclusion

Concerns over interest rates may seem trivial at the moment given the vast free cash flow that they are generating, although it should be remembered that these booming operating conditions cannot last forever, especially with talk of a recession on the horizon. Due to their lack of deleveraging in favor of massive dividends, they are unprepared for higher interest rates that, combined with even only a modest downturn, leave their ability to service their debt at distressed levels. Despite their otherwise very desirable massive 20%+ dividend yield, this leaves me to believe that maintaining my hold rating is appropriate, with the potential to downgrade to a sell rating in the future.

Notes: Unless specified otherwise, all figures in this article were taken from Star Bulk Carriers' SEC filings, all calculated figures were performed by the author.

This article was written by

My analysis primarily focuses on income investments with a preference for those sporting high and very high yields.  Whilst this space often contains value traps, it also contains very desirable deep value opportunities that have the potential to generate significant alpha for investors, which I aim to highlight through careful fundamental analysis.  Apart from my extensive personal investment experience that spans over a decade, I have also obtained a Bachelor degree majoring in Finance, minoring in Accounting with Honours IIA.

Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Star Bulk Carriers: Unprepared For Higher Interest Rates (NASDAQ:SBLK)

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Following a difficult and largely lackluster decade for the shareholders of Star Bulk Carriers Corp. (NASDAQ: SBLK), the booming operating conditions of 2021 saw massive dividends that if continued would see a yield of 25.42%. Despite these immense rewards, sadly they came at the expense of deleveraging and thus risk leaving a severe future headache, as my previous article highlighted.

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MXW Stock/iStock via Getty Images

Investment thesis

As it was time for me to update my followers on the development at Rio Tinto (), I have been compiling research and started the work. Then, along comes an excellent article written by fellow author John Kingham, asking the pertinent question " Should You Buy Rio Tinto For Its 17% Dividend Yield?

His article, which I highly recommend you to read, gives the reader a thorough review of Rio's position and business.

Since November of last year when my last article on RIO appeared, we know that it is a different world we live in and it is, therefore, worth reconsidering my stance on RIO.

Fundamentals - and why it matters so much

In my previous article, I even chose to title it: " Envious Financials And Excellent Profitability".

This is an understatement as RIO has no debt, and in fact, held cash of USD 1.58 billion in their accounts at the end of last year.

There are lots of dark clouds on the horizon, and group thinking is doing well with all talking heads in the media proclaiming that we are going into a recession.

Usually, when they say this, we are already in one. Nevertheless, we are rightfully reminded by wise large investors that during such markets we need to make sure our portfolio consists of quality companies that can withstand a storm or two.

I think RIO ticks all the boxes in that respect. They delivered a return on capital deployed of 44%. Few companies of this size can do that.

Last year's EPS was USD 13.21, and with a USD 63.18 share price, it gives us a very low P/E of just 4.78.

Instead of looking at earnings, we can look at the free cash flow of USD 17.7 billion. At the end of last year, they had 371.2 million shares outstanding. This means they had as much as USD 47.71 free cash flow per share. As such, one can say that the dividend is well covered.

Australian iron ore has a competitive advantage.

Not only is RIO's break-even for their iron ore from the Pilbara mine just USD 18.60 FOB Dampier port in Western Australia.

In addition, comes the much lower cost of getting it to China.

The market for shipping iron ore from Western Australia to China was USD 11.20 per ton as of 23 June 2022. Such a round-trip voyage starting in Shanghai going to Dampier and returning to Shanghai takes 27 days for a Capesize vessel, including loading and discharging the cargo.

For a ship owner or operator, to make the same earning on the same kind of vessel, he would need USD 31.40 per ton from Tubarao in Brazil. That round-trip voyage takes 74 days.

RIO is one of a consortium of miners developing the world's largest iron ore in Simandou in Guinea in West Africa. More on this later. It is equally far away and would require roughly the same kind of freight level.

Let us assume Rio now has a break-even cost delivered to China of USD 30 per ton. Bear in mind, if we do get a recession and the shipping market goes lower, we may say USD 25 per ton delivered to China.

There is an active paper market for forward delivery of iron ore to China and the present prices for forward delivery look as follows:

There is a huge margin of safety, which begs my question to Kingham how much margin do you require?

We make our decision based on a risk assessment that takes into account likelihood and severity. Personally, I believe the likelihood of a prolonged period of iron ore buying delivered to China at the USD 30 level is very low.

RIO will come out with their FH Financial Report on 27 July 2022, and as shareholders, we look forward to seeing their results.

Price matters

I probably repeat myself too often here on SA. But I think it is important, and these are statements that do not originate from my brain. It often comes from much more successful investors than myself. That is also why it is so important to learn from them.

Howard Marks basically tries to explain that we do not know where a share price is going tomorrow, next week, or even next year. There are simply too many unknown things that determine this. But we do need to figure out where we are in a cycle and if an asset is priced at an attractive valuation based on its fundamentals and what the margin of safety is should the future turn out different than how we have envisioned it to be.

I would like to go back to the article written by James Kingham where he questions whether you should buy Rio for its attractive dividend yield and his answer is mostly related to the margin of safety at Rio's current share price.

Their dividend for 2021 was an ordinary dividend of USD 7.93 and a special dividend of USD 2.47.

In my personal opinion, we should never buy a company purely based on its dividend yield. Never.

Some companies pay out dividends that are not sustainable. They should be avoided at all costs. Others may have shaky balance sheets or other problems. Rio is not one of them. With them, one should be prepared for a variable dividend. That is fine with me. I do not expect a consistent yield. If a market is down, we have to accept less. There are both good and bad days in all businesses.

I believe that the following development is what matters most to the future of Rio, but not necessarily in this order:

After you have read through an annual report of RIO, it does not take long to figure out that RIO is very much dependent on what is happening in China.

Here again, this fragility is something I have pointed out in my earlier articles on RIO. It will be difficult to replace such large sales to China with buyers from other countries, but they should still try to get a broader diversification of buyers. It would make them more anti-fragile.

The good news is that there is a new government in Australia that does have an agenda of resetting relationships, including theirs with China. Hopes of a less frosty relationship are there.

China, with slower growth, may not continue to consume as much iron ore as they have in the past, but this is not a certainty.

The world is going to see a big energy transformation. It will require electrification which requires vast amounts of metals such as copper, zinc, lithium, and cobalt.

To build one wind turbine (inland), the Belgian steel maker Arcelor Mittal estimates that around 225 to 285 tons of steel are required. Steel is also needed in other parts of this energy transformation. The masts for wind turbines at sea or inland are in fact almost identical. The main difference, however, is that the turbines at sea need a base that anchors the mast to the bottom of the sea. This requires even more steel.

One example is the shipbuilding industry. With new and cleaner propulsion on the cards, shipyards will remain busy for a long time.

Renewable energy is starting to gain traction. Especially in periods of expensive oil and gas, such as what we are experiencing now. More solar power and wind turbines will be installed.

RIO's many projects under development

I revisit the projects which I described in an earlier article with an update on the status.

Iron ore mine in Simandou, Guinea, West Africa

This is a mega project and holds the world's largest reserves of high-quality iron ore.

But it is located in a part of the world that does have a rather unstable environment, with governments being toppled, high corruption levels, and many other challenges.

RIO obtained their license for one of several blocks of land back in 1997. That is now 25 years ago. Other blocks are owned by mainland Chinese interests.

They are still committed to this project. However, it is still unknown when the ore can start to be loaded onto ships for export.

RIO had proposed in March to buy out the 49% of Turquoise Hill ( TRQ) for approximately USD 2.7 billion, but the offer has received some opposition.

In the meantime, there has been an ongoing battle about funding the project. The latest is that RIO has agreed to provide TRQ with as much as USD 400 million in interim debt to finance the ongoing development and has also extended the date by which TRQ is required to raise additional equity capital to year-end 2022.

Resolution Copper Mine project in Arizona

On 24th June, the 9th U.S. Circuit Court of Appeals issued a decision that upheld a 2014 decision to give thousands of acres in Arizona to RIO for its Resolution Copper project, which sits on 40 billion pounds of copper reserves. Let us hope it can move from the courtroom to start digging. I am uncertain of when that can take place.

In early May this year, Rio's CEO Stausholm informed shareholders that there are still hopes that the Jadar lithium mine in Serbia might go ahead. This USD 2.4 billion mines could be very important for Serbia as their Chairman pointed out, as it could add 4% to the country's GDP and open up opportunities for Serbia to develop a downstream business to supply green technology to the European automotive market.

Nevertheless, as I also pointed out in earlier articles, many mining projects around the world face difficulties from either the authorities or other stakeholders.

Hence, all these, and geopolitical risks are some of the main risks to the thesis.

Conclusion

I am willing to accept the volatility in the commodity sector which may result in shifting earnings and dividends from RIO.

What matters most to me is the still enviable margin they have based on the low break-even price for iron ore and the super solid balance sheet. It makes me sleep well at night.

Even if we do get a recession, that too shall pass. They are also very often followed by government stimulus packages that will require more commodities such as steel, copper, and alumina.

Rio is certainly not expensive now, and my Buy stance remains.

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Rio Tinto Stock: Take Comfort In Margin Of Safety (NYSE:RIO)

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As it was time for me to update my followers on the development at Rio Tinto (), I have been compiling research and started the work. Then, along comes an excellent article written by fellow author John Kingham, asking the pertinent question " Should You Buy Rio Tinto For Its 17% Dividend Yield?

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El futuro del coche eléctrico para largas distancias pasa sin duda por las muchas ventajas del hidrógeno, aunque a día de hoy sigue siendo una tecnología difícil de ver en la calle a pesar de que numerosos fabricantes ofrecen ya turismos movidos por hidrógeno. Los fabricantes señalan la falta de infraestructuras -tanto que a día de hoy apenas existen en España tres o cuatro puntos de suministro- y las energéticas que apenas hay coches de hidrógeno que rentabilice el caro desarrollo de estas hidrogeneras.

Es, por tanto, la pescadilla que se muerde la cola, un lento avance de este tipo de turismos que, ahora, y de la mano de Cabify, comienza un despegue que permitirá impulsar su implantación a través de flotas de empresas que permitan a las energéticas invertir en ofrecer servicios de repostaje de hidrógeno adaptado a necesidades más globales.

Así, Cabify y Toyota se han unido para presentar la primera flota de vehículos de alquiler con conductor (VTC) que utilizan el hidrógeno como fuente de energía en España. Toyota ha hecho entrega ya de cuatro Toyota Mirai de primera generación que integrarán la flota, que se ampliará con más unidades a finales de año, en principio hasta 14 coches, aunque se espera que los bajos costes de utilización del hidrógeno anime a ampliar aún más esta tecnología.

Y es que los elevados costes a los que han llegado la gasolina y el gasóleo y la propia electricidad para los coches eléctricos de batería sitúan ahora al hidrógenos como uno de los combustibles más económicos. Llenar el depósito del Toyota Mirai supone unos 50 euros para una autonomía en torno a los 600 kilómetros. Un coste muy por debajo de cualquier modelo similar con motor de combustión.

La apuesta de Cabify por los vehículos eléctricos de pila de combustible de Toyota alimentados por hidrógeno tiene una gran relevancia para el sector de la movilidad, ya que se trata de la primera vez que la tecnología de pila de combustible se incorpora como alternativa sin emisiones para los clientes de vehículos de VTC en España.

La flota de Toyota Mirai, que operará en Vecttor, utiliza el hidrógeno como fuente de energía para generar, dentro de la pila de combustible, la electricidad necesaria para alimentar el motor eléctrico, generando agua como único residuo en todo el proceso. El tiempo de repostaje de estos vehículos es tan solo de entre 3 y 5 minutos, similar al de un vehículo de combustión convencional, y ofrece una autonomía de alrededor de 600 kilómetros.

Los Mirai de hidrógeno estarán disponibles dentro de la categoría Cabify Eco, diseñada para clientes corporativos donde se incluyen únicamente en vehículos electrificados (híbridos, híbridos enchufables y eléctricos) También estarán en el resto de categorías para usuarios particulares, como Cabify, Cuanto Antes o Kids.

El repostaje se efectuará en la hidrogenera privada que la filial de Enagás, Scale Gas, tiene en la Avenida de Manoteras de Madrid. Se inauguró en enero de 2021 y es la primera estación de repostaje en España que permite recargar hidrógeno a 700 bar de presión, necesaria para llenar los depósitos del Mirai.

Miguel Carsi, Presidente y CEO de Toyota España, ha remarcado "la relevancia de tener la tecnología a punto para poner a disposición de Cabify la primera flota de VTC propulsada por hidrógeno en España. Toyota está preparada para seguir avanzando hacia una movilidad cero emisiones donde el hidrógeno juegue un papel importante como vector energético".

Descarbonizar las ciudades

Por su parte, Daniel Bedoya, Regional Manager de Cabify en España, ha afirmado que "esta alianza con Toyota es un paso más en nuestro compromiso por acelerar la movilidad sostenible, innovando y apostando por alternativas que faciliten la vida de personas y empresas, y hagan de nuestras ciudades un lugar mejor para vivir. Ir acompañado de empresas como Toyota y Enagás es una garantía de que el viaje será todo un éxito".

Para el Consejero Delegado de Enagás, Arturo Gonzalo, "este acuerdo está en línea con el plan trazado en la Hoja de Ruta del Hidrógeno del Ministerio para la Transición Ecológica y el Reto Demográfico, supone un ejemplo de colaboración entre compañías y representa un hito en la movilidad sostenible y un paso más en el compromiso de Enagás con la descarbonización del transporte".

Con esta operación, las tres compañías refuerzan su compromiso para conseguir descarbonizar las ciudades, especialmente en grandes entornos urbanos. El hidrógeno es un vector energético clave en este proceso, ya que es una fuente energética ilimitada, que se puede obtener de forma sostenible, es fácil de almacenar y transportar y puede utilizarse en ámbitos muy diferentes, desde el transporte hasta para la climatización de hogares y edificios.

Por su parte, Cabify sigue avanzando en su compromiso de descarbonización apostando por tecnologías innovadoras. En 2018, Cabify se convirtió en la primera plataforma de su sector neutra en carbono, y desde entonces compensa sus emisiones y las de sus pasajeros, y cumple con un compromiso anual de reducción.

Además, la empresa española presentó recientemente su Estrategia de Negocio Sostenible 2022-2025, la guía que marcará los proyectos de Cabify y que apuesta decididamente por combatir el cambio climático, con el objetivo de descarbonización de la flota conectada a su app en España y en América Latina. Cabify mantiene la meta de que el 100% de los viajes en su plataforma sea en flotas descarbonizadas o eléctricas para 2025 en España y 2030 en Latinoamérica.

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Cabify introduce en su flota los primeros turismos movidos por hidrógeno

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El futuro del coche eléctrico para largas distancias pasa sin duda por las muchas ventajas del hidrógeno, aunque a día de hoy sigue siendo una tecnología difícil de ver en la calle a pesar de que numerosos fabricantes ofrecen ya turismos movidos por hidrógeno.

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shaunl/E+ via Getty Images

Instead of an investment thesis

The article you are reading is the 5th in my series of articles on ZIM Integrated Shipping (). When I first paid attention to this company in July 2021, the stock was worth just over $36. Since then, my rating has not changed - I have always written that ZIM's potential for value investors is enormous and not fully reflected in the price.

Unfortunately, my last call aged extremely badly - even with the dividend yield, the potential buyer would have lost more than 36% with that purchase.

Nevertheless, I remain optimistic and will try to free up some space in my investment portfolio for the next averaging down of my long position in ZIM shares that I still hold.

My reasoning

First off, we need to find out why the stock is falling. In my opinion, a combination of factors played a role here, which together caused quotations to plunge by >48% from their peak in March.

It was not until mid-March that Drewry's composite world container index, which until then had been relatively stable in the $9000-$9500 range, began to fall sharply - at the time of writing the index stands at $7,285.89 per 40-foot container (-3% compared to last week).

At the same time, the HARPEX index, which tracks pricing in the charter market for containerships, also fell slightly from its March levels, but still looked much stronger than Drewry - this discrepancy was probably the main motive for the sell-off in ZIM shares, as the narrowing of the spread should theoretically bring less profit for ZIM going forward.

Moreover, various media write tirelessly about deglobalization processes and the slowdown of U.S. imports.

Data by YCharts

The combination of the above expectations is severely affecting ZIM's EPS figures - literally due to two metrics, Seeking Alpha's Growth Factor Grade for ZIM has changed from "A" to "F" in a very short time:

However, as we can see, other factors did not suffer much - even the decline of ROE growth, which also affected the downgrading of the Growth factor, remained at a fairly high level according to the results of the last quarter (TTM net profit divided by total equity capital in each quarter):

The company ended the last quarter with a cash balance of $4.820 billion, or about 87% of its current market capitalization, with financial debt representing only 3.3% of total common equity. This means that ZIM has so much cash that its enterprise value is only 18.44% of its market capitalization due to negative net debt.

Data by YCharts

ZIM's current financial performance against the backdrop of the recent share correction makes the company, in my view, highly undervalued, even compared to other shipping companies.

Data by YCharts

That is, as you can see from the chart above, ZIM needs 12.2% of forward EBITDA to buy out itself completely (we focus on enterprise value using cash as well as EBITDA). That's about 44.5 days of operational work (including weekends and ignoring seasonality)!

And at the same time, the stock is trying to find support at the moment in order not to fall even lower - a truly curious sight. It is moments like these that give investors the most opportunity to make profits.

We should take into account that fears of deglobalization are indeed justified - it is hard to argue with that. Developed economies have realized that too many important things for their economies depend on developing, unreliable markets, which carry many risks that can occur at any moment. Take the war in Ukraine or the escalating risks in Taiwan as key examples. However, transforming the existing system of relations and logistical supply is an arduous process that can take years. Therefore, the demand for the services of companies like ZIM will definitely never lose relevance - no matter how much imports to the United States are reduced in the short term, it will always exist because labor-intensive production cannot be fully localized inside the U.S.

For its part, ZIM is trying to establish itself in the top echelon of its industry by investing in various projects and expanding operations - this is evident from the company's sequence of recent corporate news. This is not surprising - when a company has 4.7x more cash than its enterprise value, this seems to be the only optimal move (besides high dividends).

Apart from the low valuation that should eventually drive the stock towards its fair value, I believe in a reversal of the current price trend based on the historical performance of this stock. I recommend you take a look at the ZIM price action (with my notes):

It is no secret that there are a large number of stock screeners these days. One popular strategy is to look for high dividend stocks and buy them during or before the cumulative dividend period and hold on to the ex-dividend date. Advanced investors start buying in a month or two, expecting the influx of new retail investors to support quotes.

As we can see, something similar happened in the case of ZIM Integrated Shipping - investors started going long by the ex-date, creating strong demand for the stock and driving its prices up. The company's next report is due on 19 August, less than two months from now, according to Seeking Alpha data. If we assume that the company's business has not suffered much in recent months (which seems to be true), then the dividend yield should remain at a fairly attractive level - well above U.S. inflation on an annual basis. This, I believe, will be a catalyst for the rise in quotations by the end of this summer.

Moreover, the technical picture is consistent with my conclusion that ZIM is already at its bottom. In the past, after selling pressure as strong as today - when the RSI indicator was in the 30-35 range - investors caught a 1-3 month bounce with an average growth of ~43%.

Risks and Takeaway

I see the following risks in my findings:

The use of last quarter's financial data may lead to misleading conclusions about both the valuation of the company and its actual current financial ratios and future growth prospects;

The company's investment activity may prove inefficient, which could lead to financial problems at the end of the current bull cycle;

If Danaos' (DAC) management decides to actively sell its stake in the company, this will put further pressure on ZIM in the medium term;

I may be wrong in my assessment of the technical picture - this is more art than an exact science. Beauty is in the eye of the beholder, as they say. The RSI indicator I am referring to may not bounce, but go southeast if the stock continues to correct from its current level. I have highlighted this option in the chart above - look out for it.

Despite these risks, however, I tend to believe that ZIM is heavily oversold and will see increased demand for its shares in the coming months. As the fundamental attractiveness of the industry has not changed and ZIM has become even cheaper, I reiterate my earlier buy recommendation.

Feel free to share your opinion in the comments.

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ZIM Integrated Shipping Stock: Selloff Looks Overdone, Buy

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The article you are reading is the 5th in my series of articles on ZIM Integrated Shipping (). When I first paid attention to this company in July 2021, the stock was worth just over $36. Since then, my rating has not changed - I have always written that ZIM's potential for value investors is enormous and not fully reflected in the price.

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El final del mercado bajista tardará en llegar. Eso es la conclusión que ha alcanzado un análisis de la confianza bursátil: el mercado bursátil estadounidense aún no ha alcanzado el pesimismo extremo que acompaña a los mínimos notables.

Puede parecer que hay mucho pesimismo y desesperación en Wall Street. Sin embargo, ese pesimismo parece abarcar mucho, pero ser poco profundo. Mis índices de confianza, basados en las exposiciones a la renta variable recomendadas por los temporizadores del mercado, siguen indicando un afán subyacente por declarar que se ha alcanzado un fondo.

Por supuesto, el mercado bursátil podría experimentar un importante repunte en cualquier momento. Pero el análisis sugiere que cualquier subida probablemente no supondría más que un repunte dentro del mercado bajista.

Baso estas conclusiones en el hecho de que los dos índices de sentimiento bursátil que mantiene mi empresa no solo han caído hasta adentrarse en sus respectivas zonas de pesimismo extremo (el 10% inferior de sus distribuciones históricas), sino que han permanecido en ellas durante más de un día o dos. Estos dos índices -el Hulbert Stock Newsletter Sentiment Index (HSNSI) y el Hulbert Nasdaq Newsletter Sentiment Index (HNNSI)- reflejan el nivel medio de exposición a la renta variable recomendado entre un subconjunto concreto de sincronizaciones del mercado a corto plazo.

Ya he escrito antes sobre la incapacidad de estos índices para mantenerse dentro de los deciles inferiores de sus distribuciones. La métrica que he propuesto es el número de días de corretaje durante el último mes en que ambos índices hayan permanecido en sus deciles inferiores. En la actualidad, se sitúa en el 23,8%, muy por debajo de los niveles a que llegó este porcentaje con ocasión de los mínimos previos del mercado. Por ejemplo, en el fondo del mercado bajista de 2007-09 que acompañó a la crisis financiera mundial, el total comparable fue del 81%.

Señales de capitulación

Una conclusión similar proviene de la ausencia de lo que los analistas técnicos denominan 'capitulación'. Investopedia lo define como "la dramática oleada de presión vendedora... que marca una rendición masiva de los inversores". Aunque los analistas definen la capitulación de forma diferente, ninguno de los que sigo cree que esta se haya producido todavía.

Uno de esos analistas es Manuel Blay, editor de TheDowTheory.com, un servicio de asesoramiento fundado por Jack Schannep. Aunque sus criterios particulares para la capitulación son propios, su sitio web indica que se basan en un "oscilador de corto plazo que mide el porcentaje de divergencia entre los tres principales índices bursátiles (Dow Jones Industrial Average DJIA, Standard & Poor's 500 SPX y el New York Stock Exchange Composite) y sus medias móviles ponderadas de 10 semanas".

Los niveles requeridos cambian cada semana. Pero, por ahora, según escribió Blay en un correo electrónico, sería necesario que al menos dos de los tres promedios del mercado cerraran por debajo de estos niveles: el Dow por debajo de 28.407; el S&P 500 por debajo de 3.553, y el NYSE Composite por debajo de 13.532. Cada uno de estos puntos de referencia del mercado se encuentra actualmente varios puntos porcentuales por encima.

Otro analista técnico que está a la espera de que la capitulación señale el fin del mercado bajista es Sam Stovall, estratega jefe de inversiones de CFRA Research. En un correo electrónico enviado a los clientes esta semana, Stovall dijo que basa su definición de capitulación en un "promedio de 15 días de diferencias porcentuales diarias entre los máximos y mínimos intradiarios del S&P 500". La capitulación se produce "cuando los picos [son] muy superiores a dos desviaciones estándar".

En un correo electrónico, Stovall escribió que el mercado actualmente "está por encima de una desviación estándar, pero por debajo de dos, lo que implica que aún nos queda recorrido de bajada".

(En aras de la transparencia total: ni TheDowTheory.com ni CFRA Research/Stovall se encuentran entre los asesores que contratan a mi empresa de auditoría para el seguimiento de sus rendimientos).

Es cierto que la ausencia de capitulación no garantiza que al mercado bajista le quede más recorrido. Blay señala que, aunque la capitulación es un indicador fiable de que el mercado bajista está llegando a su fin, no todos los mercados bajistas llevan a una. Al fin y al cabo, ningún indicador es perfecto.

Sin embargo, la historia nos enseña que este mercado bajista probablemente terminará con una capitulación. Por lo tanto, hay que estar atentos a la llegada de un clímax de ventas, como lo demuestran la extrema tendencia bajista de los sincronizadores del mercado, los picos de volatilidad y las grandes caídas de las medias del mercado. Si se produce dicho clímax, los inversores contrarios prestarán atención y tomarán nota.

*Contenido con licencia de 'Barron's'.

El final del mercado bajista tardará en llegar. Eso es la conclusión que ha alcanzado un análisis de la confianza bursátil: el mercado bursátil estadounidense aún no ha alcanzado el pesimismo extremo que acompaña a los mínimos notables.

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¿Cuándo acabará el mercado bajista? Atentos al 'botón del pánico'

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El final del mercado bajista tardará en llegar. Eso es la conclusión que ha alcanzado un análisis de la confianza bursátil: el mercado bursátil estadounidense aún no ha alcanzado el pesimismo extremo que acompaña a los mínimos notables. Puede parecer que hay mucho pesimismo y desesperación en Wall Street.

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alvarez/E+ via Getty Images

Price Action Thesis

We present a detailed price action analysis of ZIM Integrated () stock. We observed a double top bull trap (significant rejection of buying momentum) in March 2022, followed by a lower high bull trap in late May. After both instances, the market sent ZIM into a steep decline, forcing a rapid liquidation of positions.

Our reverse cash flow valuation analysis indicates that investors need to be cautious in adding ZIM at the current levels. The Street is modeling a steep revenue moderation in FY22 before posting negative growth from FY23. Notably, ZIM's profitability is also expected to be significantly impacted, therefore affecting its valuation.

We urge investors to be cautious given its price action dynamics, steeply falling revenue growth and profitability estimates.

Notwithstanding, ZIM seems to be at its near-term support. Therefore, investors can consider waiting for a potential short-term rally before layering out/cutting exposure.

As such, we rate ZIM as a Hold.

ZIM - Don't Ignore The Double Top

Investors can glean the significant double top in March, which led to a steep sell-off over the next month. Subsequently, a bear trap (significant rejection of selling momentum) formed in late April. We observed that double tops have consistently provided early warning signals of the market's intention to reverse bullish trends.

Therefore, given their potency, we often accord greater precedence to double tops. As a result, the initial bear traps after a double top should be executed with significant caution. These are price structures that draw in dip buyers for the market to distribute further.

Notably, another bull trap that formed in late May resolved April's bear trap. May's bull trap was significant because it created a lower high signal after a double top. Therefore, it added a layer of suspicion that the market did not intend to allow a return to a higher high.

Therefore, the recent steep sell-off in June should not be surprising. It also broke below April's bear trap, even though it's likely at a near-term bottom (to draw in more dip buyers). Notably, the market appears to have forced ZIM into negative flow (potentially bearish bias, thus reversing its trend from bullish to bearish).

But, ZIM's bearish flow has not been validated. Therefore, the price action over the next three to four weeks will be critical to determine whether the market intends to maintain it in a decisive bearish momentum.

Consequently, we urge investors to pay close attention to another lower high bull trap price structure that would likely validate the market's bearish bias on ZIM stock moving forward.

The Street Is Modeling For A Steep Fall In Revenue and Profitability

Notably, the Street highlighted heightened risks in shipping demand recently. JPMorgan ( JPM) also assessed the logistics sector has " asymmetric valuation risk."

However, these warnings came three months after ZIM formed a double top in March. Therefore, given their forward-looking perspective, we urge investors to pay attention to price structures. We believe they provide vital clues to the forward intentions of the market.

Also, investors need to consider the revised consensus estimates that have modeled for ZIM Integrated's revenue growth to have peaked in FY21. Notably, the company is projected to post revenue growth of 26.4% in FY22 before falling into negative growth in FY23.

Moreover, its adjusted EBIT margins are expected to be impacted significantly, as seen above, falling to 14.1% in FY24 from FY21's 54.2%.

Furthermore, ZIM Integrated's adjusted EPS growth is estimated to decline from FY23. Notably, those massive free cash flow (FCF) margins that we saw in FY21 (46.3%) is estimated to dissipate by FY24, falling to -0.8%.

Therefore, it should be a red flag that investors need to heed. Coupled with its twin bull traps (including a more potent double top) in March and May, the Street's prognosis aligns with our price action analysis.

ZIM - Valuation Could Be Impacted Dramatically By Falling Profitability
ZIM reverse cash flow valuation model. Data source: S&P Cap IQ, author
ZIM last traded at an NTM FCF yield of 51.4% or an FCF multiple of 1.95x. It's broadly in line with its peers' comps, with a median FCF multiple of 1.94x. Therefore, the market has de-rated ZIM and its peers broadly.

Also, we noted that the market formed its double top bull trap at the 40% FCF yield level. In addition, May's bull trap was formed at the 45% level. Therefore, we believe it has informed us that the market rejected these levels decisively and is asking for higher yields. As such, we think applying a 50% yield requirement in our valuation model is appropriate.

We also applied a market-perform hurdle rate of 11.9%, equivalent to the SPDR S&P 500 ETF's ( SPY) 5Y total return CAGR (adjusted for dividends). Finally, using a blended TTM FCF margin of 22% (Vs. FY24's estimates of -0.8%), we derived a TTM revenue requirement of $10.48B by CQ4'26.

Given the Street's modeling for a continued decline in topline growth and profitability, we believe ZIM Integrated is unlikely to meet our revenue target.

Is ZIM Stock A Buy, Sell, Or Hold?

We rate ZIM a Hold. ZIM is likely at a near-term bottom. Therefore, we urge investors considering layering out/cutting exposure to wait for the next short-term rally to sell.

Our price action analysis indicates two potent top bull traps (including a double top in March) had afflicted ZIM's bullish bias. As a result, the stock has been struggling to regain its bullish momentum. Notwithstanding, we need a few more weeks to validate its change to a bearish bias. However, the price structures don't augur well.

Our reverse cash flow model suggests ZIM Integrated will unlikely meet our revenue target at its current valuation.

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ZIM Integrated Stock: Be Really Cautious Here (NYSE:ZIM)

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We present a detailed price action analysis of ZIM Integrated () stock. We observed a double top bull trap (significant rejection of buying momentum) in March 2022, followed by a lower high bull trap in late May. After both instances, the market sent ZIM into a steep decline, forcing a rapid liquidation of positions.

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El globo dirigible, también conocido como zepelín, fue un glamuroso medio de transporte que vivió sus años dorados hace aproximadamente un siglo, si bien algunos trágicos accidentes acabaron por provocar su desaparición como alternativa voladora. Las décadas han pasado y, afortunadamente, los avances tecnológicos en materia aeronáutica, también.

La compañía británica Hybrid Air Vehicles Limited (HAV) lleva los últimos años trabajando en reconvertir un zepelín que fue diseñado inicialmente para el ejército de los Estados Unidos para usarlo en vuelos comerciales, ofreciéndolo como una solución respetuosa con el medioambiente y destinada al turismo aéreo de lujo.

Bautizado como Airlander 10, se trata de la aeronave más grande y con la mayor eficiencia energética del mundo gracias a su motor híbrido. La compañía, que aboga por llevar este tipo de ingeniería aeronáutica más allá del uso militar, acaba de recibir el primer pedido oficial de su dirigible por parte de una aerolínea comercial: la española Air Nostrum.

Así pues, el espacio aéreo de nuestro país será el primero y por el momento el único del mundo en el que se alzará esta nueva versión del zepelín. El acuerdo, que se estima que supera los 600 millones de euros, contempla la producción de diez unidades del Airlander 10 a partir del año próximo. Será presumiblemente en 2026 cuando las aeronaves empezarán a despegar en España.

La aerolínea quiere ofrecer un vuelo exclusivo que recorra la distancia entre la ciudad de Barcelona y la isla de Mallorca, en el que se prime la experiencia por encima de la rapidez por llegar al destino. Sólo cien pasajeros por trayecto podrán sobrevolar el Mediterráneo y disfrutar durante cuatro horas de la placidez de un viaje que será concebido como toda una aventura. Y es que será casi como viajar en el tiempo.

Se trata, además, de un vuelo con unas emisiones mínimas (hasta un 90% menos que un vuelo convencional), algo de lo que no puede presumir ningún vuelo comercial. Para el año 2030, además, HAV planea ofrecer su aeronave con un motor completamente eléctrico gracias a cuatro motores E-HAV1 de 500 kW producidos por Collins Aerospace.

Este globo dirigible lleno de helio también ofrece más espacio a bordo que cualquier otro avión comercial de pasajeros. Cuenta con una espaciosa cabina y lujosas comodidades que compensarán con creces el tiempo de vuelo prolongado.

La aeronave es capaz de volar hasta a 20.000 pies de altura, recorrer más de 7.400 kilómetros, y permanecer en el cielo hasta cinco días con tripulación y dos semanas sin ella. El modelo listo para la producción debería haber despegado en 2019, aunque se retrasó a 2020, y se aplazó posteriormente hasta 2024.

Aún no hay tarifas aproximadas de lo que costará un viaje en el Airlander 10. Si quieres empezar a imaginar cómo sería realizar un elegante vuelo en zepelín por el Mediterráneo y trasladarte a otra época de la historia, te sugerimos mirar el vídeo que encontrarás junto a este artículo.

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Aerolínea española Air Nostrum: Vuelve el zepelín y lo hace para viajar de Barcelona a Mallorca

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El globo dirigible, también conocido como zepelín, fue un glamuroso medio de transporte que vivió sus años dorados hace aproximadamente un siglo, si bien algunos trágicos accidentes acabaron por provocar su desaparición como alternativa voladora. Las décadas han pasado y, afortunadamente, los avances tecnológicos en materia aeronáutica, también.

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SUMMARY

Strongest Q1 results in Star Bulk's history

Simple, transparent dividend policy

Continues to strengthen its balance sheet

Environmental regulations keeping new orders under control

Hamish Norton, President of Star Bulk Carriers Corp (NASDAQ: SBLK), discussed with Barry Parker of Capital Link TV his thoughts on the dry bulk market, Star Bulk's 1Q22 achievements, dividend policy and capital allocation strategy. The full interview, whose main points can be found in the below video as part of Capital Link TV. Star Bulk Optimistic about the Dry Bulk Market
First half of 2022 trade volumes were affected by the Indonesian export ban on coal, China's Winter Olympics and zero Covid policy, poor weather conditions in Brazil, and the war in Ukraine. Nevertheless, dry bulk rates remained high in a rather slow commodity flow environment which indicates that the fleet is quite well balanced. In terms of the outlook of the dry bulk shipping market, Star Bulk does not believe that the Forward Freight Agreement curve is a reliable predictor of the market. Star Bulk remains very optimistic about the dry bulk market given the best fleet supply picture in decades with the historically low vessel order book and with the upcoming environmental regulations further suppressing orders and navigation speeds.

The Company believes that we are still in the early stages of covid recovery in China and there is a lot of restocking that needs to take place among major importers of dry bulk. China has not been a major factor in dry bulk movement in the first half of the year, yet rates have been strong. As China reopens and the steel industry returns to growth Star Bulk believes that it will have a significant positive impact on rates.
1Q 2022 Performance
Star Bulk reported very strong 1Q 2022 financial results during the traditionally weak first quarter of the year reporting the highest first-quarter profit in the company's history. Star Bulk's Board of Directors approved a dividend of $1.65 per share and over the last four quarters, Star Bulk has distributed a dividend of $5.60 per share to its shareholders.
Fleet Renewal and Expansion
Over the last three years, Star Bulk has added 58 vessels in eight small M&A transactions using shares at or above NAV to buy fleets priced attractively relative to Star Bulk's share price. Star Bulk was able to do this and increase its market cap, public float, and liquidity by a significant amount making it more attractive to institutional investors. When looking at future fleet growth Star Bulk intends to protect the dividend through the process of growth. To this effect, Star Bulk does not intend to use cash that it would otherwise pay out as dividends but rather try to continue to use shares for acquiring vessels when this would be accretive to shareholders.
Capital Allocation Supportive of Dividend Policy
Star Bulk's dividend policy is to distribute all the cash earned from operations that are on Star Bulk's balance sheet at the end of each quarter to the extent that it exceeds $2.1 million per ship and given 128 vessels this is $269 million. Star Bulk distributes all cash from operations after debt amortization and working capital and is amortizing $200 million in debt per year. The company intends to protect its dividend and not use cash from operations to buy back shares. Instead, if Star Bulk's share price is particularly attractive, the Company would consider selling an older vessel and use cash proceeds to buy back shares. At the same time if the share price is high, it might look to sell shares to buy vessels to benefit shareholders and will look to reduce leverage at the same time.

Capital Link is the investor relations advisor to Star Bulk Carriers. This content is for informational purposes only and is not intended to be investing advice.

This article was submitted by an external contributor and may not represent the views and opinions of Benzinga.

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Star Bulk Carriers Committed to a Capital Allocation Strategy that Supports its Dividend Policy

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SUMMARY Strongest Q1 results in Star Bulk's history Simple, transparent dividend policy Continues to strengthen its balance sheet Environmental regulations keeping new orders under control Hamish Norton, President of Star Bulk Carriers Corp (NASDAQ: SBLK), discussed with Barry Parker of Capital Link TV his thoughts on the dry bulk market, Star Bulk's 1Q22 achievements, dividend policy and capital allocation strategy.

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Adrian Vidal/iStock via Getty Images

Covered Call ETFs such as the investment vehicles from Global X have become extremely popular over the past several years. When a fund is generating double-digit yields, investors generally take notice. Global X has 3 main Covered-Call ETFs as part of its income-focused strategies, which include The Global X Nasdaq 100 Covered Call ETF ( QYLD), The Global X S&P 500 Covered Call ETF ( XYLD), and The Global X Russell 2000 Covered Call ETF ( ). All 3 ETFs are generating yields in the double-digits, and after my 2 recent articles, I wanted to see which fund has been the best investment.

I am a current shareholder of QYLD, XYLD, and RYLD, with QYLD being my largest position among the three. The Covered-Call income strategy has resonated with me as I sell covered calls on specific investments to generate additional income. While I am a fan of selling covered calls and investing in the Global X products, there has to be a winner among the three investments. As you can see from the title, RYLD has performed better than both XYLD and QYLD in the period I selected. In this article, I will outline my analysis and explain why I like RYLD as a future income investment. This is a data-driven approach by the numbers, so if you like math, you will find the next sections interesting.

RYLD takes gold while XYLD takes silver and QYLD is stuck with bronze

For my side-by-side comparison, I will assume 100 shares were purchased on 1/4/21, and all of the income has been taken as distributions and not reinvested. I will show the following metrics in the analysis:

Initial investment

Current investment

Profit or loss

Initial Investment ROI

Distributions Collected

Investment distribution yield since 1/4/21

Total profit

Total ROI

To start out, I took the share price of each fund on 1/4/21 and multiplied it by 100 shares for my starting amount (QYLD $22.69 * 100), (RYLD $22.37 * 100), and (XYLD $46.16 * 100). Next, I went to the Global X page and looked at the distribution from every month since January of 2021 and calculated the monthly distribution income. Here are the results.

QYLD takes 3rd place:

An initial investment of 100 shares of QYLD would have cost $2,269 on 1/4/21. Since then, QYLD has declined from $22.69 to $17.37. The initial investment has declined by -$532, which exceeds the $384.89 of distributions QYLD has paid over the past 17 months.

XYLD takes 2nd place:

If you had purchased 100 shares of XYLD on 1/4/21, it would have cost $4,616. Since the purchase date, XYLD has declined to $4,2.40, leaving investors with a -$376 return over the past 17 months. XYLD has offset the loss of capital by generating $698.50 in distributions over this period, leaving investors with a net gain.

RYLD takes 1st and still holds the crown:

RYLD is not my largest position of these 3 funds, but by the numbers, it should be. 100 shares of RYLD on 1/4/21 would have cost roughly the same amount as QYLD as shares of RYLD traded at $22.37. The 100-share investment would have cost $2,237, which generated a -$210 capital return over the previous 7 months, but it generated $415.51 in distributions.

The results:

Since the starting investment amount was different for these three funds, I am basing the results on a percentage basis. When I compare income investments such as RYLD, XYLD, and QYLD, I want to see how the following categories stack up:

downside protection for invested capital

what the initial investment ROI was

how much the distributions amounted to

what the yield on my initial investment was

total profit/ROI once the distributions were factored in.

XYLD was the best investment when it came to protecting an investor's downside. The initial investment of 100 shares declined by -8.15%, while RYLD was behind it with a -9.39% return. QYLD has been horrific as -23.45% of an investor's capital has been erased since 1/4/21, which is almost triple the amount of XYLD.

By the initial investments ROI metric XYLD would be the preferred investment among these Covered-Call ETFs, but this single metric doesn't tell the whole story. Since these investments are specifically designed to generate large amounts of income, the distributions paid need to be factored into the equation. All 3 ETFs have generated 17 monthly distributions since 1/4/17, with XYLD producing $698.50 in income, RYLD with $415.51, and QYLD with $384.89. From a yield on initial investment perspective, RYLD has generated 18.57% of its initial investment in distributions, while QYLD generated 16.96%, and XYLD generated 15.13%. While XYLD protected the initial capital better, RYLD and QYLD produced more income on a percentage basis, and RYLD took the win in this category.

You can't solely judge one of these ETFs on how much the initial investment is up or down or by the percentage of distributions they generated. Since these are still income-producing assets, I feel the best way to look at these investments is from an overall methodology by combining the losses/profits and the distributions to find the total investment ROI. QYLD has been the worst investment of the group, as when you net out the distributions from the losses, an investor still ends up with a -$147.11 loss for a -6.48% overall return. XYLD jumps into the green on the total ROI as its $698.50 nets out the -$376 of losses creating a total return of $322.50 or a total ROI of 6.99%. RYLD has retained the crown since the last time I compared these 3 ETFs. RYLD has generated $415.51 in distributions which left investors with a $205.51 profit after the -$210 in losses were netted out. RYLD's total ROI was 9.19% on the initial investment of 100 shares. Investors would have been better off with RYLD than XYLD or QYLD as it had the largest yield on investment and the largest total ROI.

RYLD hit the public markets in April of 2019, has established a long track record of income, and dismantled the bear thesis

RYLD went public on 4/17/19 for $25 per share. Since then, RYLD has paid 37 consecutive distributions without missing a single month. RYLD has established a long track record of distribution income from its Covered-Call strategy to investors. Since May of 2019, RYLD has paid $8.23 per share in distributions, which is an investment yield of 32.91% on its initial $25 share price. Shares of RYLD have declined by -14.84% as they are now trading at $21.29, losing -$3.71 in value. Investors of RYLD have still generated an 18.65% ROI since its initial $25 share price as the -$3.71 of lost capital appreciation has been offset by the $8.23 of distributions.

The first half of 2022 hasn't been great for investors as all the major indices have declined. When I look at RYLD in 2022, it hasn't been the best investment, but it fared better than its respective index, the Russell 2000, the Nasdaq, and the S&P 500. Unless you went heavy into energy, there haven't been many places to avoid the decline in equities. RYLD has provided monthly income in 2022 while protecting an investor's downside. In 2022 RYLD has declined by -17.33%, while the SPDR S&P 500 Trust ETF ( SPY) declined by -21.63%, the Vanguard Russell 2000 ETF ( VTWO) declined by -25.22%, and the Invesco QQQ ETF ( QQQ) declined by -30.13%.

Similar to my remarks about QYLD and XYLD, RYLD has protected investor's downside better than the ETFs that track their respective indexes. The 3 major bear comments I have seen about RYLD and the other Covered-Call ETFs have been:

They won't generate significant income in a downturn

They will fall further than the index funds that track their respective indexes on a % basis

The trade-off of capital appreciation for income doesn't make sense

RYLD has debunked these theories. First, RYLD has generated $1.14 per share of income over the first 5 distributions in 2022. RYLD started the year trading at $24.52 and so far has generated 4.65% of its starting share value in distributions in the first 5 months of 2022, which places it on track to deliver double-digit yields for investors who invested in RYLD at the beginning of the year. The argument about not creating significant income in a downturn has been disproven. The next argument about RYLD falling further than its respective indexes has also been debunked, which is illustrated by the chart below. Not only has RYLD fallen less than VTWO, but it's also done better than SPY and QQQ. The 3rd bearish point that I often hear is that trading capital appreciation for income doesn't make sense. Down markets are a perfect time to disprove this. In addition to declining less than the major indices and the ETFs that track them, RYLD has paid its investor's monthly income throughout 2022. When the monthly distributions are factored in, RYLD is down roughly -12.68% on the year as 4.65% has currently been returned through distributions. Income investors have different investment needs than investors looking for appreciation, and in a downturn, monthly capital that can be relied upon can make a large difference.

Conclusion

I should be investing more in RYLD than QYLD. While I am bullish on QYLD, RYLD, and XYLD, the numbers indicate that RYLD has been and still is the best investment of the three. Since the beginning of 2021, RYLD has had the largest total return on investment and the largest yield on investment. Currently, RYLD has a distribution yield of 12.16% and a 12-month trailing yield of 15.07%. The bearish comments that are often discussed have been disproven in 2022, and the mechanics of the Global X Covered Call ETFs work well in harsh investing environments. I will be allocating more capital toward RYLD in the future, and I would suggest that income investors look at RYLD as its double-digit yields hold up in good and bad times.

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RYLD: High Yield And A Better Investment Than XYLD And QYLD

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Covered Call ETFs such as the investment vehicles from Global X have become extremely popular over the past several years. When a fund is generating double-digit yields, investors generally take notice.

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The buying and selling of stock by a company’s insider give investors a sense that the stock will rise or fall in the future. MIND Technology Inc. shares valued at $21,437 were purchased by BLUM PETER H on Jun 16. At $12.64 per share, BLUM PETER H acquired 1,696 shares. The insider’s holdings grew to 1,696 shares worth approximately $1441.6 following the completion of this transaction.

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Also, BLUM PETER H purchased 50,000 shares, netting a total of over 75,000 in proceeds. Following the buying of shares at $1.50 each, the insider now holds 699,528 shares.

Before that, BLUM PETER H had added 10,000 shares to its account. In a trade valued at $17,200, the Director bought MIND Technology Inc. shares for $1.72 each. Upon closing the transaction, the insider’s holdings increased to 10,000 shares, worth approximately $0.55 million.

As published in a research note from Sidoti on September 23, 2015, MIND Technology Inc. [MIND] has been rated up from a Neutral to a Buy. Analysts at Global Hunter Securities downgraded the stock from ‘”a Buy”‘ to ‘”a Accumulate”‘ outlook in a report released in mid May. As of July 13, 2011, Global Hunter Securities has reiterated its “Buy” rating for MIND. Earlier on June 08, 2011, Global Hunter Securities resumed its rating. Their recommendation was “a Buy” for MIND stock.

Analyzing MIND’s Price Performance

On Wednesday, MIND Technology Inc. [NASDAQ: MIND] plunged -4.07% to $0.85. The stock’s lowest price that day was $0.811, but it reached a high of $0.8982 in the same session. During the last five days, there has been a drop of approximately -7.88%. Over the course of the year, MIND Technology Inc. shares have dropped approximately -49.91%. Shares of the company reached a 52-week high of $1.7500 on 01/03/22 and a 52-week low of $0.8000 on 06/09/22. A 50-day SMA is recorded $1.0377, while a 200-day SMA reached $1.4071. Nevertheless, trading volume fell to 83115.0 shares from 44900.0 shares the previous day.

Support And Resistance Levels for MIND Technology Inc. (MIND)

According to the 24-hour chart, there is a support level at 0.8051, which, if violated, would cause prices to drop to 0.7644. In the upper region, resistance lies at 0.8923. The next price resistance is at 0.9388. RSI (Relative Strength Index) is 36.50 on the 14-day chart, showing neutral technical sentiment. Moving Average Convergence Divergence (MACD) is at -0.0977, which suggests the price will decrease in the coming days. Percent R is at 84.24%, indicating bearish price movement. Stochastics %K at holding indicates that the stock is to be held.

Which companies own the most shares of MIND Technology Inc. (MIND)?

According to The Vanguard Group, Inc. filings, the company currently owns 610,380 shares, which is about 4.43% of the total MIND shares outstanding. The investor’s shares have plunged by -67,180 from its previous 13-F filing of 677560.0 shares. With the completion of the sale, Renaissance Technologies LLC’s stake is now worth $507,622. White Pine Capital LLC reduced a -5.03% interest valued at $0.34 million while BlackRock Fund Advisors sold a -1,521 stake. A total of 0 shares of MIND Technology Inc. were sold by RBF Capital LLC during the quarter, and 0 were sold by Bridgeway Capital Management LLC. In its current portfolio, ARS Investment Partners LLC holds 118,469 shares valued at $0.11 million.

In terms of MIND Technology Inc. share price expectations, FactSet research, analysts set an average price target of $2.00 in the next 12 months, up nearly 127.27% from the previous closing price of $0.88. Analysts anticipate MIND Technology Inc. stock to reach $2.00 by 2022, with the lowest price target being $2.00. In spite of this, 1 analysts ranked MIND Technology Inc. stock as a Hold at the end of 2022. On April 07, 2011, Global Hunter Securities assigned a price target of “a Buy” to the stock and upgraded coverage with a $18.

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Director BLUM PETER H bought 1,696 shares of MIND Technology Inc. [MIND] | Knox Daily

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The buying and selling of stock by a company’s insider give investors a sense that the stock will rise or fall in the future. MIND Technology Inc. shares valued at $21,437 were purchased by BLUM PETER H on Jun 16. At $12.64 per share, BLUM PETER H acquired 1,696 shares. The insider’s holdings grew t…

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Nuclear fusion is an incredibly complex scientific problem that researchers are coming at from all sorts of angles, and Zap Energy is starting to make waves through one of the lesser-known approaches. The Seattle-based startup has achieved a major milestone for its Z-pinch fusion technology, and is now working to make it a commercial reality via modular, garage-sized reactors that could be scaled up to bring this experimental form of energy to the grid.

Nuclear fusion research aims to recreate the process inside the Sun, where intense heat and pressure combine to create plasma in which atomic nuclei fuse together to release energy. Much of the effort in this field is focused on suspending these streams of plasma inside reactors shaped like donuts or twisted loops using incredibly complex magnetic fields, and this will be the name of the game at ITER, the world's largest nuclear fusion reactor set to commence operation later this decade.

Z-pinch presents a very different path forward, but one that could ultimately prove cheaper and more efficient. That's because rather than intricate webs of expensive magnetic coils and costly shielding materials to protect them, Z-pinch systems rely on an electromagnetic field that is generated within the plasma itself. This pins the plasma in place inside a relatively short column and "pinches" it until it becomes hot and dense enough for nuclear fusion to occur.

In 2019, we looked at work from a group of University of Washington scientists who had come up with a solution to instability problems that have plagued Z-pinch technology since its inception in the 1950s. Using what's known in fluid dynamics as sheared axial flow, the team demonstrated a way of smoothing out the plasma streams to prevent bulges and distortions that historically cause them to collapse.

Meanwhile, one of the authors of that study, Uri Shumlak, has been looking to leverage this sheared axial flow technique to make Z-pinch fusion technology a reality, having co-founded Zap Energy in 2017. Last week, the outfit achieved a key milestone in its journey, creating the first plasmas inside its prototype reactor, called the FuZE-Q.

"Z-pinch has long been an appealing way to achieve nuclear fusion, but for many years researchers considered Z-pinch's plasma instabilities to be an insurmountable challenge," says Shumlak, who serves as Zap Energy's Chief Science Officer. "We've shown through both simulation and experiment that sheared flows can stabilize fusion plasmas, and that the stability should extend to a commercially viable scale. The Zap Energy team has made rapid progress since this technology moved out of the lab, especially with recent team and investment growth."

The team had previously demonstrated plasmas with an electrical current of 500 kiloamps (kA), the highest its previous prototype reactors could handle. But the higher the current, the hotter and denser the plasma becomes, and with this in mind the next-generation FuZE-Q is designed to accommodate currents of 650 kA. The team's scientific modeling indicates that this is the point at which breakeven will occur, where the energy coming out of the device is greater than what is needed to operate it, referred to as Q=1.

"FuZE-Q is the fourth generation of Z-pinch device that we've built and is undoubtedly the most ambitious," says Brian A. Nelson, Chief Technology Officer of Zap Energy. "We designed it to be versatile, resilient and tunable in lots of ways that will be critical as we ramp to higher currents, temperatures and densities."

The Zap Energy team has just closed a US$160-million Series C funding round, which will further its efforts to bring its form of fusion energy to market. With no need for expensive magnets or high-powered lasers as seen in other approaches, the company envisions achieving this with mass-manufactured reactors that are small enough to fit inside a garage. These modular devices could be deployed to provide power to remote communities or combined and scaled up to provide energy to entire cities.

"To be a practical energy source, we need to go well beyond Q=1, but if you want to get fusion on the grid in time to make a difference to the planet, then the ability to iterate quickly on a small, cheap platform, is absolutely vital," said Zap Energy President Benj Conway. "We can design, build and test systems at a much faster pace than other approaches, and we are working on technology in parallel that we are going to need on the other side of breakeven."

Source: Zap Energy

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First plasma propels Zap Energy's plans for garage-sized fusion reactors

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Nuclear fusion is an incredibly complex scientific problem that researchers are coming at from all sorts of angles, and Zap Energy is starting to make waves through one of the lesser-known approaches. The Seattle-based startup has achieved a major milestone for its Z-pinch fusion technology, and is...

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H2 Clipper presents a very compelling case to bring back an extremely controversial technology, saying that large electric airships lifted and powered by green hydrogen stand ready to transport massive cargo loads over enormous distances much faster than cargo ships, opening up inland logistics facilities with minimal ground infrastructure, and doing it all with zero emissions.

We're talking cargo loads up to 340,000 lb (150,000 kg - or the equivalent of about 115 Toyota Corollas), distances up to 6,000 miles (9,650 km, or roughly the distance between Los Angeles and Barcelona), at cruising speeds over 175 mph (280 km/h, or a little under one-third the speed of a Dreamliner passenger plane - but 7-10 times faster than a cargo ship can go).

That's an incredibly compelling set of numbers, particularly given the cost; H2 Clipper claims it'll cost a quarter of what today's air freight services cost per ton-mile, making it an economically disruptive way to move bulk cargo as well as an opportunity to decarbonize trans-continental logistics operations.

Hydrogen airships have a bit of a reputation, of course, thanks to the tragic and compelling footage of the Hindenburg disaster in 1937. But as we discussed when we first profiled H2 Clipper's technology, there are many reasons why people may have taken the wrong message away from that incident, including some pretty heinous skullduggery from helium lobbyists.

As momentum gathers behind hydrogen as a next-generation clean aviation fuel, there's a compelling case to question why it can't also be used as a cheap, green lift gas as well, to open up these kinds of clean cargo transport possibilities with minimal, if any, risk to human life.

In 2021, H2 Clipper was accepted into Dassault Systems' 3D Experience lab accelerator program, giving this small company the ability to use cutting-edge simulation and development tools to refine its design. The company has completed simulated wind tunnel tests using computational fluid dynamics (CFD), validating its super-low drag aerodynamics and putting some weight behind the company's fuel burn and operational cost estimations.

At this stage, the company plans to get a prototype built by 2025, and to have a full-sized hydrogen airship flying in 2028. It's still a risky play for investors; the FAA currently bans hydrogen as a lift gas. But green hydrogen projects worth billions of dollars are springing up across the globe, so hydrogen itself stands to have a lobby group behind it like it's never had before.

In that context, one interesting use case for hydrogen airships is to move green hydrogen itself; H2 Clipper says that these aircraft will beat rail, trucks, ships and even pipelines on price for hydrogen exports moving any distance over 1,000 miles (1,600 km). These "pipelines in the sky" will also be as green as the bulk hydrogen they're shifting, adding a further benefit that green H2 exporters might be willing to take some risks betting on.

You can check out H2 Clipper's 20-minute presentation at the First International Hydrogen Aviation Conference in September 2020 in the video below.

Source: H2 Clipper

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Zero-emissions hydrogen cargo airship prototype planned for 2025

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H2 Clipper presents a very compelling case to bring back an extremely controversial technology, saying that large electric airships lifted and powered by green hydrogen stand ready to transport massive cargo loads over enormous distances much faster than cargo ships, opening up inland logistics...

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Después de un paréntesis de tres años, los Golden State Warriors vuelven a ser el mejor equipo de baloncesto. Para ello, han tenido que sufrir un descalabro desde lo más alto, debido a una serie de lesiones, hasta el fondo absoluto. De ello se puede extraer una lección sobre los mercados bajistas, las recesiones y todos los temores que se apoderan de los inversores en este momento.

Después de la caída del mercado bursátil de la semana pasada, los inversores probablemente se sientan como la estrella de los Warriors Stephen Curry en 2020, preguntándose qué más podría salir mal. El S&P 500 cayó un 5,8%, su peor descenso semanal desde marzo de 2020, mientras que tanto el promedio industrial Dow Jones como el compuesto Nasdaq cayeron un 4,8%.

Fue "el peor tramo de ventas en la historia del S&P 500", según Jason Goepfert, de Sundial Capital Research, que señaló que hubo cinco días desde el 8 de junio en los que más del 90% de las acciones del índice terminaron a la baja. La pregunta ahora es cuánto más puede salir mal.

¿La respuesta? Una larga lista. La caída de la semana, que envió al S&P 500 a un mercado bajista, se debe el aumento de los rendimientos de los bonos, algunos datos económicos débiles y, por supuesto, la Reserva Federal, que subió los tipos de interés un 0,75% por primera vez desde 1994.

Esta subida no es la única. La Reserva Federal, que está luchando contra la mayor inflación de los últimos 40 años, podría subir los tipos de interés más de lo que se espera actualmente: hay un 89% de probabilidades de que se produzca otra subida de tres cuartos de punto en julio, aunque las probabilidades de que ocurra en septiembre son mucho menores. Mientras tanto, la semana pasada aparecieron signos de desaceleración económica, ya que el inicio de construcción de viviendas cayó un 14% mes a mes en mayo y las ventas minoristas descendieron un 0,3%.

" La Fed necesita reducir la inflación, y la tasa de crecimiento de la economía pagará por ello", afirmaba Dave Donabedian, director de Inversiones de CIBC Private Wealth US.

Eso ya da miedo de por sí, pero la mayor preocupación a corto plazo para el mercado de valores podrían ser los beneficios. Ahora mismo, s e espera que sean bastante buenos, ya que los analistas prevén un crecimiento del 11% en 2022, hasta los 228 dólares por acción, y del 9,6% en 2023, hasta casi 250 dólares.

"La Fed necesita reducir la inflación, el crecimiento de la economía pagará por ello"

Pero el estratega de Wells Fargo, Chris Harvey, espera que las empresas suenen mucho más preocupadas en sus próximas conferencias telefónicas, fruto de un giro brusco del tipo que no se ha producido desde 2007.

"En general, creemos que el mercado ha pasado rápidamente de los temores a la falta de oferta a la sobreoferta, y las perspectivas corporativas cambiarán drásticamente a medida que se revelen las ganancias", explicaba Harvey, que recomienda evitar las acciones 'broken stories' (historias rotas), que incluyen a empresas como Walt Disney (DIS), Etsy (ETSY), Netflix (NFLX) y Boeing (BA).

Si tiene razón, las previsiones de beneficios tendrán que bajar, y el S&P 500, que cotiza a 15,4 veces los beneficios futuros a 12 meses, no es tan barato como parece. David Kostin, de Goldman Sachs, señala que, si las empresas del S&P 500 ganan 239 dólares y cotizan a 17 veces, el índice cotizaría a 4165, un 13% más que al cierre del viernes. Este es el caso optimista.

Pero si los beneficios de 2023 son inferiores -por ejemplo, 225 dólares- y la relación precio/beneficio baja a 14, el índice podría cotizar a 3150, un 14% menos que al cierre del viernes. "Los inversores que busquen oportunidades de valor deberían tener en cuenta tanto las valoraciones como el riesgo potencial de caída de las estimaciones de beneficios", escribe.

Esta situación dará lugar a una de las mejores oportunidades de compra en décadas

Sin embargo, no es el fin del mundo. Jim Stack, presidente de InvesTech Research, redujo su exposición a la renta variable al 44% esta semana, su cartera más defensiva desde la burbuja tecnológica del año 2000. No parece estar deprimido por ello. Por el contrario, mira hacia el futuro. La "buena noticia" es que esta situación acabará dando lugar a "una de las mejores oportunidades de compra en décadas", escribe. "Pero, por ahora, la paciencia es fundamental".

Podría llevar un tiempo, pero el mercado volverá a tener esa sensación de victoria. Pueden apostar por ello.

*Contenido con licencia de 'Barron's'.

Después de un paréntesis de tres años, los Golden State Warriors vuelven a ser el mejor equipo de baloncesto. Para ello, han tenido que sufrir un descalabro desde lo más alto, debido a una serie de lesiones, hasta el fondo absoluto. De ello se puede extraer una lección sobre los mercados bajistas, las recesiones y todos los temores que se apoderan de los inversores en este momento.

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Las bolsas no caerán para siempre, apueste por ello y prepárese

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Después de un paréntesis de tres años, los Golden State Warriors vuelven a ser el mejor equipo de baloncesto. Para ello, han tenido que sufrir un descalabro desde lo más alto, debido a una serie de lesiones, hasta el fondo absoluto.

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Thanks to significantly higher prices for its core products of iron ore, aluminium, and copper, the company's 2021 dividend comes to more than $10.

That's almost twice the previous record dividend and it gives Rio Tinto ( ) a dividend yield of almost 17% at its current share price of $62.

In GBP that's a dividend of almost £8.50 from shares costing £51 each, which is an eye-wateringly impressive yield.

Unfortunately, that huge dividend includes special dividends which are unlikely to be paid out on the same scale again. However, even if we ignore the special dividend, Rio Tinto still has a dividend yield of 13% from its ordinary dividend alone.

Of course, if you know anything about investing, you'll know that buying a stock simply because it has a very high dividend yield is usually a very bad idea.

Very high yields are often followed by very large dividend cuts, so instead of focusing solely on dividend yields, it's better to have a broader view of a company and its ability to pay dividends over the long term.

With that in mind, in the rest of this review, I'll walk you through how I approach the task of estimating Rio Tinto's future dividends, ending with an estimate of its fair value and how much I might invest in the company at its current price.

To set the stage, let's begin with a little history.

Rio Tinto has been one of the world's leading mining companies for 200 years

Rio Tinto gets its name from the Rio Tinto River in Spain. The name means red river and, because the river contains large quantities of dissolved iron, it is literally red. The river contains Iron because the surrounding area is rich in minerals and metals, including iron, copper, gold, and silver, and it has been mined for at least 5,000 years.

After a period of disuse, the Spanish government restarted the mines in 1724, but their operations were inefficient. In 1873, the mines were sold to a consortium of investors led by Deutsche Bank ( DB), and the Rio Tinto Company was born.

After World War I, the company began to diversify away from Spain through a series of joint ventures and acquisitions, and eventually it sold most of its Spanish operations in 1954.

Over the decades, these deals took Rio Tinto's operations into Africa, Canada, and other countries, most notably Australia. In 1962, Rio Tinto Company merged with Consolidated Zinc, a significant Australian mining business, and in 1995 they became a dual-listed company in the UK and Australia and that structure remain in place today.

Rio Tinto's operations are now focused on mining iron ore, aluminium (bauxite), and copper, plus a range of other minerals and metals such as gold, silver, uranium, and lithium. Over the last decade, around 80% of the company's earnings came from Iron ore, 10% came from aluminium, 5% from copper, and 5% from other minerals and metals.

Like most miners, Rio Tinto's growth has been volatile

Understanding a company's long-term growth track record is important because it can give us useful insights into its competitive strengths and potential for future growth.

Unfortunately, this becomes more difficult if the company's performance has been volatile, and if you know anything about commodities, you'll know their prices can be extremely volatile.

The chart above shows the price of Rio Tinto's core product (iron ore) falling by more than 70% from 2013 to 2016 and then increasing by almost 400% from 2016 to early 2021.

Compare that to Unilever (UL) (which is a holding in my personal portfolio and the UK Dividend Stocks Portfolio), where the price for Hellmann's Mayonnaise or Dove Soap rarely changes by more than a percent or three in any given year.

The volatility of iron ore prices makes it hard to assess Rio Tinto's underlying growth because its progress from one year to the next is primarily driven by the ups and downs of metal prices rather than whether the company sold more iron ore, aluminium, and copper.

As you can see from the chart above, Rio Tinto's capital employed (equity + debt) and revenues followed a broadly similar path to iron ore prices over the last decade. They declined from 2013 to 2015 and then slowly recovered through to 2021. But the story for earnings and dividends is very different because earnings and dividends grew extremely rapidly over the last ten years.

As ex-Bank of England Governor Mervyn King might say, what is going on here?

The first thing to note is that Rio Tinto's earnings were negative in 2012 and 2015. This was caused by various exceptional expenses, primarily a series of write-downs for previously acquired aluminium assets totalling a mind-boggling $20 billion (we'll revisit this huge mistake later).

We can strip out these non-cash and non-operational expenses by replacing reported earnings with the company's own "underlying earnings" figure. I usually ignore underlying earnings because in most cases they provide an excessively rose-tinted view of a company's performance, but in this case, it could prove useful. Here's the updated chart.

We can now see that revenues, underlying earnings, and capital employed all declined and recovered broadly in line with iron ore prices. This means that even over a period as long as a decade, Rio Tinto's results have been driven by iron ore prices more than anything else.

This is bad news because commodity prices are volatile and unpredictable. If Rio Tinto's results are primarily driven by commodity prices, how can we say anything sensible about its potential for future dividends and growth? Fortunately, there might be a way.

Instead of looking at Rio Tinto's financial results, which are driven by unpredictable commodity prices, we can look at how many tonnes of iron ore, aluminium, and copper it has produced over the years.

Production volumes have very little to do with commodity prices from one year to the next, so looking at production volumes should tell us quite a lot about the underlying growth rate of the company's productive capacity, with the volatility of commodity prices largely filtered out.

Operationally, Rio Tinto is a very stable business

Here's a chart showing Rio Tinto's production volumes, focusing on its three main products of iron ore, aluminium (bauxite), and copper.

The first thing to note is that Rio Tinto's production volumes have been very stable from one year to the next. This is good because it means we may be able to forecast the company's future production volumes with a reasonable degree of confidence.

Looking at each of the three core products in turn:

As a quick sanity check, here are the production volumes from the previous ten years.

What this chart shows is another decade of steady production, so it seems reasonable to assume that Rio Tinto's production volumes will remain stable in the future.

Interestingly, the growth trends from the 2012-2021 period were already in place during the 2002-2011 period, only more so. For example, during 2002-2011:

The 15% growth rate for aluminium production from 2002 to 2011 is particularly impressive, but much of this was due to the 2007 acquisition of Alcan for $38 billion. Unfortunately, this acquisition turned out really badly. The $38 billion price tag was way too high and led to the $20 billion write-downs I mentioned previously.

When the acquisition was made, Rio Tinto was earning an average of $4 billion per year, so the purchase price was ten times Rio Tinto's average earnings.

That breaks one of my rules of thumb by an enormous margin:

Rule of thumb: Be wary of companies that spend more on acquisitions than they make in profit

Turning back to Rio Tinto's production volumes, they're very stable and that's good because they give the company a stable foundation for producing future earnings and dividends.

However, although it's useful to strip away commodity prices so we can see what's going on underneath, Rio Tinto is a mining company and its results are heavily influenced by commodity prices, so to ignore them completely would be madness.

Given their importance, let's have a look at how metal prices have affected the company's results over the last ten or twenty years.

Over the medium-term, price volatility trumps production stability

The previous chart showed Rio Tinto's iron ore production volumes increasing very steadily from 90 million tonnes in 2002 to 192 million tonnes in 2011. That means iron ore production slightly more than doubled in a decade, which is a decent enough growth rate.

In contrast, underlying earnings from iron ore went from $458 million in 2002 to $12,853 million in 2011. That's an increase of 2,700% in a decade, which is nothing short of astonishing.
So how does that happen? How do underlying earnings go up 2,700% when underlying production volumes only went up 113%?
The answer, of course, is that iron ore prices went up. And they didn't just go up a bit, then went into the stratosphere.

For example, in 2002, the price of a tonne of iron ore was around $10, but by 2008 it had increased to a previously unthinkable $195. That's a 20-fold increase and it was almost entirely responsible for Rio Tinto's 27-fold increase in iron ore earnings.

And it wasn't only the price of iron ore that went up. Copper went up seven-fold between 2002 and 2011 and aluminium more than doubled from 2002 to 2008. But the gains in iron ore prices were by far the largest and by the end of that period, Rio Tinto had been transformed from a diversified miner into one almost entirely dependent on iron ore.

So, commodity prices can change dramatically over a ten-year period and that can have a dramatic effect on where Rio Tinto gets most of its profits.

On that basis, it seems clear that if we are to have any opinion on Rio Tinto's future prospects, we need to form an opinion on where the price of iron ore, aluminium, and copper are likely to be in the future.

And to do that, we'll need to understand what drives commodity prices over the medium and longer term. One way to explore this topic is to look back to the 2002-2011 period to understand why iron ore prices went up 20-fold.

China is the elephant in the room

It is no mere coincidence that iron ore prices exploded during the 2000s, just as China's industrialisation was driving a construction project perhaps an order of magnitude larger than anything this planet has ever seen.

Industrialising a country with a population of 1.4 billion takes a lot of steel, so China became the global leader in steel production. And all that steel needs a lot of iron ore, so China's iron ore imports went from about 100 million tonnes in 2002 to about 700 million tonnes in 2011.

For context, global iron ore production in 2002 was about 1,000 million tonnes and by 2011 it had increased to about 1,900 million tonnes, which means China was importing about 10% of the global iron ore supply in 2002 and almost 40% by 2011.

To put it bluntly, China's industrialisation led to a phenomenal increase in demand for iron ore.

For most products, an increase in demand isn't a big deal:

If demand for a product goes up, suppliers can charge higher prices and earn higher profits

Those higher profits will attract additional supplies so overall supply soon increases

The increase in supply reduces prices and profits to normal levels, at which point supply stops increasing

If we're talking about cars or covid masks then supply can usually increase or decrease to match demand in a matter of months. But for products like iron ore, it can take many years for supply to adjust to an abrupt increase in demand.

That's because opening a very large mine is extremely hard, expensive, and time-consuming. You can't just flick a switch and bring on another 10 million tonnes of iron ore supply. You have to:

Find the iron ore deposits, which can take years

Get through all the various negotiations with local communities and other stakeholders, can take years

Put lots of heavy infrastructure in place, perhaps even building hundreds of kilometres of railway and a shipping port to transport the iron ore to customers (which can takes years)

To use the jargon, the supply of iron ore, aluminium and copper is inelastic. When demand for iron ore goes up, as it did when China industrialised, supply doesn't respond in a timely manner. Because of that lag, prices exploded from $10 to $195.

For Rio Tinto and its shareholders, this was like winning the lottery. Prices went sky high, but because supply takes so long to come on stream, prices and profits remained extraordinarily high for years.

Inevitably though, this sort of thing doesn't go on forever. Eventually, supply does catch up with demand and eventually demand does begin to ease, but because supply is inelastic in both directions (slow to increase and slow to decrease), this can cause prices and profits to collapse.

That's precisely what happened after Rio Tinto acquired Alcan in 2007. Demand fell during the global financial crisis and supply was able to catch up with demand, so prices fell and Rio Tinto had to write off $20 billion of shareholders' money.

The big risk for Rio Tinto is that something like that might happen with iron ore. In other words...

What happens to Rio Tinto when China goes ex-growth?

At the height of its construction boom, China was putting up some simply astonishing numbers:

In 2009, China invested $3.5 trillion in new buildings, roads, and railways

In 2011, the 12th five-year plan targeted 26 million new homes, 83,000km of new roads, and 45,000km of new railways

By 2012, China was producing more steel than the rest of the world combined (and that continues to be the case today)

All of this kept iron ore prices above $150 per tonne for much of 2008-2011.

But after three decades of near double-digit annual growth, China succumbed to the inevitable limits to exponential growth on a finite planet.

Having exceeded a 10% growth rate for the last time in 2010, its growth rate has consistently declined to 5% and nobody knows where that decline will stop (thanks to its one-child policy and a preference for boys over girls, China's population is expected to enter a long decline somewhere around 2030).

So demand growth slowed, but new mines were still coming onstream and eventually, the world became awash with iron ore and steel. The inevitable price collapse arrived during 2014-2016, as the chart below shows.

Prices briefly fell below $40 per tonne and even though much of Rio Tinto's iron ore production was still profitable at that price, it was obviously much less profitable than before. This is why Rinto's revenues and underlying earnings fell during the middle of the last decade.

However, after the price collapse, things started to look up. Iron ore prices began to recover and by 2019 they were consistently close to $100 per tonne. Rio Tinto's revenues and underlying earnings recovered back to pre-price-crash levels and (importantly for dividend investors) the company's dividend was only reduced for a single year (by 20% in 2016), after which the dividend has increased significantly.

So China's transition from rapid industrialisation to the more sedate growth of a mature modern economy did have a negative impact on Rio Tinto for several years, but the impact was neither catastrophic nor permanent.
Note: If you'd like to know more about the impact of China on the price of iron ore, there's an excellent summary called The Iron Ore Price Wars: 2002-2017.
The whole point of this jaunt through history was to better understand what drives iron ore, aluminium, and copper prices.

The summarised version is that demand for these metals is very stable and growing slowly, unless there is a dramatic change in the physical side of our global economy, such as the rapid industrialisation of China.

Extrapolating that into the future, my basic assumption is that demand for iron ore, aluminium, and copper will continue to grow as the global population grows ( perhaps to 11 billion by the end of this century) and continues to urbanise.
But will there be another massive change to global infrastructure in, say, the next ten or twenty years that could have a dramatic impact on metal prices?
Rio Tinto says the answer is yes: The expected transition to a "green" global economy could be a key driver of both demand and prices for metals over many decades.

The green industrial revolution will dwarf China's industrialisation

To have just a 50/50 chance of keeping global warming to less than 1.5 degrees above pre-industrial levels, we need to reduce the global economy's greenhouse gas emissions to net zero by 2050.

There are various ways to achieve this, but according to the International Energy Agency (IEA), the world will need to be adding an additional 630 gigawatts of solar power and 390 gigawatts of wind power, every year, by 2030. That's more than four times the current expansion rate and requires the equivalent of installing the world's current largest solar park every single day, for years.

It will also require annual investment in emission-reducing infrastructure to increase from $1 trillion today to more than $4 trillion every year for the next few decades,

This will be the largest engineering and construction project the world has ever seen, by a country mile, so it could have a significant impact on the demand for and price of iron ore, aluminium, and copper. But what sort of impact might it have?

Iron ore: No expected jump in demand, supply, or prices

Let's begin with iron ore because it's Rio Tinto's core product. I'll also start with supply because that's the easiest thing to forecast.

As I've already said, the supply for these commodities tends to be stable because it takes time to expand or open mines. For context, Rio Tinto increased its iron ore supply by 9% per year from 2002 to 2011 and by 4% annually from 2012 to 2021.

Looking forward, it seems likely that supply will grow more slowly.

For example, even if we do manage to build enough wind turbines to reach net zero by 2050, the IEA forecasts global steel production to increase from around 1,850 million tonnes today to around 1,950 million tonnes by 2030. That's a growth rate of just 0.5%.

"Driven by population and GDP growth, global steel demand will likely recover and continue to increase. This is especially because of economic expansion in India, the ASEAN countries and Africa, even as demand in China is expected to peak and begin to decline within the next few years." - International Energy Agency

Other forecasts have steel production growing slightly faster, but some predict a peak in global iron ore production by 2030 because:

The global rate of urbanisation has already peaked, with more than 55% of the global population already living in cities

Less steel will be used per building or car through improved design

Steel will last longer thanks to the wider use of coatings and alloys

A greater proportion of steel will be recycled as the circular economy becomes the norm

We will increasingly use alternatives such as aluminium

So the outlook for iron ore production is uncertain, but most forecasts suggest a very low growth rate.

As for demand, the IEA and others don't expect demand to differ materially from demand.

That has a direct impact on the expected price of iron ore because if supply and demand are broadly in balance there is no obvious reason to expect the price to go up or down significantly compared to where it's been in the past.

The World Bank, for example, has forecast the price of iron ore to be $90 per tonne in 2030, which is close to (and probably based on) the average of the last ten years. $90 is also below the current price of $120 per tonne, which is still elevated thanks to covid-related supply/demand disruptions.

While it may seem like a cop-out to base price forecasts on historical averages, in reality, commodity prices are about as predictable as share prices (i.e. not at all predictable) so using past prices as a baseline is sensible.

Given all of the above, here are my assumptions for Rio Tinto's iron ore operations over the next decade:

Iron ore production increases steadily, by 1% per year

Iron ore earnings per tonne revert to the average of the last decade (as covid-induced issues subside) and then increase by 2% per year (in-line with the inflation target of many central banks)

Aluminium: Held back by its carbon-intensive production process

For some context, this chart shows aluminium prices over most of the last decade:

Aluminium has properties that will be useful in the transition to net zero, such as light weight for efficient vehicles and corrosion resistance for solar panel frames. This should give the metal a brighter future than steel (and therefore iron ore).

To some extent this has already been true, with global aluminium production roughly doubling over the last decade, fuelled by China's industrialisation.

However, looking forward, the IEA forecasts global aluminium production to grow by about 8% by 2030, or about 1% per year, in a world where we reach net zero by 2050.

This growth forecast seems low for such an attractive metal of the future, but aluminium is very carbon-intensive to produce, with around 15 tonnes of carbon dioxide emitted for every ton of aluminium. If the world is to reach net zero by 2050, the carbon cost of ramping up aluminium use would outweigh the benefits.

Rio Tinto is trying to address this issue in various ways, such as ELYSIS, a joint venture to commercialise and scale up a method of smelting aluminium that produces no greenhouse gases. Unfortunately, this is still a very early-stage project.

An easier way to reduce the carbon intensity of aluminium is to recycle it as part of the circular economy. The more recycling the world does the less carbon we will emit, but this will also reduce demand for primary aluminium from producers like Rio Tinto and this is another reason why aluminium production is only forecast to grow by 1% per year.

Given aluminium's expected low growth rate, it seems likely that supply will easily keep up with demand, and with supply expected to keep up with demand, my baseline assumption is that prices remain at historically normal levels.

The World Bank agrees and has forecast aluminium to reach $2,400 per tonne by 2035, compared to an average of about $2,000 over the last decade. The current price is $2,500, so the World Bank is effectively saying it expects no sustained increase in aluminium prices over the medium term.

Based on the above, here are my assumptions for Rio Tinto's aluminium operations over the next decade:

Aluminium production will grow steadily, at 1% per year

Aluminium earnings per tonne will revert to the average of the last decade (as covid supply/demand issues subside) and then increase in line with inflation, at 2% per year

Copper: The golden child of the green revolution

Of Rio Tinto's core products, copper is likely to be by far the greatest beneficiary of a world where electricity becomes the dominant form of energy.

"The energy transition requires substantial quantities of critical minerals, and their supply emerges as a significant growth area. The total market size of critical minerals like copper, cobalt, manganese and various rare earth metals grows almost sevenfold between 2020 and 2030 in the net zero pathway. Revenues from those minerals are larger than revenues from coal well before 2030. This creates substantial new opportunities for mining companies. It also creates new energy security concerns, including price volatility and additional costs for transitions, if supply cannot keep up with burgeoning demand." - IEA Net Zero by 2050

Under its sustainable development scenario (slightly less aggressive than the net zero 2050 scenario), the IEA forecasts copper demand to increase from 21 million tonnes in 2020 to 25 million tonnes in 2030, equivalent to demand growth of 2% per year.

Forecasts from Rio Tinto and others suggest significantly higher demand growth for copper if the world is to reach net zero by 2050, with copper demand forecast to reach 35 million tonnes by 2030, a growth rate of about 5% per year.

As the chart below shows, the world's existing copper mines and those in the pipeline could struggle to keep up with that level of demand growth and that could have a dramatic impact on the price of copper.

However, if the IEA forecast of 2% growth proves more accurate and copper demand only grows to 25 million tonnes by 2030, the above chart suggests we could meet that demand without serious problems.
What does all this tell us about the future price of copper?
As always, it's near-impossible to know. If supply can meet demand then prices may only increase (in a very volatile fashion) in line with inflation. But if demand cannot consistently meet demand then prices could skyrocket.

The World Bank's 2030 forecast has the price of copper close to its average over the last decade at $7,000 per tonne. As with its forecasts for iron ore and aluminium, that's below the current price of $9,000 per tonne which is elevated because of covid-related supply/demand issues.

Given these uncertainties, I think it's reasonable to assume that copper prices will increase at least in line with inflation, with the uncertainty skewed to the upside.

Based on all of that, here are my assumptions for Rio Tinto's copper operations over the next decade:

Copper production grows steadily, by 2.5% per year

Copper earnings per tonne revert to the average of the last decade (as covid-induced supply/demand issues subside) and then increase by 3% per year

Industrial Minerals: Too small to warrant a lengthy analysis

In addition to iron ore, aluminium, and copper, Rio Tinto also produces a range of other industrial minerals and products, primarily iron ore pellets, titanium oxide, borates, and diamonds.

Given that this part of the business only generates around 5% of the company's underlying earnings, it doesn't make sense for me to spend endless hours analysing each of these products and their potential futures.

A much simpler approach is to look back at the growth of Rio Tinto's minerals business over the last two decades and extrapolate that into the future. Yes, this isn't perfect, but given the relative unimportance of this part of the business, I think this is a reasonable fudge.

Starting with the 2002-2011 period, Rio Tinto's industrial minerals business generated average total earnings of $350 million per year. During 2012-2021 it produced average underlying earnings of just under $600 million. That's equivalent to an annual growth rate of 5.5%.

On that basis, here's my assumption for Rio Tinto's industrial minerals business:

Underlying earnings revert to the average of the last ten years (as supply/demand issues subside) and then grow by 5.5% per year

We now have some forward-looking estimates of what Rio Tinto's earnings might look like in the future and we are beginning to close in on the end goal, which is an estimate of the company's future dividends and therefore its fair value today.

But first, let's bring all of the above assumptions together so we can see what they say about the company overall.

Estimating Rio Tinto's overall earnings per share growth

By entering all of those assumptions into an investment spreadsheet, it's easy to produce a model for Rio Tinto's underlying earnings growth over the next decade. And here it is:

The first thing to note is that the lines on the chart are all nice and straight, but in reality, Rio Tinto's earnings will be anything but straight. It's important to remember that these lines simply represent an estimate of the average of the ups and downs that might happen in reality.

Second, the chart suggests that Rio Tinto's results will still be dominated by iron ore (red) for many years to come, while aluminium (amber), copper (black), and industrial minerals (green) continue to make up a small part of the company's total earnings.

Here's a quick summary of the main figures:

Reported earnings (purple) fall from $21 billion today to $8.8 billion in 2022 as the post-covid chaos comes to an end. That's a big decline but it's still above 2019's earnings

Reported earnings grow from $8.8 billion in 2022 to $11.8 billion in 2030, a growth rate of 3.3% per year

Earnings per share (pink) grow from $5.41 in 2022 (compared to a sky-high $13 in 2021) to $7.02 in 2030

Looking back at the company's past record and given the level of uncertainty inherent in a company like this, I think this model meets my criteria of being both reasonable and conservative.

With this earnings model in place, we can now start to think about the level of sustainable dividend Rio Tinto could pay in the future.

Estimating Rio Tinto's future dividends

To estimate the sort of dividend Rio Tinto might be able to pay, it can be helpful to think of Rio Tinto, or any company, as a type of savings account.

It works like this: If I have a savings account with a 10% interest rate and I want that account to grow by 10% per year, I'll have to reinvest all of the interest payments (or add in some new savings, but let's ignore that option for now). But if I only need the account to grow by 5% then I only need to reinvest half of the interest payment and I can take the other half in cash and spend it on whatever I like.

To translate this into companies, think of the savings as capital employed, the interest rate as return on capital employed, the interest payments as earnings, and the interest withdrawn as dividends.

The starting point is capital employed, which for Rio Tinto is currently about $40 per share.

Rio Tinto generated average returns on capital employed of 12.6% during 2002-2011 and 11.6% during 2012-2021, so let's assume a future return on capital of 12%.

If I plug those figures into a dividend model, I can then adjust the growth rate by adjusting the amount of earnings retained within the business versus the amount paid out as dividends. I can do this by adjusting the dividend cover and my goal is to get the growth rate in this model to match the growth rate from the previous "top-down" model that was based on production volumes and metal prices.

Here's what the model looks like if I set the dividend cover to be 1.5.

This model is slightly more pessimistic than the "top-down" model, with EPS going from $4.79 to $6.55 compared to an increase from $5.41 to $7.02 in the previous model. However, the difference is only around 10%, so I think this model is in the right ballpark. Also, I want my models to be realistic but conservative, so I'm comfortable with this model being slightly more pessimistic.

In terms of dividends, the model says Rio Tinto could afford to pay a progressively increasing dividend, going from $3.19 in 2022 to $4.37 by 2030.

$3.19 is a long way below the record $10 total dividend paid in 2021 and it's also a long way below 2021's $7.93 ordinary dividend, but that huge dividend was only possible because of the recent surge in inflation. Personally, I don't think a $7.93 ordinary dividend is even remotely sustainable, and here's why:

Inflation has an immediate upward impact on the cost of metals, so Rio Tinto's revenues exploded along with metal prices. But it takes time for that inflation to pass through from primary goods like iron ore to the manufactured goods (like trucks) and services (like employees) that make up Rio Tinto's expenses.

Because of that, revenues surged ahead of expenses, which led to windfall profits and record dividends for miners and oil & gas companies. However, input costs will eventually go up with inflation, so margins will eventually return to more normal levels and so will earnings and dividends.

On that basis, I think my model's $3.19 dividend estimate for 2022 is reasonable. It will be wrong, of course, but that's okay because it's the estimate of long-term dividends that matters. And just out of interest, a $3.19 dividend would give the company a still-healthy dividend yield of 5.1% at its current £51 ($62) share price.

The bulk of the dividend model is now in place, so all we need to estimate Rio Tinto's fair value is an estimate of its terminal or perpetual growth rate beyond 2030.

Of course, it's impossible to know what the true figure will be, but as a large and established global business, I would expect its long-term growth rate to be similar to the background growth rate of the global economy.

Given that global population growth is likely to materially slow after 2050, I'm going to assume a 1% real long-term growth rate for the global economy as a whole, or 3% if we include the 2% inflation target.

For a volatile business such as Rio Tinto, I'm going to be pessimistic and assume it won't grow faster than the global economy after 2030. In other words, I'll assume it can grow by 3% per year after 2030 essentially "forever".

With all of that in place we can now estimate Rio Tinto's fair value and, at long last, decide if the current price is attractive or not.

Estimating Rio Tinto's fair value using a discounted dividend model

Fortunately, this is the easy bit.

I won't belabour this point, but in theory, a company's value is equal to the sum of all its future cash returns to shareholders (mostly dividends), discounted by your desired rate of return.

We can calculate this using a discounted dividend model, and if you have no idea what a discounted dividend model is I've written a couple of articles on the subject:

For me, "fair value" is the value of those future dividends discounted by the stock market's average rate of return, which is 7% in the UK.

"Good value" is the value of those future dividends discounted by my target or hurdle rate of return, which is 10%.

All we have to do is plug all of the previous figures into a discounted dividend model (like the one in my investment spreadsheet) and it will calculate the fair value and good value prices for the company. Here's are the results for Rio Tinto:

The table says that if the model turned out to be 100% accurate (which of course it won't), then the following would happen:

Good Value: Buying Rio Tinto at £35.45 would give an expected annualised long-term return of 10%

Fair Value: Buying Rio Tinto at £63.80 would give an expected annualised long-term return of 7%

The current share price is £51, so it's towards the middle of good and fair value and therefore the expected return (according to this model) is also near the middle of 7% and 10%. Also, the estimated dividend yield for 2022 is around 5%, so that's an added attraction for income investors.

In summary, then, Rio Tinto is trading below my estimate of fair value, but is it far enough below fair value to make me want to invest?

Calculating Rio Tinto's margin of safety and target position size

It isn't enough to say that a company is trading below fair value. We need to know how far below the fair value it's trading and that's where the margin of safety concept comes in.

There are various ways to define a margin of safety, but for me, if a company is trading at fair value then its margin of safety is zero and if it's trading at my good value estimate then its margin of safety is 100%. Between those two points, the margin of safety increases gradually from zero to 100%.

With Rio Tinto's £51 share price sitting near the middle of my fair value (£35) and good value (£64) estimates, it should come as no surprise that its margin of safety is 47%. 47% is quite good, but it isn't enough to make me want to invest at the current price.

Here are my rules of thumb for buying, selling, and holding, in terms of the margin of safety:

Rio Tinto is squarely in the HOLD range, so if I already owned it I'd be happy to keep holding, but I wouldn't buy it at the current price.

If the price fell below £45 ($55) then in theory I might be interested as the margin of safety would be 66%. In reality, I probably wouldn't invest unless the price was close to £35 and the margin of safety close to 100%.

There are two reasons for that.

First, investors are very pessimistic at the moment and stocks have fallen a long way, so many of the holdings in the UK Dividend Stocks Portfolio (which my personal portfolio mirrors) have margins of safety close to or above 100%.

Why would I put money into Rio Tinto if its margin of safety was 66% when I can top up existing holdings that have margins of safety above 100%? The answer is that I wouldn't.

Second, I adjust position sizes based on each holding's defensiveness and margin of safety. For example:

As a highly cyclical commodity business, Rio Tinto would have a default position size of 2%, which is very small given that I'm only looking to hold 20 to 25 companies.

This default size is then adjusted up and down depending on the margin of safety and therefore the attractiveness of each holding's valuation.

When the margin of safety is 100% the target size is double the default size

When the margin of safety is 50% the target size equals the default size

When the margin of safety is zero the target size is half the default size

With Rio Tinto's margin of safety close to 50%, its target position size would be close to the default of 2%, and having a holding with a 2% position size, in my opinion, just isn't worth it.

I'd have to do all the work of keeping up to date with the business and adjusting its dividend model, but the investment would only make up a measly 2% of my portfolio. I can justify that effort for holdings that make up 6% or 8% of my portfolio, and perhaps even as low as 4%, but much less than that and I don't think it's worth the effort.

If Rio Tinto's price fell below my good value estimate of £35 then its margin of safety would increase to 100% and its target position size would increase to 4%, and at that point, I can justify the effort. But if the price doesn't go that low then I'm not interested.

Having said all that, after spending a fair bit of time looking at this business, I do think it ticks most of the boxes from my investment checklist and I do think I would invest at the right price. On that basis, I'll be adding Rio Tinto to my watchlist where I can keep it under review.
Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors.

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Should You Buy Rio Tinto For Its 17% Dividend Yield? (undefined:RIO)

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Thanks to significantly higher prices for its core products of iron ore, aluminium, and copper, the company's 2021 dividend comes to more than $10. That's almost twice the previous record dividend and it gives Rio Tinto ( ) a dividend yield of almost 17% at its current share price of $62.

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NYSE-listed ZIM Integrated Shipping Services has invested $6 million in the Series A funding round of Data Science Consulting Group (DSG), a leading technology company specialising in artificial intelligence (AI)-based products, solutions and services.

"DSG expects to use the proceeds of this ZIM investment to, among others, bolster the development of e-volve, its holistic AI governance and decision management system, and to expand its operations and presence to additional territories around the globe. This investment is concluded following a successful commercial collaboration between ZIM and DSG in the creation of a centre of excellence for the development of AI tools for the maritime shipping industry," according to the statement from ZIM.

Eli Glickman, President and CEO, ZIM, says: "The centre of excellence we initiated with DSG is another prime example of a fruitful partnership ZIM has established with an Israeli startup and the successful development and implementation of AI tools to improve ZIM's business decisions. ZIM's innovative spirit, demonstrated by, among others, the adoption of various digital tools, has been an important contributor to our industry leading results and, we expect, will continue to drive our success going forward. Having worked closely with the DSG team, we see their capabilities that can support our ecosystem and are pleased to make this investment that will enable them to further grow their business."

Eyal Ben Amram, EVP & CIO, ZIM added: "There is a growing demand around the world and in our industry for AI-based products and solutions which can improve, among others, supply chain management and the accuracy of forecasting tools. The positive results of our collaboration with DSG during the past year and DSG's proven versatile experience and understanding of AI convinced us to further invest in our relationship with DSG and its team."

"We are proud of the vote of confidence which ZIM's investment in DSG represents," says Elan Sasson, CEO, DSG. "The transformation of a customer turned (also) into an investor is an indication of the impact and reward we aspire to deliver to our customers and precisely the type of relationships we aim to foster. This investment will enable us to further develop our products and technologies and expand our international footprint in markets such as Australia, Japan, and others."

DSG was founded in 2015 by Sasson, Gideon Rosenthal, a brain-science AI expert, and Shaul Abergil, a senior data scientist, as a centre of excellence in AI.

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ZIM to invest $6 million in Data Science Consulting Group

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NYSE-listed ZIM Integrated Shipping Services has invested $6 million in the Series A funding round of Data Science Consulting Group (DSG), a leading technology company specialising in artificial intelligence (AI)-based products, solutions and services.

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EEUU no se quiere quedar detrás de China. El gigante asiático planea construir 150 nuevas centrales atómicas en los próximos 15 años para reducir su producción de CO ₂ y obtener la independencia energética en 2035. Los norteamericanos han respondido con un órdago de 300 nuevos reactores operativos y conectados a la red en 2050. Sin embargo, estos serán significativamente menos potentes. Si consiguen cumplir sus objetivos, al final los chinos tendrán una gran ventaja sobre los americanos.

En total - según la presidenta y directora ejecutiva del Instituto de Energía Nuclear de los Estados Unidos Maria Korsnick - estos reactores añadirán 90 gigavatios a la producción eléctrica del país. Los 150 reactores chinos, añadirán 147 gigavatios en 2035, quince años antes que los americanos.

Minireactores vs reactores

La diferencia está en el tamaño de los reactores. China construirá centrales atómicas convencionales y los 300 reactores americanos serán SMR (las siglas inglesas de pequeños reactores modulares). Estos últimos tienen, teóricamente, varias ventajas sobre los reactores convencionales de gran tamaño producto de su diseño y reducida potencia, que pasa de los 1.100 megavatios de un reactor típico a los 300 megavatios de un SMR.

Obviamente, los SMR son más compactos y más sencillos que las grandes centrales convencionales, lo que teóricamente los hace más baratos de construir y mantener. La construcción se realiza en serie, en una fábrica, para luego instalarlo parcialmente enterrado en la localización que se necesite. Una central nuclear estándar se construye específicamente en el lugar en el que va a funcionar. La construcción en serie en una fábrica reduce drásticamente la huella de carbono y el impacto ecológico de la central convencional.

El precio total también baja, según sus promotores, con un coste estimado por reactor de 1.000 a 3.000 millones de dólares contra los 6.000 a 12.000 que suele costar una central convencional con un reactor de agua ligera (LWR). También baja el tiempo de construcción: los pequeños reactores modulares tardan de tres a cinco años en estar operativos, mientras que los estándar pueden ir de seis a 12 años dependiendo del modelo.

Disminuye también el tamaño de la zona de emergencia que pasa de un radio de 16 kilómetros a dos kilómetros. Los SMR también tienen mayor seguridad, afirman, con sistemas pasivos y autocontenidos. Los reactores convencionales requieren de grandes sistemas de seguridad, flujo de agua constante y operarios expertos. Además, necesitan cargar y descargar combustible. Muchos de los diseños de SMR, por el contrario, están pensados para no necesitar combustible durante sus 30 años de vida útil (como demuestra el reactor nuclear que está en el corazón del nuevo superportaaviones Gerald Ford). Este diseño también contribuye a la seguridad de los SMR.

Dudas y retos

Los críticos dicen que no todo son ventajas. Un nuevo estudio científico publicado en mayo afirma que los SMR "serán más voluminosos y química/físicamente reactivos que los [reactores estándar], lo que afectará a las opciones para la gestión y eliminación de estos residuos". El estudio admite que "sólo han estudiado tres de las docenas de diseños de SMR propuestos" pero argumenta que "la fuga de neutrones intrínsecamente más alta asociada con los SMR sugiere que la mayoría de los diseños son inferiores a los LWR [reactores de agua ligera] en la generación, gestión y eliminación final de radionucleidos clave en los residuos nucleares".

Las compañías - como NuScale, una de las pioneras en los SMR - han respondido diciendo que el estudio no responde a la realidad y que, efectivamente, no tiene en cuenta las nuevas tecnologías y todos los diseños de SMR que actualmente compiten para llegar a la meta. Hay otros expertos que afirman que, independientemente de los residuos, existen datos que indican que sustituir las centrales convencionales por SMR no solucionará nada. Los reactores compactos, auguran, están destinados a fracasar.

Dejando de lado estas críticas, la propia Korsnick afirma que hay retos importantes en la implantación de los SMR. Principalmente, asegura, habrá que crear una nueva cadena de suministro y fabricación de estas máquinas y agilizar el proceso regulatorio para conseguir los plazos deseados. Korsnick también apunta que debería haber incentivos financieros como los que EEUU aplicó a las renovables durante la pasada década.

El renacimiento de la energía nuclear

Lo que parece claro es que la industria energética en EEUU se quiere alejar de las grandes centrales nucleares. Los americanos han visto como varios nuevos proyectos de centrales nucleares se han disparado de precio. La planta de 2200 megavatios de la compañía Vogtle en Carolina del Sur, por ejemplo, ha visto como su coste ha pasado de 14.000 millones a 30.000 millones de dólares. Otros se han cancelado por completo.

Todo esto a pesar de la política pronuclear del congreso americano - que en 2014 apoyó la creación de nuevos reactores con poco éxito- o la reciente decisión del gobierno de Joe Biden para dar un empujón a la política atómica norteamericana. La Casa Blanca - como lo ha hecho Europa - ha concluido que es imposible atajar el cambio climático sin usar la energía nuclear. No sin poner en peligro el suministro eléctrico como sucedería si se implantaran sólo las renovables, afirman. El pasado abril, por ejemplo, lanzaron un programa de 6.000 millones de dólares para modernizar plantas que estaban en riesgo de cierre.

Mientras, el programa chino para crear 150 centrales de gran potencia está ya en marcha, con un gobierno decidido a cumplir sus objetivos de producción cero de CO2 e independencia energética de otros países, especialmente del petróleo árabe. Y para más inri, los chinos no sólo están invirtiendo en esos reactores convencionales: el primer SMR del mundo se llama Linglong One y comenzó a construirse en julio del año pasado. China tiene previsto que entre en funcionamiento antes de fin de 2026, décadas antes que cualquiera de los americanos.

EEUU no se quiere quedar detrás de China. El gigante asiático planea construir 150 nuevas centrales atómicas en los próximos 15 años para reducir su producción de CO ₂ y obtener la independencia energética en 2035. Los norteamericanos han respondido con un órdago de 300 nuevos reactores operativos y conectados a la red en 2050. Sin embargo, estos serán significativamente menos potentes. Si consiguen cumplir sus objetivos, al final los chinos tendrán una gran ventaja sobre los americanos.

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EEUU responde a China con 300 reactores nucleares en 2050

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EEUU no se quiere quedar detrás de China. El gigante asiático planea construir 150 nuevas centrales atómicas en los próximos 15 años para reducir su producción de CO 2 y obtener la independencia energética en 2035. Los norteamericanos han respondido con un órdago de 300 nuevos reactores operativos y conectados a la red en 2050.

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Gigantes como General Electric llevan años probando nuevos sistemas para hacer que las turbinas de gas funcionen con otros compuestos que no generen gases de efecto invernadero. Uno de los mejores sustitutos que han encontrado es el hidrógeno ‘verde’ y, aunque afirman estar cerca de conseguir que sus turbinas puedan funcionar únicamente con este compuesto, el hecho es que por el momento solo utilizan porcentajes muy pequeños. Pero ahora un grupo de científicos noruegos asegura haber dado con una solución que promete aprovechar todo su potencial: un sistema que sustituye por completo el gas natural por hidrógeno y que además no necesita modificar las infraestructuras ya existente para que funcione.

Las turbinas de gas se usan en centrales termoeléctricas —solo en España hay más de 26.000—, pero también en distintos medios de transporte —desde aeronaves, trenes o barcos a carros de combate— o en aplicaciones domésticas como generadores eléctricos y bombas de agua. El problema es que en su gran mayoría funcionan con gas natural, un combustible fósil que emite grandes cantidades de gases de efecto invernadero a la atmósfera.

El trabajo de los investigadores de la Universidad de Stavanger, en Noruega, ofrece la posibilidad de sustituir este gas por hidrógeno, un elemento que no genera ningún tipo de emisiones nocivas cuando se emplea para generar energía.

Una tecnología de récord

"Hemos establecido un récord mundial de combustión de hidrógeno en microturbinas de gas. Nadie había sido capaz de producir a este nivel", afirma Mohsen Assadi, investigador de la Universidad de Stavanger y el líder del equipo de científicos que ha desarrollado esta tecnología. "La eficiencia del funcionamiento de la turbina de gas con hidrógeno será algo menor. Pero la gran ventaja es poder utilizar la infraestructura que ya existe. Además, no hay emisiones de CO2 asociadas a esta producción de energía".

Ilustración del Airbus A380 que servirá de banco de pruebas para los motores de hidrógeno de Airbus (Airbus)

El equipo lleva usando su sistema desde el pasado mes de mayo. Su microplanta de gas genera energía para toda la universidad. Produce calor para la calefacción, electricidad, les suministra agua caliente y el excedente de energía se vuelca en la red eléctricas y de calefacción.

"En primer lugar, se requiere un cierto esfuerzo para garantizar que la infraestructura de gas existente pueda manejar el hidrógeno en lugar del gas natural. En segundo lugar, se trata de la tecnología para la conversión de la energía, es decir, la propia tecnología de la turbina”, explica Assadi. “En eso nos hemos centrado. Hemos contribuido a las adaptaciones tecnológicas del sistema de combustible y de la tecnología de la cámara de combustión".

La primera planta de hidrógeno verde flotante se construirá en Francia. (Lhyfe and Centrale Nantes)

El siguiente paso para el equipo será convertir su hallazgo en un sistema de conversión que se pueda aplicar de manera sencilla en otras infraestructuras que ahora mismo dependen de los combustibles fósiles.

El gran problema del hidrógeno ‘verde’

Una vez resuelto el problema de la conversión falta acabar con el último malo del juego: producir hidrógeno sin generar emisiones y a un coste competitivo. Se espera que el hidrógeno ‘verde’ sea una de las patas sobre las que se asiente la próxima revolución energética. El hidrógeno ‘verde’ puede servir para propulsar los aviones, los trenes y los coches del futuro que no podrán depender eternamente de baterías de litio.

El Supercar con motor de hidrógeno A4810 de Alpine (Alpine)

Un informe de la Agencia Internacional de la Energía de 2018 aseguraba que el 96% del hidrógeno que se producía en ese momento en el mundo requería de combustibles fósiles. Para producir hidrógeno hacen falta agua y una fuente de energía que la separe en átomos de hidrógeno y oxígeno. Esa fuente de energía no puede venir de combustibles fósiles si queremos reducir drásticamente las emisiones.

Además, hay que producirlo a un coste que pueda competir con otras fuentes de energía sostenibles. El verano pasado su coste era de cinco dólares por kilo, un precio demasiado alto todavía para considerarlo una alternativa. Y también falta crear una red de distribución comercial para que pueda llegar fácilmente al usuario final.

Bombonas de hidrógeno 'verde' que propone Toyota como medio de distribución. (Woven Planet)

Ya hemos visto en Novaceno nuevos métodos de extracción de hidrógeno que pretenden solucionar este problema. El septiembre pasado hablamos de uno propuesto por un grupo de investigadores australianos que logra reducir el coste de producción usando níquel y cobalto como catalizadores para romper las moléculas de agua. Otro catalizador, propuesto en este caso por un grupo de investigadores coreanos, es, según sus creadores, más eficiente y 3.000 veces más barato que los que se emplean actualmente a nivel industrial.

Ahora falta que esas tecnologías se acaben aplicando a escala industrial. España ya puede ir tomando nota de estos avances y otros que seguro están por venir. Según un reciente estudio de la Agencia Internacional de Energías Renovables, en 2050 nuestro país puede estar entre los 15 primeros países del mundo en producción de hidrógeno ‘verde’ y barato. El informe dice que eso es posible gracias a nuestra disponibilidad de terreno para ubicar las nuevas instalaciones de fabricación y nuestro fácil acceso al agua y a fuentes de energía renovables. La lista la encabeza China, que podría producir hidrógeno a 0,65 dólares el kilo, mientras que España llegaría a los 0,80. Este estudio no tiene en cuenta, evidentemente, avances tecnológicos como los que hemos hablado, pero tampoco puede vaticinar si este gobierno, o el que venga en el futuro, apostará de manera firme por producirlo a gran escala.

Gigantes como General Electric llevan años probando nuevos sistemas para hacer que las turbinas de gas funcionen con otros compuestos que no generen gases de efecto invernadero. Uno de los mejores sustitutos que han encontrado es el hidrógeno ‘verde’ y, aunque afirman estar cerca de conseguir que sus turbinas puedan funcionar únicamente con este compuesto, el hecho es que por el momento solo utilizan porcentajes muy pequeños. Pero ahora un grupo de científicos noruegos asegura haber dado con una solución que promete aprovechar todo su potencial: un sistema que sustituye por completo el gas natural por hidrógeno y que además no necesita modificar las infraestructuras ya existente para que funcione.

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La tecnología que convierte centrales de gas natural a hidrógeno

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Investigadores desarrollan un nuevo sistema para plantas de gas que sustituye el gas natural por hidrógeno y produce energía ‘verde’ sin tener que transformar las infraestructuras existentes

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Recession?! Market Selloff?! | Income vs Growth Investing Compared: Why INCOME WINS During Bad Times

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Income Investors | News, Research, and Commentary

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Whether the companies ship oil, natural gas, grain, iron ore, cars, or refrigerators, marine shipping stocks continue to outpace the broader market.

Because of continued supply chain issues, a decrease in fleet growth, significant demand for dry bulk commodities, and the war in Ukraine, the demand for marine shipping has never been higher.

After factoring in longer trade routes, the dry bulk shipping industry is expected to grow by 2.6%.

The demand in all commodity groups is on the rise. From 2010 to 2023:

Iron ore trade is projected to expand at a compound annual growth rate (CAGR) of 3.3%

Coal trade is projected to expand at a CAGR of 2.6%

Grain trade is projected to expand at a CAGR of 5.2%

Minor bulk trade is projected to expand at a CAGR of 3.6%

(Source: " Corporate Presentation: March 2022," Star Bulk Carriers Corp, last accessed May 27, 2022.)

This comes at a time when new emissions regulations and the lack of a common standard for vessel propulsion technology have dissuaded companies from ordering new freight ships. The global order book for freight ships is at a 25+ year low, and fleet growth in 2023 is expected to be at its lowest level since 2000.

As such, the outlook for the marine shipping industry is robust, so investors might want to take advantage of that.

If you're a dividend hog looking for both growth and income, look no further than Star Bulk Carriers Corp (NASDAQ:SBLK). With a diverse fleet of 128 bulk carriers ranging from Supramax to Newcastlemax vessels, Star Bulk Carriers is the largest U.S.-listed dry bulk shipping company.

With an average lifespan of 9.9 years, the company's ships give it exposure to all cargo types and trade routes. Its Capesize ships mainly transport minerals from the Americas and Australia to East Asia. Star Bulk Carriers Corp's Supramax vessels carry minerals, grain products, and steel between the Americas, Europe, Africa, Australia, and Indonesia and China, Japan, South Korea, Taiwan, the Philippines, and Malaysia.

Those long trade routes, coupled with rising gas prices, can eat into a marine shipping company's bottom line. As fuel prices increase, inefficient vessels will be forced to decrease their speeds. Meanwhile, vessels equipped with scrubbers will deliver superior economic performance.

At Star Bulk Carriers Corp, 94% of its ships are fitted with scrubbers, providing significant leverage to fuel price spreads. To date, Star Bulk has generated about $210.0 million in scrubber savings and expects to generate $120.0 million in scrubber savings per year.

Moreover, the company's fleet has one of the lowest average daily operating expenses in the industry, at $4,310 per vessel per day. It also has one of the most enviable RightShip risk ratings: 4.5 stars. A rating of three, four, or five stars means a ship is an acceptable risk. A rating of two stars means RightShip must be contacted for further review, and a rating of one star means a more detailed investigation is required.

Thanks to Star Bulk Carriers Corp's fiscal acumen, its balance sheet continues to improve significantly. Since the end of 2019, the company's adjusted net debt has decreased by 43% to $939.0 million. Over the same period, the company's cash and liquidity have soared by 373% to $593.8 million.

First-Quarter Earnings & Revenue Beat

For the first quarter ended March 31, Star Bulk Carriers announced that its voyage revenue jumped by 80% year-over-year to $360.8 million. (Source: " Star Bulk Carriers Corp. Reports Net Profit of $170.4 Million for the First Quarter of 2022 and Declares Quarterly Dividend of $1.65 Per Share," Star Bulk Carriers Corp, May 24, 2022.)

The company's time charter equivalent (TCE) revenues were $304.9 million in the first quarter of 2022, compared to $156.4 million in the first quarter of 2021. Its TCE rate in the first quarter of 2022 was $27,405, compared to $15,462 in the first quarter of 2021. The 77% increase reflects the significantly improved market conditions.

Star Bulk Carriers Corp's net income soared by 376% to $170.3 million, or $1.67 per share, in the first quarter of 2022, from $35.7 million, or $0.36 per share, in the same prior-year period.

The company's adjusted net income in the first quarter of 2022 was $175.6 million, or $1.72 per share, compared to $35.7 million, or $0.36 per share, in the first quarter of 2021. Wall Street was looking for adjusted net income of $1.41 per share.

Star Bulk Carriers Corp's net cash provided by operating activities was $229.2 million in the first quarter of 2022, compared to $79.2 million in the first quarter of 2021. Its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) were $225.9 million in the first quarter of 2022, compared to $84.7 million in the first quarter of 2021.

Star Bulk Carriers Corp Announces Quarterly Dividend of $1.65/Share

Star Bulk Carriers' reliable cash flow has allowed SBLK stock to provide investors with ultra-high dividends. In the fourth quarter of 2021, the company announced a quarterly dividend of $2.00 per share, for a yield of 24.4%. (Source: " Dividend Policy," Star Bulk Carriers Corp, last accessed May 27, 2022.)

While that represented the third consecutive quarter in which management had raised Star Bulk Carriers stock's dividend, a number of targets must be met for that trend to continue. The company's dividend is based on its total cash balance minus the product of its minimum cash balance per vessel and number of vessels.

As of March 31, Star Bulk Carriers Corp owned 128 vessels, and its total cash balance was $444.4 million. Taking into account the company's minimum cash balance per vessel of $2.1 million and deducting the net proceeds of $4.3 million for the shares issued and sold under its effective at-the-market offering programs during the quarter, the board declared a quarterly dividend of $1.65 per share, payable on or around June 16 to shareholders of record as of June 3.

Star Bulk Carriers Corp might have lowered its quarterly payout, but it's nice to know that SBLK stock's dividend is still safe. The company's payout ratio is a paltry 33.5%, which is way below the 90% threshold I like to see. Had the company been less fiscally responsible, it could have easily raised its payout again in the first quarter. Hopefully, because of the company's strong cash flow and low payout ratio, its board will be able to give investors additional raises this year.

Investors don't seem to be too put off by the dividend cut. It's not as if Star Bulk Carriers Corp's operations aren't solid. The company did just report an earnings and revenue beat. There aren't a lot of companies doing that right now.

As a result, Star Bulk Carriers stock continues to outperform the market. As of this writing, SBLK stock is up by:

18.1% over the last month

7.5% over the last three months

71.8% over the last six months

50.6% year-to-date

92.8% year-over-year

Chart courtesy of StockCharts.com
The Lowdown on Star Bulk Carriers Stock

The demand for bulk carriers remains high, as is evidenced by Star Bulk Carriers Corp's continued wonderful financial results. The company recently reported its best daily TCE performance in the first quarter of any year, a period in which TCE rates have been traditionally weaker since 2009.

Looking to the next quarter, Star Bulk Carriers has covered 74.3% of its available days at a TCE of $29,759 per day per vessel. This bodes well for Star Bulk Carriers stockholders, especially those looking for a dividend raise.

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Star Bulk Carriers Corp: 24.4%-Yielder Reports Earnings & Revenue Beat

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Whether the companies ship oil, natural gas, grain, iron ore, cars, or refrigerators, marine shipping stocks continue to outpace the broader market. Because of continued supply chain issues, a decrease in fleet growth, significant demand for dry bulk commodities, and the war in Ukraine, the demand for marine shipping has never been higher.

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cemagraphics/E+ via Getty Images

This article was first released to Systematic Income subscribers and free trials on June 13.
Welcome to another installment of our Preferreds Market Weekly Review, where we discuss preferreds and baby bond market activity from both the bottom-up, highlighting individual news and events, as well as top-down, providing an overview of the broader market. We also try to add some historical context as well as relevant themes that look to be driving markets or that investors ought to be mindful of. This update covers the period through the second week of June.

Be sure to check out our other weekly updates covering the BDC as well as the CEF markets for perspectives across the broader income space.

Market Action

It was a tough week for preferreds as equity prices fell while Treasury yields rose as did credit spreads. All sectors finished in the red. For the month of June, only the CEF sector is still above water. For the year, the Energy sector is eking out a small positive return.

After a small relief rally in May, the sector has so far delivered a -2% total return in June.

The high CPI print put a damper on the recent rally across the income space and preferreds did not escape unscathed. So long as inflation has not clearly peaked, the income space will remain volatile, allowing investors to reinvest dividends in attractive opportunities.

Market Themes

The downtrend in the income space has revealed some weaknesses across many income portfolios. In this section, we highlight a few diversification dimensions that investors should keep in mind when thinking about portfolio construction.

The first and most obvious dimension is that of credit quality and it is one that often dominates portfolio construction to the detriment of the other key dimensions. All else equal, higher-quality securities will weaken less during risk-off periods and rally less during risk-on periods. They also present with less default risk for which they enjoy a lower yield. Finding the balance between yield and quality is an essential part of income portfolio construction, however, it is not the only one.

Another important dimension to consider in allocating to preferreds is the first call date. Although most preferred issuers are fairly rational economic agents and will not redeem a security unless it is in their economic interest, they can still do so for second-order reasons such as balance sheet or capital structure considerations. This often means that securities with shorter first call dates will be more resilient than those with longer dates, all else equal.

The third dimension is coupon level. Higher-coupon securities boast a lower duration and will have a lower volatility than their lower-coupon counterparts. Higher-coupon securities have held up better this year. At the same time, a sharp rally in the preferreds sector will benefit lower-coupon securities.

The fourth dimension to consider is the coupon type of the security i.e. whether a security is Fixed or Fix/Float. Latter securities can benefit in a period of rising rates as their coupon will often move above its fixed-rate level if the relevant reset rate (usually Libor or SOFR) rises far enough. This is the reason why Fix/Float securities have tended to hold up better this year.

Finally, whether a security is perpetual or term makes an important difference. Term securities have a lower duration profile and will be more resilient in a period of rising yields, all else equal.

A consideration of these features is more likely to prevent unexpected surprises in portfolio performance in response to changing market conditions. Investors can also rotate within these features to respond to the likely change in market variables such as short-term interest rates or credit spreads. For instance, they can tilt to Fix/Float securities when short-term rates are low and to Fixed rate securities when short-term rates are likely peaking. Equivalently, they can tilt to higher-quality securities when credit spreads are tight and to higher-yielding securities when spreads are more fairly priced.

Market Commentary

CLO Equity CEF Oxford Lane Capital Corp ( OXLC) has issued a 7.125% 2029 $60m ($69m with the greenshoe) preferred - temporary ticker (OXFCV). This is good for a couple of reasons. First, it's a term preferred with a 2029 maturity - more recently, the trend has been to issue perpetual preferreds by CLO Equity CEF Funds (e.g. PRIF.PK, ECC.PD), which are much less attractive due to their significantly longer duration profile.

These perpetual preferreds currently yield 7.3-7.5% - so not super attractive relative to a 7.125% yield of the new 2029 preferred (assuming it starts trading around "par").

Second, the stock has opened at a yield of around 7.5%, which is very attractive relative to the three other term OXLC preferreds, which are all trading well below its yield. The yield curve is relatively flat, so yields don't slope sharply down with lower maturities which the other OXLC preferreds feature.

Three, it offers more relative value opportunities - a nice way to generate additional returns by rotating within the suite over and above what the yield gives you. And four, CLO Equity senior securities have been remarkably resilient over the past few years. The average OXLC preferred is flat year-to-date for example. This is in large part due to their term profile and high-coupon which lower their duration.

Obviously, the fact that defaults have been low has helped as well, which is not guaranteed to happen next time, however, in a serious drawdown, the CLO Equity funds have been quick to buy back their senior securities in order to support their asset coverage ratios. The funds have fairly strict covenants - more strict than the letter of the 1940 Investment Act and which require mandatory redemption in case of asset coverage breach with some lag.

In reality, this is unlikely to happen as the fund would simply deleverage enough to get the ratio in line within the allowed cure period - another example of how preferreds holders get common shareholders to do them a favour (in addition to having common shareholders pay all the fund's fees etc). We view the security as attractive right now.

Stance & Takeaways

Hopes that inflation would peak have been pushed back on the back of a surprisingly strong CPI print. Short-term rates have continued to rise, which has, in turn, supported near-term reset securities. Investors who are overweight fixed-rate securities may want to have another look at this subset of the market. Among others, they include the PNC Financial Services Group Series P ( PNC.PP), which recently switched to a 3m Libor + 4.0675% coupon, in effect, equivalent to a 5.8% stripped yield based on today's Libor of 1.69% as well as the AGNC 7% Series C ( AGNCN), which will switch to a 3m Libor + 5.111% coupon, equivalent to a 7.15% stripped yield based on today's Libor. However, as Libor will likely exceed 3% over the coming quarters, the coupons of these securities should increase further, in turn, supporting their price.

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Preferreds Weekly Review: Enabling Portfolio Diversification Via Different Preferred Types

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This article was first released to Systematic Income subscribers and free trials on June 13. Welcome to another installment of our Preferreds Market Weekly Review, where we discuss preferreds and baby bond market activity from both the bottom-up, highlighting individual news and events, as well as top-down, providing an overview of the broader market.

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David Taljat/iStock Editorial via Getty Images

Since Our Previous Update...

If you have been an investor in the containership industry, then you know well enough how frustrating these past few months have been. On the one hand, companies in the space continue to report monster earnings, pay growing (and in some cases massive) dividends, and feature fantastic cash flow visibility ahead due to their multi-year charters that ensure their robust performance is not about to fade out anytime soon. On top of that, the underlying market conditions continue to form tailwinds that have sustained rates at record highs, meaning any new vessels coming out of the shipyard are instantly chartered at extremely profitable rates.

On the other hand, the overall sell-off in the market persists, and surprisingly enough, containership stocks have also declined substantially despite their ever-improving prospects.

Our two favorite stocks in the space are most likely Danaos Corporation () and ZIM Integrated Shipping Services Ltd. (). In our previous update, we discussed why analysts' estimates were unrealistically low and how ZIM's massive upcoming dividend was to have an explosive effect on Danaos' bottom line. Indeed Danaos recorded (one of) the greatest EPS surprises in years.

Despite Danaos' tremendous backlog and improving financial position, as well as TCE rates remaining at record levels which should allow ZIM (which operates mostly on the spot market/shorter-term charters) to keep generating explosive profits, both companies have seen their shares decline substantially. Specifically, Danaos and ZIM trade roughly 37% and 46% lower from their 52-week highs, respectively.

Data by YCharts

Today we are revisiting Danaos' investment case. However, besides ZIM's upcoming dividends again presenting a stimulant to the company's future profits, Danaos' investors now celebrate another catalyst to support the stock's bullish case.

In a 6-K filing that barely made any headlines, Danaos announced that its BoD has now approved a $100 million share repurchase program. Anybody who has dived into Danaos' investment case knows how undervalued the stock is and how the stock's performance over the past few months has mismatched the company's book value and future earnings prospects. We have been waiting for this announcement for quite some time now, with management being rather conservative and prudent over the company's liquidity and cash availability for future fleet expansion. With shares at such a big discount from their NAV (more on that later), Danaos' management has likely run out of excuses to give Mr. J Mintzmyer on their next earnings call regarding the absence of a repurchase program. In any case, it's finally here!

Latest Market Developments

The most probable reason for Danaos' and ZIM's share price declines over the past few months is Mr. Market's lack of understanding when it comes to their future earnings potential. Without a doubt, the containership market can be wildly cyclical. Therefore, it may be that the market fears the present euphoria will sooner than later wear off.

However, we remind that:

1. Danaos' long-term charter contracts ensure that the company will keep generating record cash flows for years ahead, even if rates were to fall in the short term.

2. Even if rates were to be halved, both companies (despite the lack of long-term charters in ZIM's case) would still be cash cows and still undervalued on a medium-term investment basis.

3. Regardless, rates have remained at record levels amid ideal market conditions.

And while supply/demand dynamics are likely to normalize from next year amid a growing order book-to-fleet ratio, supply chain disruptions and pressure to decarbonize are expected to offset new-build deliveries in 2023.

Recently there have been additional catalysts that support retention of high rates. These include port congestion in Germany due to labor strikes and ILWU's contract expiring July 5th.

Why Danaos Is poised To Trade At $150 And Beyond

To answer this question, we have to assess two aspects. Firstly, we need to assess what is Danaos' future earnings potential together with its stake in ZIM. Secondly, we need to assess Danaos' current valuation based on its current book value and its future earnings potential, combined with the newly announced buybacks. Let's go!

Danaos' Fleet Employment

Danaos' core earnings in the near future are going to be predominantly sourced from its long-term fleet employment which provides fantastic cash flow visibility. In Q1 2022, the company reported $229.9 million in operating revenues, 6.9% higher than Q4 2020, as its previous charters rolled over the newer, higher-rate ones. This trend is set to continue.

Take Danaos' 13 8,500-9,600 TEU vessels, for instance (I have trimmed the charts for clarity. They go further out 2026). As you can see, the new charters kicking in Q2, Q3, and 2023 are, on average, around double their current ones.

This applies to numerous other of Danaos' vessels. Take, for illustration, the company's 11 2,300-2,600 TEU vessels. The three new charters kicking in Q2 are at rates that are 100%, 53%, and 40% higher than their previous ones.

In its latest results, Danaos reported an operating income of $140 million, which excludes changes in the value of the ZIM stake and dividends from ZIM. Based on its fleet's upcoming employment roll-overs, we can reasonably assume an average operating income of at least $155 million in each of the following three quarters. It could be higher based on my napkin math, but we remain prudent. This should translate to an operating income of around (or larger) $605 million for fiscal 2022. Accounting for roughly $65-$70 million in interest and other finance expenses, Danaos fleet employment alone should yield net income close to $540 million, or $26 per share this year.

Earnings From ZIM's Dividends

In its Q1 report, Danaos shared that subsequent to the quarter-end, they sold 1,500,000 out of their 7,186,950 ZIM shares. Therefore, the company should now be holding 5,686,950 shares.

When asked regarding Danaos' stake in ZIM in its Q1 earnings call, Mr. John Coustas stated the following:

this is not a long-term holding. But we do not have also any intention to get out of ZIM for the time being. We believe that ZIM in line with all the other liner companies is going to make fantastic results for 2022. And it's going to deliver a significant dividend like the one that we've received this year. So for the time being, we are in a kind of a hold position.

Therefore, it's fair to assume that Danaos will not be selling any more of its ZIM stake through 2022, especially considering that shares have declined substantially lately (and are quite undervalued, in our view). Mr. Coustas is also right to expect that ZIM will deliver massive dividends within 2022, as was the case with the $110 million the company received in Q1 with respect to ZIM's Q4 2020 dividend.
For those needing a reminder regarding ZIM's dividend policy, here it is: ZIM intends to distribute a quarterly dividend between 30% and 50% of its annual net income to stockholders.
How It Works:

ZIM's dividend for each of the first three quarters of the year is going to total roughly 20% of its net income generated in each quarter.

Each fourth quarter once a year, the company is to distribute a dividend so that the cumulative dividend amount for the year will sum between 30% and 50% of its annual net income.

Delivering on this policy, ZIM paid $17.00 per share last year, representing around 50% of its annual net income.

Analysts expect ZIM to post EPS of around $43.60. However, we once again believe that analysts are behind the curve here, and ZIM should produce EPS north of $55 for the year. But for the sake of this example, let's agree on $50 to be conservative.

Assuming the company distributes $25 per share (50% of its net income), then Danaos should receive: 5,686,950 shares times $25 times 0.9 (to account for the 10% withholding tax Danaos records through its Singapore SPV) = $128 million in ZIM dividends.

Therefore, Danaos should record roughly $6.20 in net income per share from ZIM's dividends this year based on these assumptions. Combined with the $26.00 per share we derived earlier from the company's core fleet employment, Danaos should report EPS north of $32.00 in fiscal 2022, excluding any gains/losses from the movement of ZIM's stock price.

To once again illustrate analysts being behind the curve here, Danaos' consensus EPS estimates assume EPS of $23.84 for the year. Now that we have a better idea regarding Danaos' net income prospects for the year let's put that into perspective with the stock's valuation.

The Valuation & Buybacks

First and foremost, with the stock trading close to $69.40, Danaos trades at a P/E of just over 2 based on our EPS estimates. However (and despite the fact that Danaos should enjoy record earnings for the next few years), we know that the P/E ratio is not particularly useful here. After all, based on our estimates for ZIM, the stock is currently trading at a P/E below 1, with the company having a net cash position of $780 million.

Instead, let's consider the company's equity value. Danaos has been generating massive profits lately, and most of it is retained in the balance sheet one way or the other. This means capital is allocated for deleveraging, purchasing additional vessels, etc., with minimal outflows as capital returns. Therefore, the equity value on the balance sheet continues to grow rapidly.

Here's where things get interesting. Danaos featured $2.4 billion worth of equity value as of its latest results. This means that if the company were to sell off its assets, settle all of its liabilities, and distribute the cash to its shareholders, we should receive around $116 per share. The stock is thus trading at around 60% of its NAV. However, this is not entirely accurate. In fact, Danaos vessels should be valued significantly higher than their balance sheet figure since:

Elevated rates in the market imply vessels are worth more since they can produce higher cash flows.

Each ship comes with long-term charter contracts attached whose future cash flows are not shown on the balance sheet as an asset.

In that regard, we estimate Danaos' NAV to be above $150, but there is room for speculation regarding that number, so we will leave it at that.

Now, let's consider Danaos' newly announced buybacks. You can already imagine that with the stock trading at such a discount, repurchasing shares here is going to be massively accretive for shareholders. Danaos currently has a market cap of $1.43 billion. With insiders (specifically Mr. Coustas) owning a massive chunk of the stock, only around 55% of shares are public float. Furthermore, just over 10% of Danaos' float is currently shorted. This means that the company would be buying around 14% of the public float through its $100 million repurchase program at current price levels. The new buying volumes from repurchases alone should boost the stock higher significantly, considering the current trading volumes are relatively thin (around 440K shares/day).
So let's summarise:

Danaos is trading at a 40% discount against its NAV (at least)

NAV is going to increase by roughly 40-50% this year based on prudent earnings projections (excludes outflows on dividends buybacks)

The company is about to repurchase roughly 14% of its public float

The dividend yield is not substantial at 4.2%, but DPS could easily grow 50%+ this year (payout ratio is below 10% of projected earnings)

By next year, we project Danaos' NAV/share should exceed $150 this year (without any adjustments amid the value of their contracts). This figure could be higher based on how accretive the upcoming buybacks will be (i.e., by how much of a discount Danaos will be repurchasing its shares at).

Now there is an important note to make regarding NAV. Danaos' equity/NAV value includes the stake in ZIM, whose stock price on March 31st (quarter end) was close to $72. However, the stock is currently trading at $49.60, and our above points imply a constant NAV from ZIM. Still, it's fair to assume that by next year ZIM will be trading at least close to $72. Again, we remind its P/E is below 1 and has net leverage of 0.

Conclusion

Based on the sum of our points, we believe that Danaos can easily support a price close to $150/share by next year. And yet, shares would not trade at a premium to NAV at that price.

While Danaos' performance (along with most stocks in the space) has been underwhelming lately, the company's fundamentals & earnings/capital return prospects are the brightest they have ever been. At this point, the journey upward appears to be a waiting game, so patience is our best friend here.

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Danaos' New Buybacks And ZIM's Dividends To Push Stock Over $150 (NYSE:DAC)

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If you have been an investor in the containership industry, then you know well enough how frustrating these past few months have been. On the one hand, companies in the space continue to report monster earnings, pay growing (and in some cases massive) dividends, and feature fantastic cash flow visibility ahead due to their multi-year charters that ensure their robust performance is not about to fade out anytime soon.

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El petróleo vuelve a la carga. Tras unos días de alivio en los precios (cayeron en 40 dólares en poco tiempo), el petróleo parece haber retomado la senda alcista ante el anquilosamiento de la guerra en Ucrania y la ausencia de alternativas rápidas y efectivas para reemplazar al petróleo ruso del mercado. Este lunes, el barril de Brent vuelve a cotizar holgadamente por encima de los 110 dólares (el barril sube un 10% en lo que va de semana), unos niveles que de mantenerse forzarán un reequilibrio del mercado a través de la 'destrucción de demanda', un proceso doloroso para el que la Agencia Internacional de la Energía ya ha comenzado a prepararnos.

La destrucción de demanda en términos económicos se refiere a una disminución permanente o sostenida de la demanda de un determinado bien (normalmente energético: petróleo o gas) como última respuesta a unos precios muy altos y persistentes. Ante la escasez y los altos precios, los consumidores buscan vías para reducir el consumo de ese bien o tratan de encontrar caminos alternativos que eviten directamente su consumo.

El elevado precio del petróleo ha llevado a que la gasolina y el gasóleo alcancen precios históricamente altos en los países desarrollados. La teoría económica asegura que la demanda de petróleo es rígida en el corto plazo, puesto que la estructura económica no puede cambiar de la noche a la mañana: modificar el funcionamiento de los motores de combustión o los sistemas de calefacción lleva tiempo y es costoso. Pero si el precio del petróleo sube mucho y se mantiene ahí por unos meses, el resultado puede ser un menor consumo sin la necesidad de cambiar la estructura de la economía: esto es la destrucción de demanda.

Los economistas de JP Morgan creen que el mercado de petróleo se está acercando a este escenario rápidamente. Para que se produzca la destrucción de demanda, el petróleo se tiene que mantener cerca de los 120 dólares por unos meses. Ahora mismo, el barril de Brent cotiza en los 118 dólares, rozando esa zona, todo hace indicar que se mantendrá ahí o por encima mientras que dure la guerra en Ucrania.

No obstante, "dado el shock de la oferta y salvo que se produzcan avances en las negociaciones de paz, la destrucción inmediata de la demanda será la única forma de reequilibrar el mercado a corto plazo. Mirando más allá de lo inmediato, si el petróleo se mantiene en esos 120 dólares por unos meses, el golpe a la demanda de petróleo podría ser de unos 1,2 millones de barriles por día este año, dejando el consumo de petróleo en unos 550.000 barriles diarios por debajo de los niveles de 2019".

Los analistas de Natixis comentan en un informe que pese a los últimos movimientos del precio del petróleo, la dirección del conflicto entre Ucrania y Rusia seguirá siendo el factor clave de los precios a corto plazo. Mientras que una rebaja de la tensión podría acabar con la estructura actual de backwardation (denota escasez de petróleo en el mercado), la continuación del conflicto hace que aumente el riesgo de sanciones (al estilo de las impuestas por EEUU o Reino Unido), lo que podría poner en peligro las importaciones de petróleo ruso en Europa y, por tanto, seguir agudizando la estructura actual del mercado de futuros, que evidencia la escasez de crudo en el mercado spot o físico.

¿Se puede reemplazar a Rusia?

"Aunque en teoría hay suficientes barriles para compensar por completo la pérdida de las exportaciones de crudo de Rusia a Europa, la velocidad a la que estos barriles podrían llegar al mercado es demasiado lenta en comparación con la pérdida inmediata de los volúmenes rusos. Como tal, en un escenario de sanciones totales, el mercado petrolero se vería obligado a recurrir a la destrucción de la demanda... Esto vendría acompañado de precios del petróleo significativamente más altos en un principio", aseguran los analistas de Natixis.

Desde la AIE son algo más pesimistas y creen que esta fase de destrucción de demanda podría estar a la vuelta de la esquina. En su último boletín, la AIE ha incluido dentro de sus escenario una caída de la demanda por los elevados precios del crudo que responde a un descenso del consumo derivado del alto precio del petróleo.

La AIE señala que "es posible que Rusia pronto se vea obligada a cerrar los grifos del petróleo, a medida que el descenso de la demanda interna se combina con un embargo voluntario cada vez más mayoritario por parte de los clientes internacionales, a medida que las sanciones ahuyentan a más compradores. Estimamos que, a partir de abril, unos 3 millones de barriles de la producción de petróleo de Rusia podrían desaparecer del mercado. Como resultado, la producción total de petróleo se desploma a alrededor de 8,6 mb/d en abril y como no podemos saber cuánto durará la crisis, hemos mantenido ese nivel hasta finales de año".

Periodos de destrucción de demanda

Ante este escenario, la AIE ha revisado a la baja el consumo de petróleo entre el segundo trimestre de 2022 y finales de 2022 en un millón de barriles diarios. "Hay acciones que los gobiernos y los consumidores pueden tomar para reducir rápidamente la demanda de petróleo a corto plazo". La AIE prevé que la destrucción de demanda será de unos 500.000 barriles por día en lo que resta de año. Sin embargo, la caída del consumo podría ser mayor si se los países adoptan una combinación de medidas para sortear la subida del crudo rápidamente. Siguiendo a pies juntillas el decálogo de recomendaciones de la AIE se podría reducir el consumo de crudo en 2,7 millones de barriles por día.

Algunos ejemplos pasados de destrucción de demanda por una subida intensa de precios son los de las crisis del petróleo de 1973-74 y 1979. Durante 1980, el 'peso del petróleo' (la parte del PIB mundial gastada en importaciones de petróleo) alcanzó el 7,3%. El impacto de estos precios más altos del petróleo en la economía, además de la fuerte destrucción de demanda a corto plazo (y las crisis económicas que desencadenó), impulsó al mundo a buscar nuevas formas de seguir progresando sin tener que consumir tanta energía derivada del petróleo. Los expertos de Natixis explican que se lograron importantes ganancias de eficiencia gracias a la innovación tecnológica expulsando al petróleo de la generación de energía en favor de alternativas como la energía nuclear y el gas natural.

Otro episodio de destrucción de demanda más cercano se produjo entre 2007 y 2008 y tuvo algunas reverberaciones entre 2011 y 2014. En esta ocasión, además de las dos crisis que hubo por medio, el mundo desarrollado trabajó para mejorar la eficiencia de los coches, mejoró el transporte público y se buscaron alternativas (aunque ligadas con el petróleo) que diversificaron la producción de crudo como el fracking en EEUU o las operaciones en aguas ultraprofundas en Brasil.

Ahora, si el petróleo se mantiene en cotas elevadas durante un tiempo (al igual que el gas natural), además de la destrucción de demanda de corto plazo, esto podría suponer el impulso definitivo a las energías renovables en el medio y largo plazo. Los movimientos de precios generan los incentivos más potentes. Las ventas de coches eléctricos o la instalación de paneles solares en domicilios y empresas, junto a una mayor inversión en la mejora de las baterías para almacenar energía, pueden ser algunas de las tendencias que sufran un mayor impulso como producto de este nuevo pico del petróleo.

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El petróleo está a punto de entrar en fase de destrucción de demanda: qué significa y qué implicaciones tiene

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El petróleo vuelve a la carga. Tras unos días de alivio en los precios (cayeron en 40 dólares en poco tiempo), el petróleo parece haber retomado la senda alcista ante el anquilosamiento de la guerra en Ucrania y la ausencia de alternativas rápidas y efectivas para reemplazar al petróleo ruso del mercado.

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It's been a rough year for shareholders in the Credit Suisse Crude Oil Shares Covered Call ETN (NASDAQ: USOI) with shares falling by over 50% in line with a broad decline in crude oil.

If you're familiar with USOI, however, then you're likely aware that a price decline in USOI isn't necessarily the whole story. That is, USOI is designed to be an instrument which gives a very strong dividend yield to compensate shareholders. Specifically, as we will discuss in the next sections, USOI is an instrument which may be one of the best options for individuals looking to hold crude oil in this market.

Understanding USOI

Let's start our discussion by digging into the details of exactly what USOI is. In my opinion, USOI is one of the more interesting ETN designs in the oil space in that it is not just tracking crude oil, but it does so through a complete investing strategy. USOI is an ETN created by Credit Suisse which gives investors the return as though they were holding the popular USO ETF and selling a covered call against the position which is 6% out of the money. This strategy executes monthly, which means that investors should receive a monthly dividend. Historically, this dividend equates to about 12-20% on an annualized rate.

There are a few pieces to unpack here with varying degrees of impacts upon returns. First off, let's talk about the USO piece. This is fairly straightforward in that most individuals are aware of what USO is, but if not, USO is perhaps the most popular oil ETP. It provides exposure to the front month of WTI futures and it rolls this exposure into the second month futures contract roughly 2 weeks before expiry.

The key thing to keep in mind about USO is that roll yield is a real problem that tangibly impacts returns. Specifically, roll yield is what happens when you hold exposure along a futures curve and futures prices converge towards spot prices.

Numerically speaking, around 78% of all months for the past decade have seen the front two futures contracts of WTI caught in what is known as "contango", or the first contract priced lower than the second month contract. What this tangibly means is that in general, roll yield will largely be negative for USO since it is rolling exposure into higher priced contracts (due to contango) and these contracts will be converging towards the spot price.

The impacts from roll yield are not insignificant. As you can see in the following chart, the past decade has witnessed some serious degradation in performance in USO versus outright WTI due to strong contango in the market.

In some years, USO has lagged an outright investment in WTI by several dozen percentage points. Last year was a bit of an exception in that as crude markets saw inventories tightening, backwardation entered during several months of the year, which means that USO actually outperformed WTI since futures were being rolled to lower prices and these lower prices were rolling up in value towards the spot price in many months of the year.

All this said, investors in USOI need to be aware that since the strategy is directly tracking USO, as long as the market remains in contango, you will generally see small but steady losses from roll yield.

Another key thing to keep in mind about USOI is that since it is a covered call strategy, it is selling off its upside above 6% for months in which WTI increases by more than this amount. This is an important factor to remember in that since WTI has been sliding in value this year, we are probably going to see a rebound at some point in the future. If the current level of volatility continues through the recovery, this rally will likely be double-digit percentage returns over short time periods. USOI is selling off upside exposure to this movement in exchange for dividends.

Neither of these factors (roll losses or the covered call) represent a strong reason to either buy or sell the ETN at this time. However, when you combine these factors with the current crude environment, I believe that in the short run, USOI offers an exceptional opportunity for participating in the crude markets.

Crude Fundamentals

The crude markets are currently caught between a rock and a hard place due to the emerging coronavirus. The basic issue boils down to two things: demand is going to slow while supply is still increasing.

First off, let's talk about demand. We currently don't see this in the following chart because it is lagged by a week, but at present, there are broad-based self-quarantines going on across the United States. What this tangibly means is that driving demand has immediately and dramatically slowed and this will result in refineries cutting runs.

Again, EIA data is a few days lagged (this chart shows through last Friday), but I fully expect this chart to show an accelerating drop next week as demand collapses.

In and of itself, this would be very bearish crude oil. However, when you combine this with the OPEC+ price war, the recent collapse in crude oil markets makes sense. At present, Russia and Saudi Arabia are in a battle over market share. Specifically, a few weeks ago, the OPEC+ meeting dissolved without a resolution and Saudi Arabia then proceeded to flood the crude markets.

As long as this war goes on, the price of crude will likely be weak. However, I don't really think there's much room for it to go down further. The reason here is that U.S. production is actually already vulnerable due to slowing production growth.

The basic problem here is that production growth has been slowing due to a wave of bankruptcies. These bankruptcies have been driven by the "low" prices of crude in the $50 range. Given that Saudis have flooded the markets since then and price is off almost 50% from these levels, the wave of bankruptcies is almost certainly going to immediately accelerate and production is going to strongly respond.

For crude oil, we are in an awkward spot fundamentally. On the one hand, we have a wave of supply from Saudi Arabia meeting a slowdown in demand. But on the other hand, we have vulnerable producers reaching the point of capitulation which will bring down production. Due to the conflicted fundamental picture, an outright neutral bias on crude makes sense.

But in the case of USOI, it thrives during times of crude going sideways. Since it sells off the upside in exchange for a healthy dividend and not too much upside is to be expected until these fundamentals resolve themselves, buying USOI seems like a very sound bet in this environment. For this reason, I would suggest buying and holding USOI until we see refining demand return and Saudi Arabia slow its selling.

Conclusion

USOI is an interesting ETN which offers a healthy dividend in exchange for selling off the upside in movements of crude oil. Crude fundamentals are currently suggestive of a neutral movement in crude pricing, which is very beneficial for holders of USOI. As long as Saudi Arabia continues to pump while production continues to slide, fundamentals will generally be neutral.

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USOI: A Strong Buy During Oil Turbulence (NASDAQ:USOI)

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It's been a rough year for shareholders in the Credit Suisse Crude Oil Shares Covered Call ETN (NASDAQ: USOI) with shares falling by over 50% in line with a broad decline in crude oil. If you're familiar with USOI, however, then you're likely aware that a price decline in USOI isn't necessarily the whole story.

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diegograndi/iStock via Getty Images

Investment Thesis

KNOT Offshore Partners LP () is an income stock that generated a total return of 28% YTD compared to a loss of 21% of the S&P 500 and the general downturn of the market.

Data by YCharts

The company has distributed a consistent dividend of $0.52 per share for the last 27 quarters, currently yielding 12.5%. However, its distribution coverage ratio has fallen to 0.7x in the MRQ from 1.28x in Q4 2021 and 1.2x in Q1 2021, primarily because of the scheduled drydocking of its 3 vessels, which adversely affected the company's financial statements. The company expects to carry out 3 more drydocking in Q2 and overcome the negative effects of drydocking by the second half of 2022.

Data by YCharts

Considering that its fleet utilization rate, including the scheduled drydocking, was 99.7%, I expect the company to bounce back from this slump and continue its normal trajectory of being a worthwhile shipping industry long-term investment stock.

Liquidity & Distributions

DNV reports that there are at least 22 new oilfields under development in the probable or the discovery phase worldwide, with indications of as many as 14 FPSOs to be installed by 2023. This is in line with my previous coverage of estimates portrayed by Rystad Energy which forecasted strong growth in the shuttle tanker market, signifying a solid availability of the market demand that KNOP may be able to leverage, as it is a major player in the global shuttle tanker market, accounting for almost 17% of the 102 shuttle tankers in service globally.

The global oil market is shaken amid the Russia-Ukraine situation, but KNOP isn't affected by short-term oil price and volume volatility as it generally deals in medium to long-term time charters with average remaining charters of 1.8 years and options to extend these by a further 2.4 years on average by the MRQ. These contracts have a forward contracted revenue of $594 million (excluding options), up 6% QoQ, the majority of which is set to be realized before 2027.

The recent financial statements were underwhelming because of the sequential decline in its revenue, which may indicate stunted growth to investors, but as aforementioned, it is exclusively because of scheduled drydocking for the repair & maintenance of 3 vessels. This R&M activity also consumed significant cash, leading to the company's cash reserves suffering a net reduction of $21 million, closing in at $41.3 million in the MRQ.

Even though KNOP's free cash flow per share of $0.47 in the quarter fell from $1.13 in the previous quarter, and its earnings yield of 10.76% was not enough to cover the dividend, its levered FCF margin of 48.8% is over 6.5 times higher than the industry median, and its free cash flow yield of 21.92% is ample enough to cover its dividend yield of 12.5%, resulting in an FCF yield to dividend yield ratio of 1.75%. These numbers indicate a supple cash situation, meaning that when the revenues rebound later in the year, its liquidity will move toward a much healthier side, further improving its dividend coverage ratios.

One thing investors should not expect from KNOP is dividend growth, which may be a deal-breaker for some, but its dividend sustainability more than makes up for it, which persisted at the current levels even through the worst parts of the pandemic.

Valuation

Going by the relative valuation metrics compared to the industry medians and its 5-year averages, the stock seems fairly valued, despite the YTD gain. However, KNOP is currently trading at a 6.7% discount to its book value per share of $17.05, at a price of almost $15.9.

The company has improved its book value for the third quarter in a row and expects to further improve it through future acquisitions financed by debt and liquidity. However, in its earnings call, the management has said that the decision will be weighed against its ability to pay dividends, as that remains its utmost priority.

KNOP stock appears reasonably valued for long-term investors looking to earn a solid and safe quarterly dividend while preserving their capital.

Conclusion

The qualitative information about the scheduled vessel drydocking is extremely relevant to the current financial performance and position and always needs to be confirmed to ascertain any positive or negative profitability and growth anomalies.

While important, the dividend coverage ratio should not be considered in isolation to paint a bleak picture of the company but rather seen in conjecture with other financial and liquidity metrics that iterate the company's solvency position.

With a 60-month beta of 1.02 and a short interest of less than 1%, the stock is a very reliable and low volatility investment, good for preserving capital while generating a consistent quarterly dividend. I expect the company to rebound to its prior financial health once the R&M activities subside in Q2.

Even though the stock may experience some upward volatility, I expect it to keep reverberating between the $15 and $20 per share mark, so growth investors looking for capital appreciation may be well suited to look elsewhere, but income investors interested in maritime stocks should definitely keep KNOP in watchlists.

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KNOT Offshore Partners (KNOP): Strong, Consistent Dividend Yield

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KNOT Offshore Partners LP () is an income stock that generated a total return of 28% YTD compared to a loss of 21% of the S&P 500 and the general downturn of the market. The company has distributed a consistent dividend of $0.52 per share for the last 27 quarters, currently yielding 12.5%.

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Denys Yelmanov/iStock via Getty Images

Elevator Pitch

I have a Buy rating for ZIM Integrated Shipping Services' () shares. ZIM is an appealing long-term investment candidate given its unique business strategy. More importantly, ZIM's generous dividends will enable investors to be patient and wait out the current uncertainty associated with freight rates and the near-term financial performance of shipping companies in general. ZIM is a good dividend stock which rates well on criteria like dividend safety, dividend payout, and dividend yield.

ZIM Stock Key Metrics

ZIM refers to itself as "a global container liner shipping company" in the company's FY 2021 20-F filing, and the key statistics relating to the company are presented in the chart below.
ZIM's Key Numbers At A Glance

Apart from the figures highlighted above, investors should also pay close attention to ZIM's share price performance metrics and its key Q1 2022 operating metric (freight rate).

ZIM's stock (+27.4%) has outperformed the market (-9.0%) by a wide margin in the last one year, but its share price performance in the past month has been disappointing in both absolute and relative terms. In the last month, ZIM's shares dropped by -21.5% as compared to a -5.0% decline for the S&P 500 in the same period.
ZIM's One-Year Historical Share Price Chart

ZIM's Stock Price Performance In The Past One Month

Specifically, ZIM saw a sharp -15% fall in its stock price from $68.52 as of June 7, 2022 to $58.46 as of June 8, 2022, before closing even lower at $51.74 as of June 15, 2022. A June 8, 2022 Seeking Alpha News article had attributed this to a recent bearish JPMorgan ( JPM) sell-side analyst report. In the report, the JPM analysts noted that they "anticipate a slowdown in freight traffic will hurt the (shipping) sector and singled out the company (ZIM Integrated Shipping Services) as a stock that will underperform."

Earlier, ZIM disclosed the company's Q1 2022 performance on May 18, 2022 prior to trading hours. Notably, the company's average freight rate per TEU expanded by 6% QoQ and +100% YoY to $3,848 in the first quarter of the current year.

In terms of future expectations, ZIM noted at the Bank of America ( BAC) Transportation, Airlines & Industrials Conference on May 19, 2022 that it is "still taking a conservative view that the market might start to normalize towards the second half of the year and that the spot rates might cool off a little bit." At the company's most recent quarterly earnings call on May 18, 2022, ZIM also highlighted that "the supply-driven balance reverses in 2023 when more significant newbuild deliveries" are expected to come onstream.

The company's management comments are aligned with the sell-side's consensus financial estimates. Based on S&P Capital IQ data, ZIM's topline expansion is forecasted to moderate from +169% in 2021 to +26% in 2022, and the company is projected to deliver negative revenue growth of -31% and -11% for 2023 and 2024, respectively.

It is inevitable that freight rates will normalize in time to come and ZIM will eventually see slower growth going forward. This implies that a further correction in ZIM's share price (as it did in the past one month) in the near term won't be a surprise. As such, it is important that ZIM's shareholders are sufficiently rewarded with dividends to wait out the volatility in the company's share price in the short term. I will focus on ZIM's dividends in the next two sections of the current article.

What Should Investors Know About ZIM's Dividend?

Investors should know a couple of things about ZIM's dividend in considering whether it is a good dividend stock.

Firstly, ZIM has the intention to return a significant percentage of its excess capital to the company's shareholders, and this is evidenced by its relatively healthy dividend payout ratio.

At its Q4 2021 investor briefing on March 9, 2022, ZIM stressed that "our dividend policy says that we will distribute between 30% and 50% of our annual net income in dividends." According to the sell-side's consensus financial projects obtained from S&P Capital IQ, ZIM is expected to pay out dividends per share of $17.25 and $7.04 for FY 2022 and FY 2023, respectively. The company's 2022 and 2023 dividends in turn represent 40% and 50% of its normalized earnings for this year and next year, respectively. This is in line with ZIM's stated dividend policy.

Secondly, ZIM's forward dividend yields are very attractive.

ZIM offers a consensus forward next twelve months' dividend yield of 29.4% as per S&P Capital IQ data. The stock also boasts consensus forward fiscal 2023 and 2024 dividend yields of 14.1% and 8.7%, respectively, at the time of writing.

Even if the 25% withholding tax (assuming shareholder is not a tax resident in a country that has a tax treaty with Israel and not entitled to a lower withholding tax rate) is taken into consideration, ZIM's adjusted dividend yields are still very high. Specifically, ZIM will still provide appealing (albeit reduced) consensus forward dividend yields (adjusted for 25% withholding tax) of 22.1%, 10.6%, and 6.5%, for the next twelve months, FY 2023, and FY 2024, respectively.

Thirdly, ZIM's future dividends are reasonably safe.

One key factor is ZIM's expected dividend payout in the 30-50% range as discussed above which is neither too low nor too high. Another key factor is ZIM's strong financial position which should provide support for the company's future dividends. ZIM had a net cash balance of $779 million as of March 31, 2022 which is equivalent to roughly 13% of its market capitalization.

In summary, ZIM should impress dividend-focused investors with its reasonable dividend payout ratio, high dividend yields, and the safety of its dividends.

How Often Does ZIM Stock Pay A Dividend?

The frequency of dividend payments is an important factor to consider for investors who rely on dividends for regular income.

At its Q4 2021 earnings briefing, ZIM had emphasized that its priority is "delivering on our dividend commitment, not only in terms of absolute numbers (dividend yield) but also in terms of frequency of payments, as they will be paid quarterly."

Also, the company's dividend policy is to distribute 30-50% of its earnings as dividends for the full year, including both interim and final dividends.

While it is common for companies to pay out a greater proportion of their full-year dividends at the end of the fiscal year (final dividend), ZIM had noted at its recent first-quarter investor call that the company will still maintain its interim quarterly dividend payout ratio at a reasonable 20%. This ensures that ZIM's shareholders will receive decent income or dividends on a quarterly basis throughout the year.

Is ZIM A Good Long-Term Investment?

The shipping business, like any other cyclical industry, will have its ups and downs. In that respect, a good long-term investment in the shipping industry is a company with the right strategy to navigate across different cycles.

There are three key aspects of ZIM's strategy which I am positive on.

The first is ZIM's strategy to focus on niche areas of the shipping market. On its investor relations website, the company mentioned that it "strives to increase and sustain profitability by selectively competing in niche trade lanes where the market is underserved." Specifically, ZIM disclosed that it has "a sizeable market share" in the "Transpacific, Cross Atlantic, Cross Suez, Intra-Asia and Latin America" trades. In other words, ZIM picks the spots where it competes in. This is not that much different from former CEO Jack Welch's goal for General Electric ( GE) to be either first or second in the markets it participates in.

The second is ZIM's actions to lower its dependence on the spot market. By having the majority of the company's vessels on long-term charters, fluctuations in spot rates will not impact the company to a large extent in the short term. At the Bank of America Transportation, Airlines & Industrials Conference on May 19, 2022, ZIM revealed that only a mere "11 of those (137 vessels in total) that will come up for renewal between now and the end of the year."

The third is ZIM's focus on asset-light businesses within the company. In its FY 2021 20-F filing, ZIM noted that it runs "several logistics subsidiaries" which "are asset-light and provide services such as land transportation, custom brokerage, LCL (Less-than-container Load), project cargo and air freight services." Most companies perform poorly in shipping down-cycles because of high asset intensity and the effects of negative operating leverage. In contrast, ZIM stressed in its 2021 shareholder letter that its "asset-light model" gives it a "flexible cost structure and operational efficiency."

Is ZIM Stock A Buy, Sell, Or Hold?

ZIM stock is a Buy. I like the company's dividend policy, and its long-term business strategy as well. As such, I am bullish on ZIM in the long run, notwithstanding short-term volatility in its share price.

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Is ZIM Integrated Shipping A Good Dividend Stock?

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I have a Buy rating for ZIM Integrated Shipping Services' () shares. ZIM is an appealing long-term investment candidate given its unique business strategy. More importantly, ZIM's generous dividends will enable investors to be patient and wait out the current uncertainty associated with freight rates and the near-term financial performance of shipping companies in general.

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Adrian Vidal/iStock via Getty Images

Unless you went to cash or invested heavily across the oil patch, chances are your investments are stuck between a rock and a hard place. There have been limited places to hide as both the Nasdaq and S&P 500 have slid into bear markets, and bonds didn't offer the type of protection conventional wisdom would have us believe. The 60/40 portfolio and even target-date funds are underwater in this economic environment. Many investors don't move in and out of the markets as tops and bottoms aren't known until well after their established, and missing entry and exit points becomes a huge gamble. All we can do is speculate on when the pain will end based on historical trends.

There have been 12 recessions since 1948. There were 3 occurrences where the market finished in the green 6 months prior, during, and 1 year after the recession ended. There were 6 occurrences where the markets finished in the green during the recession. There was only 1 occurrence where the market finished negative 1 year after a recession. To date, every recession which has ended has resulted in the markets being higher 3 years after and 5 years after 100% of the time. The big question that remains is how will the Fed's quantitative tightening impact the markets? The Fed will take a phased approach to unwind its balance sheet, and as of June 1 st, the Fed started with a 3-month period of unwinding $30 billion of treasuries and $17.5 billion in mortgage-backed securities. These amounts will increase to $60 billion and $35 billion in September.

Only time will tell when a bottom is established and how the Fed's quantitative tightening will impact the markets this summer. YTD, the Invesco QQQ ETF (NASDAQ: QQQ) has declined by -31.73% as the Nasdaq has fallen deeper into a bear market. Some investors hate the Global X NASDAQ 100 Covered Call ETF ( QYLD), while others look to it to generate double-digit yields. One of the most common arguments which are used to discredit an investment in QYLD is that it won't be stable in a bear market environment. Numbers don't lie; right now, QYLD has declined by -23.15% in 2022, while QQQ has declined by -32.44%. This isn't an investing environment with many positive outcomes but the idea that QYLD would fall further than the underlying index or see the level of income it generates severely impacted has been debunked. Please keep in mind that QYLD is not a vehicle for capital appreciation. Eventually, when a bottom is established, QYLD will start to appreciate and regain some of the lost capital appreciation, but due to its covered-call strategy, it won't completely follow QQQ upward. Investors should understand exactly what they are signing up for with QYLD, as this is an income-first strategy that sacrifices capital appreciation to deliver yields that seem too good to be true.

More investors are piling into QYLD as its Net Assets continue to increase

I wrote my first article on QYLD almost 1 year ago, in August of 2021. When I wrote this article, QYLD had $3.81 billion in assets. As of June 15 th, 2022, roughly 10 months since that article was published, QYLD has grown its net assets by $2.91 billion or 76.38%. QYLD now has $6.72 billion in net assets under management and could reach $7 billion on the 1-year anniversary of my first article. It's clear that QYLD fills a void for many investors, and its strategy continues to deliver large amounts of income to its investors.

QYLD has been a continuous debate, but I believe there is nothing to debate in this investing environment. Everyone's investment needs are different, and not every investor has a need for income distributions from their investments. If you are 25 with decades ahead of you, investing in an S&P 500 index fund would be a more viable solution as its prospects for capital appreciation exceed QYLD's. On the other side of the coin are income investors who are less concerned with capital appreciation and more concerned with steady streams of income. The proof is in the numbers, and more investors who are focused on income are adding QYLD to their portfolios.

Covered-call strategies are looked down upon by some as your trading upside potential for immediate income, while others are more than willing to engage in this trade-off. QYLD invests at least 80% of its total assets in the securities that create the NASDAQ-100 index. Each month QYLD will write or sell one-month call options on the Nasdaq 100 index, which are covered since QYLD holds the securities underlying the options written. Each option is written and will generally have an exercise price at or above the prevailing market price of the Nasdaq 100 index from when it was written. QYLD's distributions are predicated on the options premiums generated, which will fluctuate but will never be nonexistent. Investors are warming up to the mechanics of QYLD as covered-call strategies have gone mainstream.

Viewing QYLD through the eyes of an income investment

QYLD started 2022 trading at $22.29 per share and has declined by -$5.16 or -23.15%. In the same period, QQQ has declined by $130.29 (-32.44%) per share from $401.68 to $271.39. Neither scenario is ideal, but income investors look at things much differently than investors focused on capital appreciation. QYLD has already generated 5 distributions from January through May, amounting to $1 per share. Hypothetically, if you had purchased 100 shares at the beginning of 2022 for $2,229, you would have generated $100 in income, which is a 4.5% yield on investment. There is another distribution coming at the end of June and 6 more distributions throughout the remainder of the year. If you had taken the same capital ($2,229) and placed it in QQQ, you would have been able to purchase 5.55 shares. QQQ has paid 1 dividend in 2022 to date in the amount of $0.43 per share. Your investment in QQQ would have generated $2.39 in income or roughly 1/10 th of a percent (0.11%) yield on your initial investment. Even with a 2 nd dividend coming in the next several weeks, your yield on investment would be roughly 0.25%.

I look at an income investment the way I would look at a business. When you own a business, you don't have the value of your business flashing on a screen. Regardless of the business's size, the objective is to generate profits. The markets fluctuate, and every minute of every trading day, shares of QYLD fluctuate. From an income perspective, the most important aspect is that the dividends or distributions flow into your account. This is not a situation where QYLD is declining, where the market is appreciating, the entire market is giving back gains, and QYLD is falling alongside the market. The difference is that income investors are getting paid their monthly distributions on the way down from QYLD and experiencing less capital depreciation than its respective index, QQQ.

When you look back over the previous year, QYLD has paid $2.71 in distributions per share which is a 12-month trailing yield of 15.68%. If you want to assume that 100 shares were purchased on 6/1/21, the initial investment would have been $2,223. The forward yield would have been 12.19% on the original investment. Commutatively, QYLD has paid out $20.04 across 101 distributions since its inception. QYLD started trading at $25 per share and has experienced peaks and valleys since the end of 2013. If you had purchased 100 shares at its inception, your initial investment would have been $2,500, and you would have generated $2,004 in distributions which is an 80.16% yield on investment.

Many companies that were held on pedestals have significantly declined during the current downturn. This is part of investing, bull markets don't last forever, and the good thing is, neither do bear markets. When I purchase QYLD, I am looking at a long-term vehicle for income generation, and the day-to-day share price doesn't concern me. If you had purchased 100 shares at inception for $2,500, your initial capital would have declined by -$787 (-31.48%) since the end of 2013. While being in the red never feels good, QYLD would have generated $2,004 in distributions over the years. I would look at this as my initial investment of $2,500 should eventually regain some if not all the capital it lost some time in the future while putting $2,004 in my pocket. I still have $1,713 invested, which could very well be over $2,000 by the end of 2022, and I will still have monthly distributions being generated with an installment coming in the next 2 weeks. If QYLD was to pay $2.50 in distributions per share, then in the next 2 years, each share would have generated $25 in distributions since its inception at the end of 2013, placing the income generated at the equivalent level of the initial investment. If you had held the shares as an income investment, 100% of your capital would have been returned to you through distributions in less than 10 years while still having those 100 shares generating future income.

My plans for QYLD and why I remain very bullish on QYLD as an income investment

On 2/10/20, right before the pandemic sent the world into a tailspin, QYLD traded at $24.11 per share. Just over 1 month later, on 3/16/20, shares of QYLD had declined to $18.23, losing -24.39% of their value. Almost 11 months later, on 2/8/21, QYLD trades at $23.46, regaining almost all the value they had lost during the Covid Crash. Going back further, on 9/10/18, QYLD traded at $25.24, and just over 4 months later, on 12/17/18, shares traded at $20.50, losing -18.78% of their value. Over the next 2 years, shares regained almost all their value before Covid occurred. The -23.15% that QYLD has lost in 2022 isn't its first major decline, and it won't be the last. The silver lining is that QYLD has paid its distribution every month over the past 111 months and throughout every decline its faced. In 2018 QYLD paid $2.66 per share in distributions; in 2020, when companies were cutting and reducing their dividends paid, QYLD produced $2.54 in annual distributions per share.

Regardless of what transpired in the markets, uptrends and downtrends alike, QYLD has always generated large amounts of income. Eventually, the markets will recover, and QYLD will recover, the question that remains is when? As an income investment, I am not concerned with QYLD's share price and am looking at the current volatility as an opportunity. I plan to continue adding to QYLD monthly and increase its distribution stream. I don't need the income today, so I have elected to reinvest the monthly distributions. I believe QYLD will grow its net assets and continue to generate monthly distributes for decades into the future. With several decades on my investment horizon, I plan on adding and compounding my way into a large monthly income position with QYLD.

Investors should read through QYLD's investment documents and understand the mechanics behind the investment. This isn't a typical index fund and isn't designed to keep up with an index fund during periods of appreciation. QYLD is an income-focused investment, and investors should be very clear about their investment expectations before jumping into QYLD. Based on how much I am allocating, the power of compounding, QYLD's history, and several decades of time, after crunching the numbers, QYLD fits in my income investment thesis. Just because it works for me doesn't mean it will work for you, and I can't stress enough to go through the numbers. In the end, QYLD has proven to be less volatile than QQQ, and the main criticisms against QYLD have been debunked. If you're an income investor, I believe QYLD is a buy.

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QYLD: Viewing Through The Eyes Of An Income Investor (NASDAQ:QYLD)

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Unless you went to cash or invested heavily across the oil patch, chances are your investments are stuck between a rock and a hard place. There have been limited places to hide as both the Nasdaq and S&P 500 have slid into bear markets, and bonds didn't offer the type of protection conventional wisdom would have us believe.

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As the quest for (CNN) - less environmentally damaging aviation continues, one Spanish airline has thrown its hat into the ring by ordering new hybrid airships -- which pack as much of a punch visually as they are said to do environmentally.

Air Nostrum, which operates flights under the Iberia Regional umbrella from its Valencia base, has ordered 10 Airlander 10 aircraft, with delivery scheduled for 2026.

Previously, its manufacturers had predicted the aircraft -- which was unveiled in 2016 -- would be in service by 2025.

Made by UK-based Hybrid Air Vehicles (HAV), the hybrid airships could cut emissions by 90%, according to the company.

Held aloft by helium and powered electricity, they will seat 100 passengers, and typically fly 300-400 kilometers (186-249 miles), according to the manufacturer. Don't expect a lightning-fast flight, however -- the maximum speed will be 80 mph (129 kph).

The deal follows six months of "rigorous studies and modeling" of internal Spanish routes, according to the manufacturer.

HAV says that in future, potential short-range routes for the aircraft could include Liverpool to Belfast (168 miles), Seattle to Vancouver (127 miles), and Oslo to Stockholm (263 miles). The aircraft can make point-to-point journeys, since it doesn't need an airport runway to land -- waterfronts, greenfield sites and underutilized airports have all been earmarked by HAV.

"Airlander doesn't need airport structure to operate. HAV is exploring novel operating locations with Air Nostrum," a spokesperson told CNN.

The interiors are rather more glamorous than typical airplane cabins, with a 1-2-1 configuration, some seats facing each other with, and transparent walls giving views of the countryside below. For those who like to see where they're going, it will fly at a maximum of 20,000 feet.

Air Nostrum President Carlos Bertomeu said the airships will help his company toward European Union "Fit for 55" goals of cutting emissions by at least 55% by 2030.

"The Airlander 10 will drastically reduce emissions and for that reason we have made this agreement with HAV," he said in a statement. "Sustainability... is already a non-negotiable fact in the daily operations of commercial aviation.

"Agreements such as these are a very effective way to reach the de-carbonization targets contemplated in the Fit for 55 legislative initiative."

HAV CEO Tom Grundy added: "As countries like France, Denmark, Norway, Spain and the UK begin to put in place ambitious mandates for the decarbonization of domestic and short haul flight, Hybrid Air Vehicles and Air Nostrum Group are demonstrating how we can get there -- and get there soon.

"Airlander is designed to deliver a better future for sustainable aviation services, enable new transport networks and provide rapid growth options for our customers."

HAV will start building the fleet this year, creating 1,800 jobs in Yorkshire, UK.

The company said that that it was working on "further developments in electric propulsion," and hope that the Airlander 10 will become the first large scale aircraft to achieve zero-emissions flight.

Photos: Courtesy Hybrid Air Vehicles

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air nostrum orders fleet of airlander 10 airships - cnn

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This European airline just ordered a fleet of airships

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As the quest for (CNN) - less environmentally damaging aviation continues, one Spanish airline has thrown its hat into the ring by ordering new hybrid airships -- which pack as much of a punch visually as they are said to do environmentally.

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da-kuk/E+ via Getty Images

Strong fundamentals, huge growth prospects, and a relatively stable democracy make Indian stocks and the Indian equity market a preferred investment choice among its peer emerging markets. However, I find that The India Fund, Inc. (NYSE:IFN), a closed-ended India focused mutual fund, has failed to record positive price growth, despite a majority of its holdings generating exceptionally high returns.

However, the total return, which also includes dividend, stood in excess of 17 percent, 32 percent, and 171 percent over the period of 3 years, 5 years, and 10 years, respectively. This becomes possible only due to an exceptionally high yield. It is also trading at a value much lower than its book value. All these provide an impression of a probable undervaluation of this fund.

Overview Of The Fund

The India Fund is a small-sized closed-ended equity mutual fund that invests in public equity markets of India. Domiciled in Singapore, this fund was launched on December 27, 1993 by Aberdeen Standard Investments (ASIA) Limited. The fund’s primary aim is to achieve long-term capital appreciation through exploiting the positive structural changes that are expected to take place in the Indian economy.

It benchmarks the performance of its portfolio against the MSCI India Index. The MSCI India Index is designed to measure the performance of the large and mid cap segments of the Indian market. The index covers approximately 85% of the Indian equity universe. Effective February 28, 2020, the MSCI India Index (Net Dividends) replaced the MSCI India Index (Gross Dividends) as the Fund’s primary benchmark.

The largest investment management firms such as Vanguard Group, Inc., BlackRock Inc., Principal Financial Group, Inc., State Street Corporation, and CenterSquare Investment Management LLC., don't have any significant investment in this closed-ended fund - which is telling. Only two financial institutions - Lazard Asset Management LLC and Allspring Global Investments Holdings, LLC - hold more than a million shares of this fund. IFN has an asset under management (AUM) of $475 million, and expense ratio of 1.35 percent.

The Growth Prospects Of Indian Stocks

The UN Department of Economic and Social Affairs said in its World Economic Situation and Prospects (WESP) report that “India… is expected to grow by 6.4 per cent in 2022, well below the 8.8 per cent growth in 2021, as higher inflationary pressures and uneven recovery of the labor market will curb private consumption and investment”. Still, the growth rate will be the highest among large economies, and more than double that of global economic growth, which is projected at 3.1 percent only.

Even as the stock market is currently struggling due to various macroeconomic factors, there is a belief that it still is in a much better state than many major stock markets, and the growth barriers are slowly getting eradicated. “Omicron variant has receded sharply while commodity prices and bond yields have started to stabilize. The Russia-Ukraine conflict will likely be scaled down from global nuclear brinkmanship to a local conflict… general cooling down of commodity prices and the expected increase in oil output by OPEC+ will also support markets now."

Regarding the political stability of India, people learning things only from newspapers may form incorrect impressions. The country's power center lies in the business community. This is not a weakness because it acts as a fulcrum of sorts to the political turmoil that seems to be a constant presence in India - made more so by media, both local and foreign. The business houses ensure that politics stays stable. This is why Indian stock markets are able to outperform peer markets in many other countries.

Distribution Of Portfolio And Major Holdings

More than 82 percent of IFN’s investments are in giant and large cap stocks. IFN’s top 16 holdings constitute around 60 percent of the total portfolio, and all these stocks are blue chips. These 16 stocks include equity shares of both Housing Development Finance Corporation Limited (HDFC.NS) and HDFC Bank Limited (HDB), both of which are set for a merger into HDFC Bank Limited. So, effectively there will be 15 equity shares, on which the performance of this fund will largely depend. Based in India, all these companies are heavily traded and have a high market capitalization.

Most of these stocks are constituents of Sensex and/or Nifty, the composite index of Bombay Stock Exchange (BSE) and National Stock exchange (NSE), respectively. Also, the portfolio is well diversified. The portfolio represents companies from every segment of the economy. However, the major concentration is from Information Technology & Communication (ICT) and Financials. Stocks from these two sectors constitute almost 55 percent of the entire portfolio.

Among its top holdings, there are technology & communication companies like Infosys Limited (INFY), Tata Consultancy Services Limited (TCS.NS), Bharti Airtel Limited (BHARTIARTL.NS) and Mphasis Limited (MPHASIS.NS), as well as financial institutions like HDB, ICICI Bank Limited (IBN), Kotak Mahindra Bank Limited (KOTAKBANK.NS), and SBI Life Insurance Company Limited (SBILIFE.NS). FMCG giants like Hindustan Unilever Limited (HINDUNILVR.NS) and Asian Paints Limited (ASIANPAINT.NS), also constitute a significant portion of its portfolio. These 10 stocks are high growth stocks, and highly sought after in India.

Historical Price And Dividend Performance

Over the past 5 years, the ITC stocks recorded enormous growth. MPHASIS.NS recorded 300 percent growth. TCS.NS grew by 172 percent. BHARTIARTL.NS grew by 99 percent. INFY grew by 156 percent. Financial companies also recorded significant growth: HDB – 65 percent, HDFC.NS – 37 percent, IBN - 111 percent, KOTAKBANK.NS -88 percent, and SBILIFE.NS – 52 percent. HINDUNILVR.NS and ASIANPAINT.NS recorded a growth of 101 percent and 131 percent, respectively.

The portfolio also includes few infrastructure oriented stocks among its top holdings. Stocks like UltraTech Cement Ltd. (ULTRACHEMCO.NS), Power Grid Corp of India Ltd. (POWERGRID.NS), Container Corporation of India Ltd. (CONCOR.NS), Larsen & Toubro Ltd. (LT.NS), and Prestige Estates Projects Ltd. (PRESTIGE.NS) generated a moderate growth in the range of 33 percent to 66 percent.

Currently these 16 stocks constitute almost 70 percent of the entire portfolio. This suggests that the composition of the current portfolio has been able to generate a reasonably high return during the past 5 years. Moreover, only four stocks have been added to the portfolio for the first time Since 31st, October 2018. Despite this, the price return of The India Fund, Inc. has been extremely poor. IFN’s price dropped by 30.75 percent during the same period.

Not only that, The India Fund, Inc. has failed to generate price growth both in the shorter term and longer term. The price loss over the past 3 years and 10 years has been 20 percent and 3.24 percent, respectively. In the shorter time frame, price dropped by 21 percent and 22 percent over the past 6 months and 12 months, respectively. This obviously raises the question why the growth generated by its top holdings was not reflected in the stock's performance?

Why Is The Fund Price Not Growing?

It's surprising that the fund price has been falling consistently. A probable reason might be the lack of faith in the fund's management. The fund is mostly composed of stocks from NIFTY, and/or SENSEX. NIFTY has 50 stocks, and SENSEX has 30, and most of the stocks are overlapping. Thus, selecting and tracking the portfolio is not that cumbersome. Still, I find that the expense ratio is very high at 1.35 percent.

Another reason might be lack of understanding and knowledge about the Indian stock market. During the past 10 years, the Indian stock market has performed much better than some other stock markets. There is a perception among many investors that this growth was not purely due to fundamentals. Some people think that the Indian market is not mature enough, and it possesses a high element of risk. However, the growth drivers are still present, and there is no significant reason to be worried about the future growth prospects, despite the record inflation and looming recessions all over the world.

According to Sampath Reddy, Chief Investment Officer, Bajaj Allianz Life, “long-term India growth story remains intact with India remaining a preferred investment choice among peer emerging markets on the back of strong fundamentals. We presently prefer the large-cap segment from a valuation perspective. If there is any market correction, it can be capitalized as a buying opportunity by the investor (as per their individual risk profile). However, return expectation from equities is expected to be more moderate in 2022”.

Why Does Investing In IFN Make Sense?

This gives an impression the fund is yet to generate the growth that it should have generated. Such a high yield also might have raised concerns in the mind of investors. Investors seem to be skeptical about such a high proportion of investments in technology and financial stocks. IFN’s undervaluation is also reflected in its price multiples. Price/Book (P/B) value of 0.74 suggests that the stock is trading at discount. The stock is also trading very close to its 52-week low price of $16.45. Compared to its net asset value (NAV), the stock is trading at a discount of 10 percent.

A positive thing about The India Fund, Inc. is that despite such negative price performance, the stock has delivered substantial total return in the medium and long run. This is due to the consistent high yield delivered by this fund. It has been paying regular quarterly dividends since 2018.

Prior to that, the fund used to pay an annual dividend. This fund has generated an average yield of more than 12 percent over the past 10 years, and its current yield is 12.16 percent. Since we are comparing the price returns of its major holdings during the past 5 years, we must see the yield over the same period. Not surprisingly, that's also high - in excess of 10 percent.

This undoubtedly makes this stock a lucrative one. Investors are getting a double digit return only in the form of yield. In case of a positive price growth, the yield will come down. However, the drop in yield will be compensated by the rise in price. It may not happen in equal proportion, but it will compensate to a larger extent. Nonetheless, I’ll expect a double digit total return under such circumstances.

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India Fund: Double-Digit Yield, Growth Prospects Of Indian Economy Make It Attractive

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Despite consistent negative price performance, IFN has delivered substantial positive total return in the medium and long run, thanks to its consistent double-digit yield. Read more here.

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This article was co-produced with Williams Equity Research.

Arbor's Role In Real Estate

One of the best ways to understand a company is to walk in the shoes of a potential customer. When a prospect visits Arbor Realty Trust's ( ) website, they'll quickly realize the firm specializes in loans to all property types, including multifamily, office, industrial, retail, healthcare, hospitality, military, student, and even senior housing.

They'll also notice two main businesses, one for small loans under $7.5mm and the other for larger loans. Regardless of loan size, Arbor's approach is excellent terms (e.g., willing to go to 80% loan-to-value, even on small loans), competitive interest rates, hands on support and customization, fast execution, and in-house servicing for the life of the loan.

Many lenders, likely including the one that provided the mortgage on your home, sell the loans almost immediately after origination to a Wall Street firm that securitizes them.

Arbor is a repeat top 3 Freddie Mac Small Balance Loan lender and top 5 Fannie Mae Small Loans lender.

These are the loan programs available today just for the larger commercial loans. This diversity allows Arbor to rotate as supply and demand for different loan types fluctuate.

One area that an investor could reasonably assume Arbor is at a disadvantage is technology. We all hear of the hundreds of millions of dollars large financial institutions spend to improve the user interface and integration capabilities of the applications and software clients utilize. J.P. Morgan averages $12 billion in technology spending every year. I picked that number for a few reasons, including the fact it's almost identical to the value of Arbor's entire portfolio.

I refinanced my primary residence in July of 2021 to a 15-year loan at 2.0%. I shopped many lenders for the best terms and went through the entire loan process with both established and smaller, more technology focused providers.

It wasn't the gigantic Wall Street firms spending billions a year in technology that had the most reliable and seamless process - it was firms like Better Mortgage. That wasn't too much of a surprise as I'd already seen how third parties, like Bankrate, rank lenders.

Arbor's ALEX platform reminds me of how modern mortgage companies operate. It has e-signature execution, a dedicated loan officer, a single form encompassing the entire loan application process, and 24 hours a day loan progress updates and visibility via mobile. These advancements are still relatively new in the residential mortgage market, but they are brand new on the commercial side.

I am head of acquisitions of a new short-term rental real estate fund I co-founded and recently decided on a lending partner to help grow the portfolio. I doubt there was much difference between the process I went through in recent months and what it would have looked like five or 10 years ago. After learning more about Arbor's offerings in this area, they are now on my short list for potential lending partners going forward.

Although most people haven't necessarily run across Arbor in their daily lives, the firm has been around for over 25 years and is rated by S&P and Fitch for commercial and special loan servicing (that's not the typical company credit rating). This puts Arbor in a small group of sophisticated firms.

Now that we have a good idea of what Arbor does, let's see what they own.

Understanding A Unique Portfolio

A good grasp on portfolio strengths and weaknesses is key to analyzing any equity REIT or mortgage REIT ("mREIT"). There are usually multiple layers if you look closely, and Arbor Realty Trust's portfolio is a great example of that.

Starting with the above chart, we see it consists primarily of Bridge Loans, Mezzanine Loans, and Preferred Equity. $11.75 billion of the $12.16 billion in gross assets, or 96.6%, fall under the bridge category.

As the name suggests, these are loans designed to transition properties from one purpose or condition to another. Yields for bridge loans are higher than traditional mortgage loans and can entail more risk (but not always).

Within the 96.6% of the portfolio allocated to bridge loans, the vast majority, $10.8 billion or 91.9%, are tied to multifamily properties. The next largest allocation is $408.3 million to single-family residential. You won't be able to gauge how heavily weighted Arbor's business is to bridge loans connected to multifamily properties by perusing the website.

Despite the concentration in multifamily bridge loans, the portfolio is well diversified geographically, which is important. Perhaps more than ever, spreading what is effectively real estate exposure across many states and regions is critical.

Let's see how the portfolio's cash flows have evolved in recent quarters.

Arbor Realty's Cash Flow & Dividend

Like most non-equity REITs, Arbor uses distributable earnings per share ("EPS") to measure its cash flow. It's not a perfect measure, but it's sufficient for measuring cash flow and dividend coverage over time.

Going into Q1 2022, the market expected Arbor to generate $0.48 in distributable EPS. Arbor's stock last closed at $15.19, meaning $0.48 would be a 12.6% cash flow yield. That's already among the best of any REIT, equity, or mortgage.

But Arbor isn't just any REIT.

It beat Q1 estimates by 14.6% by delivering $0.55 per share in distributable EPS. Arbor is also among the fastest growing of any REIT. For context, Arbor generated $0.74 in annual distributable EPS in 2017 versus $2.01 in 2021. That's 171.6% growth in four years.

That's permitted Arbor to responsibly grow its dividend at a rapid pace. On May 6th, just after Q1 earnings were released, the company increased the quarterly dividend yet again to $0.38 per share. At the time, that equated to a 8.8% forward yield. With the stock price down from ~$17.35 to $15.19 since earnings were released, that has increased to 10.01%.

If you are like most experienced dividend investors, the first thought that enters your mind after reading that statistic is "sure, now what about dividend coverage?"

And back in 2017, that was an especially good question as the payout ratio was essentially 100%. That's not the case in recent years, however, as Arbor generated excess earnings per share above what was needed to cover the distribution of $0.43 in 2020 and $0.53 in 2021.

That's a 73.6% payout ratio for 2021.

Last quarter wasn't any different; the $0.55 in distributable EPS against the latest dividend of $0.38 is a 69.01% payout ratio.

A 70-75% payout ratio is associated with top quality investment grade equity REITs. Most mortgage REITs, even the good ones like Blackstone Mortgage Trust ( BXMT) and Starwood Property ( STWD), routinely pay out above 90% of their distributable earnings in distributions.

And none of Arbor's peers, and I mean none, have increased their dividend eight consecutive quarters. In case you are wondering if they were doing the "one cent a quarter" trick, the dividend is up 27% over that period.

Do you know why all that is especially surprising?
BXMT and STWD have dividend yields of 8.35% and 8.63%, respectively, and that's despite payout out a much higher percentage of their cash flow as dividends.
To understand how that's possible, it's time to talk valuation. And we can't forget about risk.

The Key Ingredients To Every Investment Recipe: Valuation & Risk

On the risk front, Arbor recorded $3.1 million in provisions for current expected credit losses (often noted as CECL in presentations and filings). For context, Arbor originated $2.83 billion in new loans in Q1 2022, and as we discussed earlier, maintains a portfolio of over $12 billion loans.

If my math is right, the CECL is 0.0254% of the total portfolio value. That's less than a one tenth of one percent. Rarely is $3.1 million a rounding error, but it is here.

This is in line with Arbor's excellent risk management and loan loss mitigation historically. Loan losses are where the rubber meets the road for mortgage REITs like Arbor, but what other risks should we be aware of?

Despite a heavily diversified income stream in some way, in others it is closely tied to bridge loans in one or two areas of the real estate market. In some ways, that's significantly more concentrated than the businesses of larger commercial mortgage REITs like BXMT and STWD.

In addition, while neither BXMT or STWD are investment grade, they do have much larger balance sheets, a large parent company as a potential backstop/support system, during a crisis, and have credit ratings, albeit a couple notches from investment grade.

On the other hand, I know many real estate investors that would much rather have Arbor's portfolio than BXMT or STWD's as they are loaded with office, retail, and a good amount of hotel properties that many remain bearish on. Arbor has no material exposure to any of those sectors.

Determining book value for Arbor isn't an exact process, but we can still use earnings multiples to reliably encapsulate the firm's relative value to other mortgage REITs. In reality, cash flow yield per share is more important than premium or discount to book value.

Arbor is on track to generate at least $2.10 in distributable EPS in 2022, or a 7.3 EPS multiple against Friday's close. Applying roughly the same EPS calculation yields $2.50 for 2022, or a 11.8 EPS multiple. STWD's distributable earnings have been more volatile and more difficult to predict but should land around $2.30 per share, or a 9.7 EPS multiple.

We could also talk about Granite Point Mortgage Trust ( GPMT) or Ladder Capital ( LADR), but they are significantly more expensive on a cash flow basis than ABR, STWD, or BXMT as they were more negatively impacted by the pandemic and associated market crisis.

They aren't bad companies and have other elements of their business models that are unique and attractive. Williams Equity owns shares in every company mentioned in this article, including them.

That said, it's clear that Arbor has been playing on a completely different stage than the other small and middle-weight mortgage REITs and has more often than not outperformed the heavyweights.

Conclusion

I don't know of any other company with a comparable three or 5-year track record as Arbor that trades below 12x forward cash flow, much less 8x.

Arbor handled the pandemic extraordinarily well and its heavy concentration in multifamily bridge loans, although a risk in of itself, is compelling in an inflationary environment where risks in many other areas of real estate, like office, don't seem to be going away.

If you were to adjust Arbor's stock to the median of the heavyweight peers, that's $22 per share, or about a dollar shy of the 52-week high set in November of last year. That's a 43.9% capital gain and a 10.01% yield on cost if you assume it takes a year to get there, or a ~54% total return. This is the literal upside to a high-quality stock like Arbor selling off indiscriminately.

On the downside, Arbor's double-digit yield (by two basis points) and exceedingly conservative payout ratio means there is at least a reasonably high likelihood that investors will receive the current distribution rate of $0.38 quarterly while we wait for the stock price to take its course.

That's not a terrible "bear" case if you ask me.

Note we didn't even mention the fact the distribution has increased for eight consecutive quarters and has more than doubled since 2017.

My oh my, Arbor is a definitive Buy!

Author's Note: Brad Thomas is a Wall Street writer, which means he's not always right with his predictions or recommendations. Since that also applies to his grammar, please excuse any typos you may find. Also, this article is free: written and distributed only to assist in research while providing a forum for second-level thinking.

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Arbor Realty Trust: Is The Best REIT Ready For The Worst Market? (NYSE:ABR)

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This article was co-produced with Williams Equity Research. One of the best ways to understand a company is to walk in the shoes of a potential customer. When a prospect visits Arbor Realty Trust's ( ) website, they'll quickly realize the firm specializes in loans to all property types, including multifamily, office, industrial, retail, healthcare, hospitality, military, student, and even senior housing.

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ZIM Integrated Shipping Services Ltd. () has faced choppy trading in recent weeks, and this week in particular, amidst a worsening macroeconomic situation and broader market swings. It is beginning to look like the container shipping boom is winding down. However, the music has not yet stopped playing for ZIM, and the market is acting as if it has. The company is selling for roughly its cash value at the end of the year, and we can still expect a 20-30% yield.

Fundamentals Stay Strong

ZIM's first quarter earnings were strong. Well, strong may be a bit of an understatement. They completely knocked it out of the park. The company reported $14.19 in earnings per share on a diluted basis, more than $1.7 billion in profit on revenues of $3.7 billion - not bad margins if you ask me. The company also still has a leverage ratio of - wait no, they don't have a leverage ratio because they have functionally no leverage. However, the company does have $2.7 billion in cash and a total of $6.4 billion in current assets.

Fleet Growth Ahead?

It is worth looking at ZIM's most recent May 31 presentation, to see how the company is looking ahead. One of the most notable points is that ZIM is aiming to nearly double its TEU capacity with an orderbook of 415k on top of 475k in current operating capacity. As with ZIM's current fleet, the majority of this orderbook comes through chartered deals, primarily with Seaspan ( ATCO), rather than direct ownership, as has been the company's long-time MO.

ZIM is also continuing with its strong "Global-niche strategy," focusing on developing routes where it can have a competitive edge. This diversified global-niche strategy makes sense with the company's newbuilding charters that have focused significantly on vessels sized 7,000 TEU or less (respectably sized ships, but not neck-and-neck competing for those new 23,000 TEU behemoths ferrying transpacific cargoes).

Expanding into some of the less-covered shipping markets where economic growth is supposed to be the most robust over the next few decades is a solid move from ZIM and speaks to management's unique strategy.

But How About Rates for those New Vessels?

The main question for ZIM's future growth comes from freight rates: will they fall from these record highs, and if so, when?

Well, if the recent import numbers are any indication, soon. Or even now. Imports to the United States have collapsed in recent weeks, though we may see somewhat of a rebound in the coming months.

The level of inventory that companies have built up (largely because of supply chain fears) means that there will be less demand for new imports and thus demand for TEUs will stay lower. Although depending on the success of companies, like Target, in holding inventory sales in the hope of being able to reorder to meet shifting consumer tastes, we may see a sharp rebound in shipping demand to the United States sooner than you think.

Looking at the Freightos Global Container Index, we can see that though rates have fallen from their height of heights, they remain way higher than years past - and very profitable.

Even if rates were to drop another 50% from $7,261, ZIM would still be rolling in cash. Judging by the company's 2021 first quarter - some of the rates for which were set in late 2020 at lower than $3,000 - the company could easily still be earning $5+ per share per quarter for earnings of $20 per year. This would provide a yield of 13-20% conservatively.

I think that rates may indeed have further to fall. But ZIM is ready and will still be profitable - plus with all its debt repaid, the company can be expected to post even better free cash flow in the near term (though newbuildings aren't free, the company has pure cash).

The Uber-Strong Dividend Continues

Even at just 20% of ZIM's quarterly net income, this dividend payment of $2.85 would make a respectable dividend-paying stock of ZIM alone - with a yield of 5.47% when we pretend it's the one annual payment we get. And not only does ZIM pay quarterly but the company's policy of a top-up payment in the fourth quarter to bring the overall payout ratio to 30-50% of the company's net income guarantees a hefty yield.

This year may well be the peak for ZIM's dividend payments, but what a peak it will be. The company can be expected to easily pay out an average of $2.50 per quarter, with a top-up dividend at the end of the year likely to raise that amount. Conservatively, with $10 of dividends, ZIM is still paying out a whopping 19% yield. And this yield is a near-certainty given the company's cash reserves. More than likely the company will pay out a near 30% yield.

Valuation

Over the past week, ZIM's share price has cratered - starting with a stiff 15% drop on Wednesday as concerns rose about the economy and slowing imports.

The following days were similarly hard for ZIM, leading the company to shed around $2 billion in one week. Down 22.14% in one week is not a great place to be, for any company.

However, it could be a great place to be for investors looking to load up on ZIM shares. The book value per share of ZIM shares is currently $35.56 for a price-to-book value of 1.46. As I mentioned in my last article on ZIM, by the end of the year, ZIM will have more than its current share price in cash. That makes ZIM a hard-to-lose bet.

Conclusion

ZIM is selling for its cash balance plus a conservative estimate of its earnings for the year. The macro-environment, and sentiment along with it, have certainly worsened. However, the truth of the matter is that ZIM can afford to weather worse rates. Yes, the good times were good - great even - but the fall in rates is not about to be a return to the bad times, just a slightly-less-profitable-than-boom-times level. ZIM is offering a 20%+ yield, zero leverage, and a strong management team. That makes the stock a hard-to-lose proposition.

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ZIM Integrated: Great Deal With 20%+ Yield Post-Selloff (NYSE:ZIM)

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ZIM Integrated Shipping Services Ltd. () has faced choppy trading in recent weeks, and this week in particular, amidst a worsening macroeconomic situation and broader market swings. It is beginning to look like the container shipping boom is winding down. However, the music has not yet stopped playing for ZIM, and the market is acting as if it has.

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China afirma haber desarrollado un nuevo sistema que resuelve el problema de los residuos radioactivos de las centrales nucleares, convirtiéndolos de nuevo en combustible apto para esas mismas centrales. Los investigadores del país asiático aseguran que su tecnología crea un ciclo infinito para el uranio y consigue la eliminación de los residuos radiactivos, el gran problema de la energía de fisión nuclear.

"Es una revolución de la energía nuclear", apuntan los analistas Thomas Corvette y Peter Singer en la publicación de análisis militar y geoestratégico Defense One. Y es el "producto de la enorme inversión de China en sistemas avanzados de energía nuclear, el avance podría llevar al país hacia la independencia energética y consolidar aún más su liderazgo mundial en tecnología respetuosa con el clima ", aseguran.

Cómo funciona

En un estudio publicado por el Instituto de Física Moderna -dependiente de la Academia China de las Ciencias, una de las más respetadas y principales organizaciones de investigación científica del planeta- los responsables del proyecto afirman que la tecnología lleva en desarrollo 10 años, tiempo en el que han solucionado múltiples retos científicos.

Según los investigadores, su sistema consiste en un acelerador lineal de partículas de gran potencia, un cañón que dispara un haz de protones de onda continua de 10 mAh. Los científicos chinos aseguran que es la primera vez en la historia que se ha conseguido algo así, incrementando "la intensidad de la corriente de haz continuo en casi cinco veces en comparación con los mejores del mundo ". El prototipo, dicen, ha funcionado de forma constante con una potencia estable de 100 kilovatios y picos de 205 kilovatios durante 100 horas.

Pero este cañón de protones es solo el primero de tres componentes. El haz se dispara sobre un objetivo, la segunda parte del sistema, que contiene un elemento pesado que, según Corvette y Singer, es muy probablemente bismuto rodeado de una capa de material fisible como torio-232 o uranio-239.

Al impactar los protones contra este objetivo, se liberan neutrones que van a parar a un reactor subcrítico, un reactor de fisión que no alcanza el punto crítico de un reactor nuclear estándar. En este punto está el residuo nuclear que absorbe los neutrones para convertirse de nuevo en uranio fisible. El proceso no alcanza el nivel de criticalidad de una reacción en cadena, afirman. Sencillamente, termina y deja el combustible listo para cargarse en una central nuclear. Cuando este vuelva a consumirse, el residuo se vuelve a pasar por el nuevo sistema y así de forma infinita con un gasto mínimo de nuevo combustible y energía adicional necesaria para hacer funcionar el acelerador de protones.

China se está tomando el clima muy en serio

Como apuntan Corvette y Singer, China está apostando cientos de miles de millones de dólares por la independencia energética y la neutralidad de carbono. Y, al contrario que Europa o Estados Unidos, los asiáticos consideran que la fisión nuclear es clave para conseguir estos dos objetivos en paralelo con las renovables, la energía de fusión nuclear y otras tecnologías experimentales, como los reactores de sal de torio.

Ahora mismo, China afirma que tendrá la primera central de fusión que conectada a la red eléctrica nacional en 2035, antes de conseguir la fusión comercial a gran escala en 2050. Aunque está por ver si esto será así, lo cierto es que están decididos a hacerlo realidad e invirtiendo lo que haga falta. En paralelo, están llevando a cabo inversiones similares en centrales solares, eólicas e hidráulicas, la última una de las centrales más grandes del mundo, que está siendo construida enteramente por robots.

Para 2035 también tendrán 150 nuevos reactores nucleares construidos con una inversión total de 440.000 millones de dólares. Aunque China acaba de encontrar uno de los mayores depósitos de uranio del planeta, el reciclaje efectivo del uranio será clave para estas centrales y obtener la independencia energética de otros países, especialmente del crudo árabe.

Tan importante como esta independencia será el eliminar los residuos, algo que el estudio recalca especialmente: "[Esta nueva tecnología] puede resolver de manera eficiente los problemas del reciclaje de combustible nuclear y la eliminación segura de los residuos nucleares para la seguridad, el desarrollo limpio y sostenible de la energía nuclear, y proporcionar soluciones efectivas para lograr el objetivo de neutralidad de CO₂". Esperemos que, por el bien del planeta, lo consigan.

China afirma haber desarrollado un nuevo sistema que resuelve el problema de los residuos radioactivos de las centrales nucleares, convirtiéndolos de nuevo en combustible apto para esas mismas centrales. Los investigadores del país asiático aseguran que su tecnología crea un ciclo infinito para el uranio y consigue la eliminación de los residuos radiactivos, el gran problema de la energía de fisión nuclear.

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El cañón de partículas chino que resuelve el gran problema de las centrales nucleares

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China afirma haber desarrollado un nuevo sistema que resuelve el problema de los residuos radioactivos de las centrales nucleares, convirtiéndolos de nuevo en combustible apto para esas mismas centrales. Los investigadores del país asiático aseguran que su tecnología crea un ciclo infinito para el uranio y consigue la eliminación de los residuos radiactivos, el gran problema de la energía de fisión nuclear.

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Esta semana se ha confirmado que el Índice de Precios al Consumo (IPC) de mayo se situó en el 8,7%. Hay que remontarse a 1994 para una tasa tan elevada. A lo que se suma que la inflación subyacente subió hasta el 4,9%. Ante esta escalada descontrolada de los precios de los alimentos, la energía y la gasolina, muchos se preguntan por su impacto en su poder adquisitivo. Una forma fácil de medir su efecto a largo plazo es la llamada "regla del 72".

Se llama la "regla del 72" porque hay que dividir este número por un determinado tipo de interés anual para determinar el tiempo aproximado que tardará un inversor en duplicar su dinero. Esta fórmula suele aplicarse a los rendimientos de las inversiones.

No obstante, también sirve para el actual escenario inflacionario. La diferencia es que la regla funciona a la inversa: el resultado es cuánto tiempo tendría que transcurrir para que el valor de los ahorros de los consumidores se redujera a la mitad. Para ello, hay que dividir 72 por la tasa de inflación anual. En el caso de España, habría que dividir 72 entre 8,7 y daría 8,27. Es decir, que el dinero de los consumidores españoles tardaría poco más de 8 años en reducirse a la mitad.

Cabe señalar que esta regla trabaja con el supuesto de que la inflación se mantendrá en el tiempo, en el caso de España más de 8 años. Según Greg McBride, analista financiero jefe de Bankrate, a CNBC, "es poco probable que ocurra". Sobre todo teniendo en cuenta que tanto el Banco Central Europeo (BCE) como la Reserva Federal de EEUU (Fed) ya han anunciado nuevas subidas de los tipos de interés, en un intento por hacer frente a la actual tasa. Tal y como informó esta semana la institución europea, en la próxima reunión de julio y en la de septiembre se subirán los tipos 25 puntos básicos, en ambos casos.

Asimismo, hay que tener en cuenta que no todos los hogares tienen el mismo nivel de ahorro y, por consiguiente, el aumento de los precios no les afecta igual. También depende de si se va en coche al trabajo, se utiliza el transporte público o se trabaja desde casa. Por otro lado, las subidas de sueldo y los rendimientos de las inversiones también pueden contribuir a reducir el impacto de la inflación.

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Esta es la regla que te permite calcular el impacto de la inflación en tus ahorros

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Esta semana se ha confirmado que el Índice de Precios al Consumo (IPC) de mayo se situó en el 8,7%. Hay que remontarse a 1994 para una tasa tan elevada. A lo que se suma que la inflación subyacente subió hasta el 4,9%.

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Golden Ocean Group: 14% Yield, Low Debt, Strong Earnings (NASDAQ:GOGL)

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Golden Ocean yields 14.44%. Its earnings soared by 3-digit %s in Q1 '22 & full year 2021, & Q2 '22 should be another good quarter. See more on GOGL stock here.

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It wasn't long ago that the idea of the meat on our plates coming from vast stainless steel bioreactors, rather than farmed animals, seemed like science fiction. The notion has gone through numerous rebrands since its early positing as 'vat meat', which triggered unappealing visions of high-tech Spam.

'Lab meat' came next, as scientists perfected the recipe in small beakers in laboratories. Then came the more appetising-sounding 'cultured meat', as investment from high-profile individuals rocketed and producers positioned these products as having been brewed, just like beer. Now, 'cultured meat' has evolved to 'cultivated meat', which is the preferred term used by CEOs in the industry.

Whatever you choose to call it, with the future of global food security in question, and farmed meat a key culprit in climate breakdown, slaughter-free meat is starting to look increasingly like the future of food.

How is lab-grown meat made?

Rather than being part of a living, breathing, eating and drinking animal, cultivated meat is grown in anything from a test tube to a stainless steel bioreactor. The process is borrowed from research into regenerative medicine, and in fact Prof Mark Post of Maastricht University, who cultured the world's first burger in 2013, was previously working on repairing human heart tissue.

Cells are acquired from an animal by harmless biopsy, then placed in a warm, sterile vessel with a solution called a growth medium, containing nutrients including salts, proteins and carbohydrates. Every 24 hours or so, the cells will have doubled.

How different is cultivated meat from the real thing?

Cellular farming doesn't grow cuts of meat, with bone and skin, or fat marbled through it like a succulent ribeye steak. Muscle cells require different conditions and nutrients to fat cells, so they must be made separately. When the pure meat or fat is harvested, it is a formless paste of cells. This is why the first cultivated meat products served up have been chicken nuggets or burgers.

The flavours, however, are of real meat. As they are produced in a sterile environment, there is less risk of contamination from disease and chemicals. This is in contrast to conventional agriculture where, says San-Francisco based Josh Tetrick, CEO of GOOD Meat, "you have a live animal slaughtered on the floor. If you look at the Salmonella, E. coli, faecal contamination that's part of animal agriculture, it looks much better from a cultivated meat perspective than it does from a conventional meat perspective."

Is lab-grown meat as nutritious as regular meat?

A spokesperson for UPSIDE Foods, a San Francisco-based leader in the cultivated meat arena, says that the nutrient profile will be similar, but it will also be possible to enhance or even personalise it.

"We are exploring ways to improve the nutrient profiles of our products. Whether that's less saturated fat and cholesterol, or more vitamins or healthy fats," they said. "For instance, imagine if we could produce a steak with the fatty acid profile of salmon? Or what if consumers could customise the nutrient profile in their products to meet their dietary needs?"

As there are so few cultivated meat products on the market requiring food labelling, we'll have to wait to get a better understanding of the nutritional value.

When can people buy it?

People in Singapore already can. Tetrick's company, GOOD Meat, has been producing and selling its chicken in Singapore since December 2020 at special events, both in an upscale hotel restaurant and the legendary Mr Loo's hawker stall.

Breaded chicken and shredded chicken have both gone down well. Tetrick says the company has applied to the US Food and Drug Administration (FDA) for approval in the US, but no timescale has been given.

Other producers say that Western countries are still ironing out the details of how regulatory approval will work, but say they'll be ready to scale up as soon as approval is given in the coming years.

Is it better for the environment?

The truth is, we can't know until mass production is happening. Modelling the potential impacts of a fast-moving biotech industry that's still in development is subject to many ifs and buts. One 2019 study from the University of Oxford warned that the energy used to make cultivated meat could release more greenhouse gases than traditional farming.

Pelle Sinke, researcher at Netherlands-based sustainability consultancy CE Delft, who was not involved in the research, says the part of the study that assumed use of electricity generated by a large proportion of fossil fuels highlighted the importance of renewable energy for cultivated meat production.

"In some scenarios, cultivated meat had a higher global warming effect, and in some scenarios a lower effect, depending on consumption levels, expected energy use for cultivated meat and the beef cattle system it was compared to," he says.

Sinke adds that the study doesn't, however, take into account the lower land use of cultivated meat. "[There's] the possibility to use that land for plant-based protein production, nature and extra renewable energy production, which in turn influences the CO ₂ emissions of cultivated meat," he says.

His own team has also been investigating the environmental impact and he says that while cultivated meat is no silver bullet to solve all the world's problems, "it certainly has a lot of potential because it directly offers a more sustainable alternative to conventional meats. It is a more efficient way of converting crops into meat, and therefore much less land is needed to produce these crops.

"But it does use more energy. For a lower carbon footprint than conventional meats, it is crucial that renewable energy sources are used in its production, including in the supply chain - importantly for the production of nutrients and other ingredients needed for the culture medium."

All of the companies contacted for this article - Mosa Meat, GOOD Meat and UPSIDE Foods - understand that building sustainable energy into production is essential.

What challenges need to be overcome?

A vegan growth medium

Until recently, in order to kick-start cell division, about 20 per cent of the growth medium had to be foetal bovine serum, drawn from the blood of a cow foetus. Not only is the serum prohibitively expensive, but it's also distinctly not vegetarian.

But all the major players now claim to have developed an alternative. In early 2022, Post and his team published an academic paper about their foetal bovine serum alternative. The process uses genetically modifying yeast to produce the necessary proteins. This technology, called precision fermentation, is similar to how medical insulin is made (we have a lot more than beer and bread to thank yeast for!). Post says that there is a whole new burgeoning industry for producing vast vats of productive microorganisms.

Tetrick admits, however, that there are still challenges with scaling up the alternatives, and that his chicken in Singapore is produced with foetal bovine serum. "[It's] not because we want to, but because it was included when we initially submitted our application, because we hadn't solved it when we submitted," he says. "We're awaiting regulatory approval to produce without it."

Mass production

Tetrick says that scale is the next great hurdle to clear. You need to be churning out "a minimum of 15 million pounds [6.8 million kilos] per year at a facility, which is sort of a rule of thumb for national distribution across the US or Western Europe."

This will necessitate bioreactors that hold at least 200,000 litres, which has never been done in cell culture. "People eat it every week in Singapore... right now the largest size that we're [producing in] is 1,200 litres, which is very small, relative to what is required. In my mind, this is the single biggest limiting step of the entire industry."

Only when produced at scale can the price come down and compete with cheap, intensively farmed meat. Meanwhile, GOOD Meat's Singapore operation is currently running at a loss, selling hawker stall dishes for four Singapore dollars (around £2.50). When launched in the West, all the products will start off at expensive restaurants - adding cachet to their launches - and can only trickle down to affordable supermarket prices with economies of scale.

Texture

Yes, much of the world's meat consumption consists of burgers, nuggets and sausages. But what if we want a juicy, cultivated steak? How do we turn meaty mush into a choice cut? It's a fast-moving picture, but GOOD Meat's current solution for their chicken products is to pair it with more structured vegetable proteins.

Its offering in Singapore is 73 per cent chicken. "[And then the rest] is binders and fillers," says Tetrick. "We're trying to optimise it for the sensory and consumer experience: taste, texture, flavour profile, cost."

Cellular agriculture trailblazers argue that it's cheap burgers and chicken that are using up the majority of the one-third of the planet that's currently dedicated to growing farm-animal feed, so these products are both the most urgent and easiest to get to market. To achieve the texture of steak, says Tetrick, scaffold technology will be necessary, as a way of building structure inside the vessel. This scaffold will most likely be made using vegan collagen.

Ethically, can everyone eat it?

Now that the foetal bovine serum is out of the way, vegetarians could, ethically speaking, eat this meat - if they have an appetite for it.

The religious element is a little trickier. For meat to be permissible under Islamic and Jewish laws, there are strict rules on how animals are slaughtered and how the meat is prepared. Cultivated meat is set to trigger lively debates among religious leaders around the world (interpretations of scriptures vary geographically), and has already started doing so in some zones.

Would cultivating meat from kosher or halal meat cells solve the problem? In Indonesia, which has the world's largest Muslim population, the influential Muslim organisation Nahdlatul Ulama has reportedly given a statement putting cultivated meat in "the category of carcass which is legally unclean and forbidden to be consumed."

In contrast, the Muslim-majority country Qatar is heavily investing in the technology, and building a production plant with GOOD Meat.

Meanwhile, in the London Beth Din (Court of the Chief Rabbi), there's excitement at the prospect of a meat that could be a neutral food, under kosher law. Foods in milk or meat categories must be kept separate, so to have a neutral meat could provide a convenient loophole. And it could eventually provide cheaper kosher meat, which traditionally tends to be expensive.

As Rabbi Conway says: "This is an extraordinary breakthrough and potentially a very exciting development for the kosher consumer. If the meat was available on a commercial scale, we would need full details of the manufacturing process and the ingredients used to rule whether it was kosher, but potentially this could make life easier and cheaper for kosher consumers."

What would happen to farmers and their animals if cultivated meat takes off?

"We envision that small-scale conventional farming will still be used for premium meat cuts and dairy products for years to come," says Post. "This protein transition will happen over decades, and innovations rarely completely replace existing practices. Cellular agriculture has the potential to create a more balanced and symbiotic relationship between small-scale farmers, consumers and the planet."

Post's team is already partnering with a farmer in the Netherlands, who keeps a free-roaming, high-quality herd of Limousins, raised not for slaughter, but for regular biopsies for Mosa Meat's burgers. "The same way that crop farming currently provides feed for animals, we also require feed for our cells, using the same type of nutrients a cow needs," says Post. "We will work with farmers to grow the crops needed to feed our beef cells."

UPSIDE Foods takes a similar view, while Tetrick says GOOD Meat is developing a beef line, culturing meat cells from a company called Toriyama, which is a high-end wagyu beef producer in Japan. "That's another interesting thing about cultivating meat - you can use these high-end meat sources and the cost to do it isn't any more," Tetrick says.

It's not just meat that can be cultivated

Dairy, without the cow

From milk to ice-cream to cream cheese, Perfect Day 's milk protein is already available in over 5,000 stores across the US. But instead of being made by cattle, it's produced by a fungus genetically programmed to create cow whey protein, using the same precision fermentation technology responsible for medical insulin. And the best bit: it's lactose free.

Egg whites, without the chicken

Precision fermentation is used by Every Company to make egg white, as well as a soluble version of the protein that even the fussiest palate would be hard-pressed to taste or see, making it an ideal additive for protein-boosting drinks and other products.

Bluefin tuna, but no fishing

As the name suggests, Finless Foods is creating animal-free fish. The company cultures bluefin tuna cells in what it calls a microbrewery-style production facility. I was lucky enough to attend an early prototype testing in 2017, and I can confirm that the fish croquettes tasted subtly of a sea in which the cells had never swum.

No-hunt exotic beasts

Start-up Primeval Foods sees the next logical step in culturing meat cells as a chance to taste exotic, off-limits animals such as lion and zebra. After launching in 2022, Primeval Foods is already promising imminent tastings in London and New York, and has so far released pack shots of tiger steak and zebra sushi rolls.

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What is lab-grown meat? How it's made, environmental impact and more

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It wasn't long ago that the idea of the meat on our plates coming from vast stainless steel bioreactors, rather than farmed animals, seemed like science fiction. The notion has gone through numerous rebrands since its early positing as 'vat meat', which triggered unappealing visions of high-tech Spam.

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Golden Ocean Vs. Star Bulk: Latter Is Still A Better Buy (NASDAQ:GOGL)

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The stock prices of Golden Ocean and Star Bulk have reached my previous targets. Now, I have new targets for the stocks. Learn more here.

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BIGZ CEF: A Buy If You Can Stomach It (NYSE:BIGZ)

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BIGZ is appropriate for those that don't mind riskier holdings and the potential for strong growth in the future. BIGZ is currently trading at a near 15% discount.

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Investing In Shipping Company Stock In 2022

Asia-U.S. shipping indexes are down approximately 20% to 30% from their peaks due to lockdowns in China and port congestion. There's a ton of pent-up demand for dry bulk and maritime shipping, and consumers are absorbing price increases given the high amounts of inventory at ports.

Because supply chain disruptions and the backlog have to work themselves out on the heels of the limited supply of vessels, we believe shipping stocks are a buying opportunity.

The global shipping crisis will take a while to work out, primarily when the world's second-largest economy, China, whose abysmal healthcare is resulting in extended lockdowns. While delivery delays for ocean freight have substantially increased since the pandemic, continued lockdowns in Asia as countries cannot support the outbreaks, and the backlogs and shipping demand will continue to serve as core growth drivers for shipping companies going forward. Hence, this growth, combined with incredible valuation frameworks, provide an excellent opportunity to buy these stocks.
Shipping Companies Are Setting Sail for A Rally
Shipping companies are price makers. Not only are GOGL, ZIM, and SBLK deep value stocks with excellent growth potential, the current environment should increase their revenue. Shipping companies can pass along costs to consumers, and the companies in need of goods will pay whatever it costs, including higher fuel prices, to receive their goods. It's also why inflation will persist at high levels because the logjam will take a long time to work out, and therefore, prices will stay high. The Fed cannot fix supply chain disruptions prompted by a pandemic-related shutdown in China, the world's second-largest economy, or resolve the supply chain disruptions from the war in Ukraine. Federal Reserve monetary policy and U.S. interest rates will do nothing to tame these issues. While the U.S. may see domestic demand curtailed due to a decrease in consumer spending, people still have to eat. When you have shortages of grain and other non-agricultural products, it's going to take a long time to work that through the system, and therefore, shipping stocks stand to see superior growth potential in the future compared to average stocks.

"The change in Covid prevention policies in different cities has imposed an extraordinarily severe impact on logistics," said Cui Dongshu, Secretary-General of the China Passenger Car Association. According to Bloomberg Shipping data, 230 cargo carriers off the coast of China are gridlocked, an increase of 35% from last year, with imported containers in Shanghai waiting an average of 12.1 days for pickup. And while a wave of imports is creating more backlogs in ports around Europe and the United States, inter shipping and delivery logistics are top of mind for nations searching for faster routes to offload containers and store inventory. While these "issues" may seem problematic, the three stocks we're mentioning in this article are set to benefit, especially in this inflationary environment.

Golden Ocean Group Limited (NASDAQ:GOGL)

Market Capitalization: $2.77B

Quant Rating: Strong Buy

Quant Sector Ranking (as of 5/17): 6 out of 583

Quant Industry Ranking (as of 5/17): 4 out of 25

Headquartered in Bermuda, dry bulk shipping company Golden Ocean Group Limited ( GOGL) operates and transports vessels that contain bulk commodities like ores, coal, grains, and fertilizers. On a longer-term upward trend, GOGL has stellar momentum, giving investors a reason to continue actively purchasing shares, which is driving the stock's price higher. Year-to-date, the stock is +56.12%. The company's quarterly price performance below shows that GOGL outperforms its sector peers by two, three, and four times. In addition to excellent momentum, GOGL comes at a severe discount.

GOGL Valuation

This stock has an incredible valuation framework. With an A+ valuation grade, GOGL's current P/E ratio of 5.97x is 64% below its sector peers. On a forward P/E basis, it also trades at a 75% discount to its 5-year historical average. The stock also showcases an excellent EV/EBITDA (TTM) of 6.31x and nearly 40% below its peers with a Price/Book ( TTM) ratio of 1.53x.

If the company's price point is not enough to convince investors, let's look at Golden Ocean Group's growth and profitability.

GOGL Growth And Profitability

Golden Ocean is experiencing tremendous growth, with tailwinds from increasing freight rates and expectations of dry bulk fleet demand outpacing its supply. For four consecutive quarters, GOGL has beat both top-and bottom-line earnings, with the most recent resulting in 4 FY1 Up revisions and an A- Revisions Grade. EPS of $0.98 beat by $0.15, and revenue of $312.87M beat by $15.34M, an increase of 148.69% year-over-year.

"We recorded an EBITDA just above $240 million, which translated into a net income of $204 million or $1.02 per share. This is the best quarterly result in the history of Golden Ocean...Iron ore prices are firming, demand from plants is also supporting while the energy crisis means demand for coal remains elevated. So, we remain very bullish for what lies ahead...we continue to pay out a significant portion of our net profit in dividend and that the supply and demand fundamentals remain in place for a sustained period of profitable markets" - Ulrik Andersen, GOGL CEO.

With its robust balance sheet and severely discounted valuation, GOGL is sitting pretty. Continued dry bulk demand and delivery logistics exceed supplies, benefiting shipping companies. Because Golden Ocean is a major coal and iron ore shipper, distant countries like South Africa and Australia, feeling the adverse effects of port jams, are in need. Those nations moving away from Russian supplies are also creating outsourcing opportunities for Golden Ocean's Capesize and Panamax fleets, reporting rates between $29,635 and $39,304 per day. In the words of fellow Seeking Alpha Contributor Pearl Gray Equity Research:

"This stock is a tremendously well-placed value play. Golden Ocean illustrates tremendous efficiency with its Panamax and Capsize vessels carrying essential dry bulk in the coal and iron ore space. I think Golden Ocean's gross margins illustrate its robust market position via economies of scale, which allows the stock to be a potential "best-in-class" pick in the current inflationary environment."

We believe our next stock pick is in a great position as well.

ZIM Integrated Shipping Services Ltd. ()

Market Capitalization: $7.62B

Quant Rating: Strong Buy

Quant Sector Ranking (as of 5/17): 7 out of 583

Quant Industry Ranking (as of 5/17): 5 out of 25

Like GOGL, ZIM Integrated Shipping Services Ltd. ( ZIM) is on a longer-term uptrend with a comparative strength that outperforms the S&P 500 by more than 80% over the last year.

With its subsidiaries, ZIM provides container shipping and port-to-port transportation services, which bodes well for this company, given that container shipping rates are sky-high, with global spot rates more than quadruple pre-pandemic levels. And while rates are beginning to come down, ZIM continues to have stellar A+ Momentum, with the stock's quarterly price performance substantially outperforming its peers.

The stock is up 18% YTD and is trading below $70 per share. With a valuation in single-digit multiples, a Forward A+ P/E ratio of 1.8x, nearly 90% better than its sector peers, the PEG (TTM) is at a -99.36% discount to the sector, investors better add this stock at its current valuation fast before this ship sails!

ZIM Growth And Profitability

In addition to the tailwinds outlined above, ZIM has stellar growth and profitability, translating into an excellent dividend yield to keep shareholders happy. Following another stellar earnings announcement, ZIM declared a $17/share dividend plus November's $2.50/share dividend from November 2021, for a total annual dividend of $19.50.

After reporting record full-year and Q4 2021 results, Yair Seroussi, ZIM Board of Directors Chairman stated,

"2021 was a transformative year for ZIM. We kicked off the year with listing our shares on the world's leading capital market in New York and have not looked back since. The many accomplishments of the past year and our remarkable performance, both financially and operationally, are the direct outcome of the unrivaled execution of our talented and dedicated management team and employees around the world, supported by the Board. In 2021, we took important steps to best position ZIM for long-term enduring growth and value creation for our shareholders. We remain focused on maintaining our strong execution and agility in 2022 and beyond, while advancing the highest standards of corporate governance and responsibility."

Consistent with ZIM's focus on profitability, shareholder's equity increased to $4.6B, the full-year 2021 EBITDA margins were 61%, and the company continues to outperform freightliners' industry averages. In addition to stellar profitability, the company's EPS of $14.16 beat by $0.96 and revenue of $3.47B beat by $101.23M. With significant cash on hand and investment into equipment to continue its best-in-class growth, ZIM is a top shipping stock to keep in mind, along with our next carrier, Star Bulk.

Star Bulk Carriers Corp. (NASDAQ:SBLK)

Market Capitalization: $3.07B

Quant Rating: Strong Buy

Quant Sector Ranking (as of 5/17): 9 out of 583

Quant Industry Ranking (as of 5/17): 7 out of 25

Star Bulk Carriers Corp. ( SBLK), the global cargo shipping company that transports bulk materials including iron ore, coal, grains, fertilizers, and steel products, is our final top shipping stock to consider amid the global shipping crisis. Shanghai, the world's busiest port, was recently shut down, creating a logistical traffic jam of containers and ships, creating bottlenecks everywhere, and ProShares CEO Michael Sapir says it best,

"The pandemic didn't just highlight the crisis facing the global supply chain, it identified a ripe opportunity to invest in the companies striving to provide real solutions and embrace new technologies that may revolutionize global trade."

There's no denying why this stock is rated a strong buy. And Star Bulkers and our other shipping stocks are ripe opportunities, as evidenced by their fundamentals, quant ratings, and factor grades. Check out SBLK's Factor Grades and quant ratings below, which characterize the stock's value, growth, profitability, momentum, and EPS revisions compared to the same metrics for other stocks in its sector.

This stock comes at an extreme discount, trading at $31/share, the stock's forward P/E ratio is 4.7x, a -70% difference to the sector, and its current PEG is at a -99.81% discount to the sector. With continued A+ momentum quarterly, the stock is significantly outperforming its peers. When comparing six-month, nine-month, and one-year price performance, SBLK is two and three times better performing than its peers.

If the charts and figures above do not have you seeing green yet with this stock's stellar valuation and momentum, let's look at its growth and profitability.

SBLK Growth And Profitability

Over the last 60 days, SBLK has experienced an earnings increase of 2.3%. As we look at the company's most recent earnings, it's no surprise that Star Bulk beat estimates for both top and bottom lines, resulting in six FY1 Up analyst revisions. EPS of $2.96 beat by $0.44, and revenue of $427.64M nearly beat by 200%! SBLK has experienced the evolution of adjusted net income and adjusted EBITDA, the latter growing more than 10x over the last eight quarters to demonstrate its substantial operating leverage.

Following its recent Q4 earnings beat, SBLK increased its dividend by 60%, which prompted its stock to rally +6.6% post-market. Star Bulk has a solid 25.80% forward dividend yield, which is substantial compared to the industry average of 0.6%. As fellow Seeking Alpha Contributor SM Investor writes, "According to the iron ore demand, freight rates, and charter rates, Star Bulk is ready to stay profitable in the second quarter of 2022."

With continued demand for shipping and a backlog of goods jammed in ports, we expect that our shipping stocks will continue their bullish trend. The price of commodities, charter rates, iron ore, fertilizers, and grains continue to rally, and GOGL, ZIM, and SBLK are ready to stay profitable through 2022. These stocks are strong buys.

A Win-Win For Value And Growth Investors

Value stocks are excellent buys, and all three of our picks, GOGL, ZIM, and SBLK, are very attractive on value, growth, and profitability metrics. All three stocks possess forward revenue growth above 24% and EBITDA growth above 46%. Even with geopolitical circumstances that include lockdowns at the world's largest ports, our stocks benefit from tailwinds, including high demand and price competition that other industries are not experiencing, making them strong buys.

Where many investors are dedicated to finding discounted stocks that trade at lower prices relative to fundamentals like earnings, sales, cash, and book values, other investors seek growth opportunities. If you can find stocks representing both value and growth, it's a win-win, which is why we are recommending these shipping stocks. If you're interested in other value or growth stocks, feel free to search our Top Value Stocks or Top Growth Stocks for ideas. Our tools help to ensure your portfolio contains strong investments that stand to increase over time.

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Asia-U.S. shipping indexes are down approximately 20% to 30% from their peaks due to lockdowns in China and port congestion. There's a ton of pent-up demand for dry bulk and maritime shipping, and consumers are absorbing price increases given the high amounts of inventory at ports.

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InfinitumProdux/iStock via Getty Images

Safe Bulkers Overview

Safe Bulkers () is a dry bulk shipping company which controls a fully delivered fleet of 50 vessels with significant mid-sized market exposure (Post-Panamax, Kamsarmax, and Panamax). Although SB has typically traded at a premium to peers in the past due to a strong track record of stability and prudent financial management, shares are now trading at a sizable discount to NAV, and Safe Bulkers is by far the cheapest diversified dry bulk shipping company in our coverage at Value Investor's Edge.

We believe Safe Bulkers should trade closer to average peer valuations and therefore this is one of our top picks in the current market. However, there is a clear factor which is likely weighing on SB's recent stock performance, which is the currently lackluster dividend payout. Alongside Q4-21 earnings, the company reinstituted a fixed dividend at $0.05/qtr and this payout was kept for the recent Q1-22 report. This current dividend pales in comparison to surging payouts at leading firms such as Genco Shipping ( GNK) and Star Bulk Carriers ( SBLK); however, we expect payouts will rise over the coming year as SB continues to delever their balance sheet while prioritizing selective fleet renewal and second-hand acquisitions.

SB's pro forma (including newbuild capex) debt-to-assets ratio is 46%, which is a healthy level and provides notable upside to improving market conditions. In previous discussions, management has floated a conservative mid-30% D/A as a rough target. If dry bulk market conditions remain moderately strong, SB should hit these levels by late-2022, and we should see an increase in fixed dividend payouts. If shares continue to trade lackluster, then SB might also institute a share repurchase program.

SB has approximately 121.7M shares outstanding for a common equity market cap of nearly $600M. SB also has $100M in preferred equity par value split between Series-C and Series-D (SB-C/D). SB currently offers a smaller fixed dividend yield of 4%, but we anticipate substantial increases over the coming year as legacy charters are renewed at high rates and financing is secured for upcoming vessel deliveries. SB has prioritized stable and secure fixed payouts in the past, and we expect this strategy will continue.

The rest of this report includes our Q1-22 earnings review, capital allocation discussion, and a valuation assessment.

Q1-22 Earnings Review

Safe Bulkers ( SB) reported an adjusted EBITDA of $46.9M, and adjusted net income of $32.3M, or $0.24/sh, in-line with our $0.19-$0.24/sh estimated range with an average TCE of $21,352/day. The TCE performance was in-line with our expectations (which were based on the company's previously disclosed charterbook).

Safe Bulkers has several below-market charters on the Panamax side of the fleet, but these will transition into index-linked market rate contracts between June and August of 2022 (which should provide a decent boost earnings into 2H-2022). The majority of the ships in the Kamsarmax and Post-Panamax segments are chartered at decent market-level rates, whereas the company also has a number of Capesizes chartered out under very long-term contracts, which are otherwise in-line with market levels for those durations.

SB declared a $0.05/sh dividend, in-line with the previous quarter's distribution. This represents a negligible amount of operating cash flow, but management is committed to improving the balance sheet. Management's stated goal is to "have the dividend sustained and to grow it in the long run." Unlike a few other peers who have targeted outsized variable dividends (which move up and down each quarter), SB has preferred to offer a stable fixed payout.

Q2-22 & Q3-22 EPS Projection

SB does not provide guidance as a percentage of the fleet fixed, but it does provide its full charterbook (which illustrates recently conducted spot fixtures). Given the company's charterbook, and given prevailing FFA expectations for June, we expect the company to report adjusted EPS of between $0.31/sh and $0.36/sh for Q2-22, which currently is above average analyst expectations.

Although market rates remain to be seen, SB has several weaker legacy charters expiring between June and August, which means Q3-22 earnings could potentially be notably higher, perhaps hitting the $0.45-$0.60 range for a single quarter.

Altogether, if the dry bulk market is reasonably strong for the duration of 2022, SB could produce total EPS ranging between $1.50-$2.00. 2023 performance could be markedly higher yet on the back of a larger fleet with significantly stronger average fixed charters.

Solid Operational Performance

The company realized an average TCE of $21,352/day, with the charter book weighing on their overall performance due to legacy medium-term Panamax charters which were signed in 2020 and now are notably below market levels.

Daily operating expenses amounted to $5,722/day, whereas daily G&A came in at around $1,520/day. However, once we exclude dry-docking and pre-delivery expenses, operating expenses came in at around $4,923/day, which is very close to SBLK's industry-leading $4,747/day level. SB's overall cost structure is competitive, allowing for one of the lowest total cash breakeven levels in the industry. Going forward, and as the newbuild assets are delivered, we expect the company's operational performance relative to peers will continue to improve.

Charter Cover: Short-Term Drag, Done by Q3-22

SB is characterized by its balanced exposure to the time charter market coupled with near-term spot market exposure. The company has done a very good job securing longer-term charter cover for their Capesize vessels, but at the same time, some of their Panamax charters secured in mid-2020 have weighed heavily against recent performance.

For example, seven out of twelve Panamaxes are chartered out at very mediocre charters (currently achieving rates of between $11,750/day and $13,800/day), which has weighed significantly on performance throughout most of 2021 and into early-2022. However, these vessels will mostly revert to index-linked market level contracts between June and August of this year, providing a substantial uplift to overall earnings, especially in Q3-22.

On the Capesize front, the company has used recent market strength to increase its charter cover with long-term contracts. It now has one vessel chartered out until September 2031 at $25,928/day, another asset chartered out at $25,250/day until May 2025, a 2014-built vessel chartered out at $25,200/day until February 2025, and finally, a 2012-built asset chartered until November 2024 at $24,400/day.

The Capesize coverage may seem low given prevailing rates, but when looking at 2023 and 2024 FFAs, these rates are quite decent and well in-line with current market rates. We have modeled a $60M charter discount on SB's charterbook primarily due to the mediocre Panamax time-charters. The majority of this discount factor will amortize in our valuation models over the remainder of 2022.

Fleet Expansion Program

SB has expanding the fleet over the past year and a half via a series of second-hand purchases, divestitures, and newbuild contracts. Overall, the company has ordered a total of 11 newbuilds and acquired seven second-hand vessels. Since these transactions were conducted, asset pricing has continued to increase, and SB is now sitting on an estimated $125M in mark-to-market gains on recent vessel buys (over $1/sh of value creation).

In May, SB took delivery of the first of its 11 newbuild orders, a Kamsarmax vessel, financed with a sale and leaseback transaction for a period of 10 years with a purchase obligation at the end of the 10 th year, with purchase options starting after the third year.

In January, SB agreed to acquire a 2014-built Capesize for $33.8M, and the vessel was delivered in February (with the acquisition funded from cash reserves). In April, another Capesize (a 2012-built asset) was acquired for $30M and was subsequently delivered in May 2022 (also financed with cash reserves).

As of May 20 th, the company's remaining capital expenditure requirements amounted to $218.6M in aggregate, consisting mostly of the newbuild orders ($217.4M), with the remainder attributable to "one scrubber and several BWTS retrofits". Management expects to face around $29.4M in capital expenditures for the remainder of 2022, followed by $141.8M in 2023, and $47.4M in 2024. As of May 20 th, cash and cash equivalents amounted to $141.5M (plus an additional $136.6M in undrawn borrowing capacity from RCFs and $20M in secured commitments for the financing of one of the newbuilds). SB has since added a pair of Kamsarmax newbuilds (Q3-24 & Q1-25 deliveries), bringing the total to 11.

SB has been one of the most active acquirers of tonnage over the past year, especially on the newbuild side, and they have been markedly more aggressive than other publicly traded peers, which have either foregone asset purchases or stuck with limited second-hand purchases. Recent newbuild ordering has allowed SB to reduce substantially its fleet age, now estimated at under 8.5 years, which is the third lowest among bulker peers (only GOGL and GRIN have younger fleets).

The company recently agreed to acquire three middle-aged Capesizes at decent pricing. Management's reasoning for these acquisitions is that Capesize valuations have lagged those of smaller vessels, and since management has a positive outlook for Capesizes, they have decided to play some offense. Although most retail investors have scorned companies who invest in additional assets or newbuilds, if an investor is either bullish on the future dry bulk market, or expects notably higher inflation, then SB is conducting the most efficient strategy for this stage in the cycle.

When asked on the recent earnings call about acquiring smaller second-hand vessels, the CEO mentioned those ships are very expensive relative to Capesizes, making the Capes a clear choice at this stage. Granted, smaller vessels have posted impressive performance over the past year (especially on a relative basis vs. Capesizes which have been held back by weaker China growth), but the company does not expect this negative performance gap to continue. If the dry bulk markets are strong into the next few years, the larger vessels will provide the highest torque.

Strong Financial Position

As of March 31 st, the company had $166.3M in cash, cash equivalents, and restricted cash, and a further $146.6M in undrawn borrowing capacity available under RCFs. Additionally, the company also had $46.2M in secured commitments for sale and leaseback agreements for the financing of two newbuilds.

This compares to a total debt position (including the recently placed Greek Bond) of $409.4M, which is virtually fully covered by the scrap value of the company's fleet (estimated at $395M assuming a scrap rate of $660/ton). However, we also need to include the $100M of preferred equity between the remaining Series-C and the Series-D tranches.

SB entered the current bulker upswing with one of the most levered balance sheets in the sector, and management is now focused on lowering debt ratios to closer to 30% D/A (SB currently has 48% D/A including the remaining newbuild capex, or roughly 35% against the current fleet). Operating cash flow generation for the remainder of the year will easily top $120M (potentially closer to $150M), which should bring SB to reasonable leverage ranges by the end of 2022.

Capital Allocation: Delevering & Selective Fleet Renewal

SB has been one of the last dry bulk peers to transition to heavy shareholder with returns (via dividends or share repurchases). Management has been clear regarding capital allocation priorities: they want to delever the overall balance sheet and continue renewing the fleet if asset pricing remains attractive.

Management will continue to prioritize fixed dividend distributions (instead of the variable option many bulker peers are utilizing). They want the dividend "to be sustainable and here for the long-term". In previous years, SB has also incorporated a share repurchase when the stock is 20%+ below NAV, so if shares continue to muddle, we might see a repurchase.

This defensive approach is not surprising given how hard the past decade has been (SB is one of the only survivors from the past cycle), but it underpins that we should not expect massive dividends in the immediate future. This will most likely continue to drive a slightly higher discount relative to peers but given the extremely high insider ownership in the company (insiders control around 40% of the common shares), we should see prudent asset allocation and a return of repurchases if large discounts continue. SB currently trades at one of the largest discounts to peer averages we have seen in nearly a decade, and we should see stronger relative appreciation in the near- to medium-term.

In the medium-term (late-22 through mid-23), we expect to see higher dividend payments and perhaps a series of share repurchases (if shares remain underpriced). Therefore, SB is currently one of our favorite stocks in the bulker sector given the extremely high relative discount the stock continues to trade at (even after applying a $60M below-market charter discount).

In addition to deleveraging, management will also continue to selectively renew the fleet. They have recently focused on second-hand Capesize vessels given the discount on these ships relative to their smaller counterparts and they have pursued a newbuild program to replace parts of their mid-sized fleet. Although many have critiqued the acquisitions and limited push into newbuilds, SB has already driven more than $1/sh in value by moving early and securing yard slots well before the spike in prices.

Battle-Tested Management

It's worth noting/reminding that SB was one of the very few dry bulk firms who survived the last downcycle without massive share dilution. If we go back to 2008-2009 and look at all dry bulk comps, almost every other firm went bankrupt or diluted shareholders by over 90%. SB never resorted to heavy dilution nor a reverse split like many of its peers. However, management also strives to establish a company which is strong enough to survive any cycle, hence their previously stated goal is to drive total leverage closer to 30% while also selectively renewing the fleet.

SB Focus Question Review
Note: These initial focus questions were included as part of our extensive earnings season coverage at Value Investor's Edge, where we cover 40+ firms across the maritime shipping sectors. Commentary on fleet positioning? Usage of bond proceeds? SB has been busy with fleet renewal, divesting the oldest vessels while ordering several newbuilds. Is management happy with the company's current fleet positioning? Is management willing to divest the oldest portion of the fleet at current pricing? Regarding the bond issued in the Greek capital markets, any further commentary regarding where the proceeds will be deployed? Commentary on shareholder returns? SB has been clear they will prioritize strengthening the balance sheet before boosting shareholder returns, but the company declared a $0.05/sh dividend on Q4 earnings. What kind of dividend will the company declare on Q1 earnings? Is management willing to institute a share repurchase program to repurchase shares at the current discount to NAV?
Q1-22 Answer: SB has continued with fleet renewal, taking delivery of the first newbuild while also acquiring two middle-aged Capesizes at firm pricing (plus a third mid-aged Capesize whose acquisition was announced shortly after). Recent bond proceeds were mostly used to finance recent acquisitions, to lower secured debt levels, and to repurchase $38.1M worth of preferred (which looks like a no-brainer given the instrument was yielding 8% compared to the Bond's 2.95% coupon). Going forward, management remains constructive on the overall market outlook, and we expect additional transactions (acquisitions centered on Capesizes) in the near/medium-term, whereas the disposal of the oldest vessels also seems likely if valuations continue to rise.

Q1-22 Answer: Management's previous commentary still stands: they will continue to reduce leverage levels and will continue to look at potential acquisition opportunities. The dividend declaration was the same as in Q4 (still representing a negligible amount of operating cash flows). Management wants the dividend to have a fixed, long-term nature, and they do not seem willing to pursue a variable dividend policy as most peers have done (which would have otherwise went a long way in pushing the stock higher). We expect SB will eventually raise the dividend to the $0.10-$0.15 range in coming quarters as leverage is reduced and earnings increase.

Why is SB Cheaper than Comps?

We believe SB is attractive on a standalone basis, with an end-22 target of $7-$8 (up to 63% upside in six month) and a current 'fair value estimate' of $6.00 (22% immediate upside). However, SB is even cheaper yet when compared against peer valuations.

SB's closest direct comps are Diana Shipping ( DSX), with a P/NAV of 1.2x, and Eagle Bulk ( EGLE), with a P/NAV of 1.05x. Star Bulk Carriers ( SBLK) is the bellwether of the sector as well, with a P/NAV of roughly 1.1x.

The average P/NAV of these 3 comps is 1.12x, whereas SB trades at 0.72x even after including the $60M below market charter discount (which will mostly be gone by August). If SB traded to the peer average of 1.12x NAV, it would trade around $7.65 now and roughly $8.20 by August.

Why does this huge disparity exist? We have followed SB for over a decade and normally this has been one of the firms which trades at the highest valuation. We believe SB's lower fixed dividend vs. peers rushing to pump out higher-ticket variable cash payouts has led to this performance. Over time, we expect valuations will once again normalize and SB will likely outperform. Furthermore, some investors have complained about SB adding discounted second-hand tonnage or pursuing some selective newbuilds. If investors are truly bullish about the sector prospects and/or concerned about inflation, then adding selective assets is the superior move at this juncture. The ships SB ordered in 2021 are now already valued more than $5M higher apiece and SB controls some of the extremely few remaining slots for 2023-2024 deliveries.

Fair Value Estimate: $6.00 Now, $8.00 by End-22

SB reported in-line earnings for Q1-22, and the company's operational performance continued to be strong especially given the sizable below-market legacy charterbook (which has weighed significantly against performance over the past few quarters). Most of the below-market charters will roll off between June and August of this year, providing a decent tailwind through Q3 if dry bulk market rates continue to improve.

The market has been volatile throughout the first half of the year, but rates have held up remarkably well. As China reopens, iron ore demand is expected to increase noticeably, which should drive additional upside. The war in Ukraine continues to upend bulker trade, and although overall grain volumes will be under severe pressure, rerouting of cargoes should add to ton miles (especially in coal markets), which should ease the impact.

We have recently raised our 'fair value estimate' from $5.50/sh to $6.00/sh, which is nearly a 10% discount to NAV and also includes a $60M charter discount due to the handful of far below-market Panamaxes (expiring between June and August) and one Kamsarmax (expires in November). This discount will amortize through our models throughout the rest of 2022. Without this discount and including quarter-to-date cash flow, unadjusted NAV is roughly $7.30/sh at this point, which means SB is trading at a P/NAV of around 67%. Given the ongoing discount, prudent management, and SB's historical trading range of over 100% NAV, SB is now one of our top picks in dry bulk, and in shipping overall.

Stay Ahead of the Shipping Markets

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Safe Bulkers Stock: Best Value In Dry Bulk (NYSE:SB)

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Safe Bulkers () is a dry bulk shipping company which controls a fully delivered fleet of 50 vessels with significant mid-sized market exposure (Post-Panamax, Kamsarmax, and Panamax).

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CLM: Cornerstone Strategic Value Fund. Fund Review: U.S. KING of INCOME | CRAZY 17% Dividend Yield!

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HD Hyundai has announced that the Prism Courage, a 122,000 tonne ultra-large natural gas tanker operated by its subsidiary Avikus, has become the first large ship to make an ocean passage of over 10,000 km (6,210 miles) under autonomous control.

A ship that is capable of sailing itself isn't new. Even the smallest vessel can be equipped with an automatic pilot and it isn't uncommon to come across stories of freighters steaming into harbor without a soul aboard after being prematurely abandoned by their crews. In fact, even a sailing craft without a single bit of electronics aboard can keep a steady course if the sails are set properly and the tiller secured.

However, that is a very different thing from an autonomous ship making a passage. An automatic pilot simply allows a craft to maintain a heading and maybe it can be programmed to respond to things like GPS waypoints and currents, but an autonomous ship must be able to handle many different kinds of sensor readings and to not only make decisions about how to respond to them, but to do so in accordance with the rules of the road and maritime law.

The captain and crew of Prism Courage monitor the autonomous navigation system

HD Hyundai

Which brings us to the Panama-flagged Prism Courage. The ship left Freeport, Texas on May 1, 2022, then passed through the Panama Canal and crossed the Pacific Ocean to arrive at the Boryeong LNG Terminal in South Chungcheong Province, Korea, after a voyage of 33 days.

During the latter half of the journey, the ship was under the control of the autonomous navigation system HiNAS 2.0, which not only steered it, but sought out the optimal routes and best speeds based on Hyundai Global Service’s Integrated Smartship Solution (ISS) artificial intelligence. This provided navigation as well as compensation for weather and wave heights and legally avoiding passing ships by steering in real-time.

The HiNAS 2.0 system provided an increase in fuel efficiency of 7 percent and a reduction of greenhouse gas emissions of 5 percent. In addition, it was able to locate and avoid other ships over 100 times. During the voyage, the Prism Courage was monitored by the American Bureau of Shipping (ABS) and the Korea Register of Shipping (KR) to confirm its performance and stability.

The goal is to prepare the HiNAS 2.0 for marketing by next year, after official certification.

"Avikus’ autonomous navigation technology was greatly helpful in this ocean-crossing test especially for maintaining navigating routes, autonomously changing directions, and avoiding nearby ships, which were all increasing ship crews’ work conveniences," said Captain Young-hoon Koh of the Prism Courage.

Source: HD Hyundai

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Massive LNG tanker sails itself across the Pacific in shipping world first

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HD Hyundai has announced that the Prism Courage, a 122,000 tonne ultra-large natural gas tanker operated by its subsidiary Avikus, has become the first large ship to make an ocean passage of over 10,000 km (6,210 miles) under autonomous control.

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Bienvenidos al resumen de mayo 2022. En Mayo hicimos varias compras aprovechando la volatilidad en Estados Unidos, también ampliamos en España.

Movimientos mayo 2022

Como todos los meses, vamos a separar los movimientos del mes en tres bloques: compras, ventas y dividendos para hacer mas amena la lectura.

Compras

Mayo vino cargado de compras, todas ellas ampliaciones, ningún valor nuevo.

Vamos a entrar en detalle con las compras de mayo:

6 x Kimberly-Clark (KMB)

20 x Main Street Capital (MAIN)

500 x Mapfre (MAP)

280 x Ebro foods (EBRO)

10 x National Health Investors (NHI)

50 x Iron Mountain (IRM)

Ventas

Este mes no hubo ninguna venta ni rotación.

Dividendos

En mayo hemos recibido 14 dividendos en total, trece de ellos de empresas americanas, y uno de empresas españolas. Estos han sido los dividendos recibidos en mayo por países y ordenados por fecha de cobro.

🇺🇸 Estados Unidos

General Mills: $5.1

AT&T: $277.5

National Health Investors: $45

British American Tobacco: $68.03

AGNC Investment: $120

Apple: $2.3

Colgate-Palmolive: $4.7

Main Street Capital: $10.75

Pembina Pipeline: $12.98

Realty Income: $7.41

Abbvie: $14.1

Procter & Gamble: $9.13

Starbucks: $4.9

En mayo de 2022 recibimos 342,8 euros de dividendos brutos de empresas españolas (antes de pagar impuestos).

➡ Los dividendos en euros suponen un incremento de +33.91% respecto al mismo mes del año anterior.

Las empresas americanas nos aportaron en mayo de 2022 un total de 581,9 dólares de dividendos brutos.

➡ Los dividendos en dólares americanos suponen un incremento de un +146.85 % respecto al mismo mes del año anterior.

Nota: los porcentajes anteriores se calculan usando la calculadora de porcentaje entre dos números.

En mayo nuestra cartera mantuvo la tendencia positiva gracias las compras realizadas y las recientes subidas en los mercados.

A cierre de mayo nuestra cartera tuvo un incremento de +9.98% con respecto al mes pasado y alcanza un valor estimado de 186.708,6 euros.

Cartera – Mayo 2022

Este mes hemos publicado la página del dividendo T. Rowe Price, como ya adelantamos el mes pasado.

Despedida

Este mes aprovechamos nuevamente la volatilidad en los mercados sobre todo en Estados Unidos para ampliar algunos valores a buen precio. Con las últimas compras en Estados Unidos esperamos los próximos meses dividendos brutos de al menos 600 dólares americanos.

En lo personal fue un mes de mucho movimiento por mudanza, por fin dejamos la capital de España después de casi diez años 🙂 una nueva etapa mucho más tranquila nos espera.

Y hasta aquí el resumen de mayo de 2022.

Esperamos que sus inversiones y dividendos sigan creciendo. ¡Hasta la próxima inversores!

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【 RESUMEN MAYO 2022 】Compras, ventas y dividendos

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Resumen MAYO 2022. En mayo de 2022 recibimos catorce dividendos, seis compras y ninguna sola venta o rotación.

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I am reaffirming a positive risk/reward rating for Rio Tinto () based on its unique portfolio diversification benefits, its leverage to secular growth trends, and its exceptionally asymmetric risk/reward profile. Rio's investment case is bolstered by its top-tier copper growth potential, industry leading aluminum profitability, and arguably the world's highest quality iron ore assets. The downside is reinforced by a nearby technical support base that has developed over the past 13 years, a discounted valuation, a 10% dividend yield, and a structurally bullish supply and demand balance for industrial metals over the coming decade.

Risk/Reward Rating: Positive

Bloomberg's Joe Weisenthal recently covered the structurally bullish supply and demand balance for industrial metals. Weisenthal conducted an interview with Goldman Sach's Nick Snowdon covering the topic of copper. Weisenthal's Twitter commentary on the transcripts of the interview speaks volumes: "Why Copper Could Surge 10x Over The Next Decade" and "Absolutely worth your time, IMO, to understand this story, and the idea that copper will be the oil of the 2020s."

While a 10x price increase for copper as well as it becoming the "new oil" are in the realm of possibility, it is important to weigh the source. Goldman Sachs is a sell-side investment bank that is in the business of raising capital for companies, including miners. That said, the above quotes capture the most likely directional trend for copper, and industrial metals more generally, looking out at the coming decade.

For a more comprehensive look at the global energy transition and its anticipated effect on various industrial metals, please see the "Global Growth Opportunity" and "Levered to Asian Demand" sections of my January Rio Tinto report. Please note that I structure these reports to serve as an extended framework and decision support tool for approaching each company through time. As a result, each report builds on prior work.

With that said, we appear to be entering exciting times for the materials sector, and the mining and metals industry in particular.

Diversification

I opened my January Rio Tinto report with the following passage which continues to capture the essence of the Rio Tinto investment case.

Rio Tinto is among the world's leading producers of iron ore and aluminum and offers one of the highest copper growth profiles amongst its peers. As a result, the investment case for Rio Tinto hinges on the global supply of and demand for these critical industrial commodities as well as Rio Tinto's competitive positioning.

A less appreciated aspect of the Rio Tinto investment case is the extraordinary portfolio diversification that Rio offers to most of today's investors. We are all familiar with the increasing dominance of index funds in today's markets. Additionally, it is now widely accepted amongst the investment community that the vast majority of active portfolio managers underperform their index. As a result, a large percentage of active managers engage in what is called "shadow indexing" to ensure that their performance does not deviate significantly from their benchmarks.

With the S&P 500 index serving as the barometer of "the stock market" for most professionals and the preferred investment vehicle for many, it is important to understand what "the market" is offering investors. The following table breaks down the sector weightings in the S&P 500 index using the holdings of the SPDR S&P 500 Trust ETF ( SPY). The table below was compiled from State Street and details the sector exposure that the majority of today's investors have in their portfolios.

I have highlighted in yellow the materials sector weighting in the US stock market (Rio Tinto is in the materials sector but is not in the S&P 500). At only 2.82% of the market, it is safe to say that the majority of investors have little to no exposure to the materials sector.

If the secular growth trends in the coming decade rhyme with the initial quotes above, index investing is likely to underperform materially. The period following the 2000 tech bubble offers a glimpse into the possibility of poor index performance over a prolonged period of time. The S&P 500 did not surpass the 2000 peak until 2013.

Delving deeper into the materials sector, the exposure to the metals and mining industry (Rio Tinto's subsector) is even more alarming from the perspective of diversification. The following table was compiled from State Street and lists each of the companies that comprise the materials sector in the S&P 500 index.

I have highlighted in yellow the two companies that are in the metals and mining subsector as well as their total weighting in the S&P 500. Index investors, and many of those invested in portfolios that benchmark to the S&P 500 and similar indices, have 0.3% exposure to what could become one of the greatest growth opportunities in the coming decade.

Additionally, the two similar companies, Freeport-McMoRan ( FCX) and Newmont ( NEM), essentially offer exposure to copper and gold. As a result, Rio Tinto offers near perfect diversification for investors by providing material exposure to iron ore, aluminum, copper, gold, and soon lithium.

In summary, the majority of today's investors can achieve a more efficient portfolio (the same or higher expected return with lower risk) by adding Rio Tinto. Rio Tinto is a perfect portfolio diversifier.

Copper: The New Oil

Going back to the Weisenthal quotes above and the likelihood of a secular bull market for copper, Rio Tinto has a world-class copper portfolio with peer-leading growth potential. This growth potential was on display in the first quarter when Rio offered to acquire the remaining shares of Turquoise Hill Resources ( TRQ) that it does not already own.

Rio Tinto currently owns just over 50% of Turquoise Hill Resources. If the offer is accepted, Rio would own 66% of the Oyu Tolgoi mine in partnership with the Mongolian government, which owns the remaining interest. Oyu Tolgoi is a tier-1 resource and is entering its most valuable phase of development with the commencement of the underground expansion. The underground mine, which holds much higher grades of copper and gold compared to the open pit mine, will bring Oyu Tolgoi to its planned production potential.

At peak stable production, Oyu Tolgoi is estimated to average 1 billion pounds of copper production per year through 2041, with the potential to extend the mine life for decades. I estimate Rio Tinto's cash flow potential at this level of production could range from $2 billion to $3.6 billion per year if copper prices are in the $4 to $6 range. This range represents a copper price change from today's price of between -7% to +40%. I view this as a fairly modest estimation of the potential for copper over the coming decade.

A more bullish scenario could develop due to a structurally tight supply condition resulting from the energy transition. If this becomes the case, cash flows would explode from my estimated $2 billion to $3.6 billion per year at $4 to $6 copper. Please note that my cash flow estimate incorporates 330,000 ounces of gold production per year and Rio Tinto's 66% ownership of the Oyu Tolgoi mine.

For a review of the bullish case for copper, I would suggest " The Revenge of the Miners" presentation by Robert Friedland, the Executive Co-Chairman of Ivanhoe Mines ( OTCQX:IVPAF). In his more recent presentation in Riyadh, Saudi Arabia, Friedland estimated that the mining industry needs to invest an additional $240 billion over the next five years just to meet demand.

For reference, Rio is offering $2.7 billion for half of the cash flow estimated above, which amounts to one third of Oyu Tolgoi's estimated 1 billion pounds of copper production per year. The valuation at which Rio Tinto is acquiring the remaining Turquoise Hill Resources interest is summarized in the table below. The capital structure information was compiled from Seeking Alpha. I have added my cash flow and valuation estimates in the lower portion of the table.

Rio is essentially acquiring 330 million pounds of planned and established copper production and 110,000 ounces of gold production per year for $2.7 billion. This looks to be an exceptional capital allocation choice. A new mine of this magnitude would require a considerably higher level of capital investment, a much longer time frame, and the extraordinary risks that are associated with all new mine developments.

Copper Portfolio

In fact, Rio Tinto has created a formidable copper portfolio of world class assets. For example, Rio Tinto owns a 30% interest in the world's largest copper mine, Escondida in Chile. Rio Tinto owns 55% of the Resolution Copper mine in Arizona which, if brought online, could produce 25% of the United States' annual copper demand for forty years. As discussed above, Rio is set to own 66% of the Oyu Tolgoi mine, which is slated to become the world's fourth largest copper mine. Finally, the company owns the Kennecott copper mine in Utah, which is the world's deepest open pit mine and has produced since 1906. This mine has been upgraded for at least another decade of production.

The following table summarizes Rio Tinto's potential copper production. This production looks to be achievable in the mid to second half of the current decade and represents 118% growth compared to Rio's 2021 copper production. The data was compiled from Rio Tinto's 2020 and 2021 annual reports and the most recent Turquoise Hill Resources Q4 2021 investor presentation and are solely my estimates based on the available information.

I have highlighted in blue my valuation estimates of Rio Tinto's current copper potential in the mid-decade time frame, which the market should progressively price into Rio's shares. The estimate range is $36 to $89 per Rio Tinto share, with $36 to $62 being the most likely scenario several years out. Please note that these per share valuation estimates only reflect Rio's copper portfolio. With Rio Tinto trading near $74 per share, and copper comprising only 12% of Rio's current business, the copper analysis suggests that Rio Tinto's shares have material upside potential.

The 9x cash flow multiple is derived from Freeport McMoRan's current enterprise value to cash flow valuation using its trailing 2021 cash flow. Freeport represents a copper bellwether. I assume Rio Tinto's copper portfolio cash cost to be $1.30 per pound, which is currently in line with a broad spectrum of copper producers with similar high-quality assets (including Freeport McMoRan and Ivanhoe Mines).

Copper Forecast

In the short term, copper supply looks likely to exceed demand as a result of the global economic slowdown coinciding with new production coming online and production recoveries following the COVID disruptions. That being said, copper inventories are currently near 16-year lows.

With the increasing importance of copper to the unfolding energy transition (see "Global Growth Opportunity" in my last report), it would be rational for industry and government participants to restock inventory of a mission critical commodity at the earliest opportunity. As a result, the price of copper is likely to be well-supported near current levels, with the caveat that downside volatility could materialize if a global recession takes hold. Regardless, the view through the coming decade looks quite bullish for copper. The following table from my January report provides recent industry copper price forecasts per year.

I have highlighted in blue Goldman Sach's forecast as I view the price estimates for 2024 and 2025 to be in line with the onset of likely supply shortfalls coming into view. The yellow highlighted cells represent average estimates which are generally near the midpoint of my $4 to $6 dollar range used above.

Copper Technicals

Taking a step back, the following 20-year monthly copper chart places the price estimates above into proper context. Notice that the price of copper recently broke out to a new all-time high near $5 before being quickly rejected. The upper orange line denotes the primary resistance level while the lower orange line represents the nearest support level ($3.90 to $4.50). The two green lines represent what should be an extraordinarily strong support zone ($2.80 to $3.30).

In my estimation, the area between $3.50 and $4 should offer strong support. Additionally, this zone could be tested in the near term due to the aforementioned supply coming online. A recent Seeking Alpha article by Carl Surran, SA News Editor, " Global copper supply seen outpacing demand next year, RBC says," summarizes the near-term copper setup quite well. The following quote captures RBC's forecast from the article:

RBC forecasts copper's price averaging $4.32/lb in 2022 and falling to $3.75/lb in 2023 and 2024 on a "small" surplus in the market.

The key phrase in the above quote is "small surplus." Copper is a global commodity and the price is set at the margin. The mining industry is notorious for production disruptions due to all manner of natural and recurring events such as equipment failures, labor strikes, and natural disasters.

As a result, a "small surplus" can become a material deficit if production becomes interrupted. The lack of margin for error is made more acute by copper inventories being near 16-year lows. The following 5-year weekly chart provides a closer look at the recent copper trend.

While copper is technically extended to the upside compared to the COVID price weakness in the first half of 2020, this upside extension has been consolidating sideways for nearly a year. As a result, copper is not technically overextended on a 1-year time frame. Nonetheless, investors should be prepared for a possible test of the $3.50 to $3.90 range. If this were to occur, it would likely create material downside volatility for copper stocks and represent an excellent entry point for investors looking to accumulate shares.

The possibility of a near-term copper correction and the associated volatility this would create for copper stocks, further highlights a core pillar of the Rio Tinto investment case, diversification. While a copper bellwether like Freeport McMoRan would likely selloff materially in a near-term copper correction, Rio Tinto's shares should experience much less volatility as copper represents only 12% of its current business. The copper case for Rio Tinto is all about its future growth plans which are well aligned with the potential for supply shortfalls toward mid-decade.

Aluminum

The aluminum market is also undergoing a structurally bullish transition due to the demand for "light weighting" to reduce energy consumption throughout the global economy. However, the most important and bullish structural shift is emanating from China. China has halted aluminum capacity growth, which has been stagnant since 2017 as can be seen in the slide below from my prior report. This seismic shift is creating a more economically robust supply dynamic for the global aluminum market and is likely to support higher prices over the intermediate to longer term.

Aluminum is one of the most carbon-intensive metals to produce. Given that the majority of China's aluminum supply is powered by burning coal, it is highly likely that this structural supply constraint will remain in place given China's emission target commitments and global trade disputes.

Rio Tinto operates one of the most efficient aluminum businesses in the world from a carbon footprint perspective. With carbon prices skyrocketing and carbon increasingly becoming a cost, Rio Tinto has a competitive cost advantage. 60% of the global aluminum industry is powered by coal. As the cost of these coal operations continues to increase, it will place upward pressure on aluminum prices. Rio Tinto should experience substantially higher profit margins as a result.

Aluminum: Profitability

In fact, from a profitability perspective, Rio Tinto is an industry leader, which can be seen in the slide below from my prior Rio report.

Like Freeport McMoRan in the copper industry, Alcoa ( AA) is a bellwether in the aluminum industry and serves as an excellent comparable company for Rio Tinto's aluminum business. Additionally, Alcoa's and Rio Tinto's aluminum businesses are roughly the same size from a revenue perspective.

The table below summarizes Rio Tinto's 2021 and 2020 aluminum results and compares them to those of Alcoa. The data was compiled from the Rio Tinto company reports used thus far and Alcoa's 2021 10-K filed with the SEC. I have highlighted in yellow the sales figures for each company, which are nearly identical. The key differentiator of Rio Tinto's aluminum business, profitability, is highlighted in blue for ease of comparison.

Rio Tinto's aluminum business produced an incredible 159% of Alcoa's EBITDA on nearly identical sales in 2021, and nearly twice as much in 2020. It is clear that Rio Tinto's aluminum business deserves a substantial valuation premium compared to Alcoa, and the industry as a whole.

Aluminum: Valuation Premium

Rio Tinto's valuation premium extends beyond its superior profitability. On the cost of capital front, Rio's long-term credit rating is in solid investment grade territory (S&P Global Ratings: A, Moody's: A2) while its short-term credit ratings are the highest possible. In comparison, Alcoa's long-term credit rating was just recently upgraded to one notch above junk by Fitch (BBB-). S&P Global Ratings continues to have a junk credit rating on Alcoa (BB+), however, the outlook for an upgrade is positive.

This is important because Rio Tinto has a much lower cost of debt capital compared to Alcoa. On the equity side, Rio Tinto has a 5-year beta of 0.59 compared to Alcoa's 2.34. Essentially, Rio Tinto's equity is roughly half as volatile as the overall equity market. In comparison, Alcoa's equity is roughly 2.34x more volatile than the overall equity market. Using beta as a gauge of equity risk, Rio Tinto's cost of equity capital should remain well below that of Alcoa's.

When discounting the cash flows of each business, the lower discount rate applied to Rio Tinto's aluminum business compared to that of Alcoa amplifies the valuation premium emanating from Rio's materially higher profitability.

In the following table, I approximate the premium using a discounted cash flow framework. I incorporate the assumption that Rio Tinto's total cost of capital is 33% less than that of Alcoa's and that its annual cash flow remains 60% higher than Alcoa's. Under these assumptions, Rio Tinto's valuation is roughly 2x that of Alcoa's. Alcoa's current valuation is summarized in the table below. The capital structure information was compiled from Seeking Alpha.

I have highlighted in blue the estimated value per share of Rio's aluminum business using this comparable approach. The yellow highlighted cells compare the resulting valuation multiple of Rio's aluminum business to that of Alcoa's. I view Rio Tinto's premium aluminum valuation of 6.29x EBITDA as very reasonable in relation to Alcoa's 4.21x valuation.

Aluminum + Copper Valuation

If we add the $17 per share estimate for the aluminum business to the range of copper valuations from above, the resulting valuation of Rio's two smaller business segments can be estimated. Please note that aluminum accounted for 19% of total sales in 2021 while copper comprised 12% of sales. The valuation estimates per share under the three copper scenarios above (including the aluminum estimate) is as follows: $53, $79, and $106.

Iron Ore

The copper and aluminum businesses are relatively small for Rio Tinto compared to its iron ore business. I began with the smaller segments to illuminate the value proposition of Rio Tinto's shares at $74. Additionally, I covered the iron ore business in more detail in my prior report in the "Iron Ore: Core Business" section. I highly recommend reading the report as it compliments this analysis.

The following table displays the performance of each of Rio Tinto's businesses in 2021 and 2020. It was compiled from the company reports used thus far. I have highlighted in yellow the performance of the iron ore business to highlight the scale of the operation.

In recent years, the price of iron ore has skyrocketed which has translated into incredible cash flow for Rio Tinto. In 2021 alone, using EBITDA as a cash flow proxy, the iron ore business generated nearly $28 billion. With a current enterprise value of $124 billion, Rio Tinto is valued at 4.5x its iron ore EBITDA alone and 3.2x its total 2021 EBITDA.

The reason for the incredibly low valuation is that the market expects iron ore prices to trend toward the mid-$80 per tonne range in the coming years. This compares to an average price of roughly $147 in 2021, and $103 in 2020. The following table summarizes the industry iron ore price estimates from the January Rio report.

I have highlighted in yellow the central forecast tendency towards $85 over the coming years. This price trajectory for iron ore suggests that we ignore the exceptional 2021 iron ore results in estimating the sustainable performance level of the iron ore business.

The central forecast tendency toward the mid-$80 range through 2025 looks like an appropriate baseline expectation going forward. This price estimate was the top end of the iron ore trading range between 2016 and 2020, preceding the recent price spike. This is likely to be a strong support zone for iron ore.

As a result, Rio Tinto's iron ore performance in the 2018 to 2020 period offers a high confidence estimate of sustainable iron ore earnings. The following table was compiled from Rio Tinto's 2020 annual report. It details Rio Tinto's iron ore earnings between 2018 and 2020 and the associated iron ore price. The lower two rows summarize several per share valuation estimates for the iron ore business.

I have highlighted in yellow Rio Tinto's 2019 iron ore results. The $9.6 billion of iron ore earnings in 2019 at an average iron ore price of $85 is an excellent sustainable earnings profile given the price forecast. Using this consensus baseline price for iron ore allows for upside surprises emanating from the global energy transition and the various Belt and Road type initiatives which were discussed in my prior report.

Iron Ore: Valuation

I selected Vale S.A. ( VALE), a leading iron ore producer, for a relative valuation approach for Rio Tinto's iron ore operations. The iron ore production profile for each company is nearly identical. Vale is currently valued at 15.25x its 2019 normalized earnings estimate, assuming a 30% tax rate similar to Rio Tinto's. This approach places a $90 per share valuation on Rio Tinto's iron ore business (highlighted in blue in the above table). At the time of my last report, Vale was valued at 12.5x normalized 2019 earnings, which implied a $74 per share valuation for Rio's iron ore business.

Please note that Rio Tinto's iron ore operations carry substantially lower ecological and social risk than Vale's operations. Vale's primary mine assets are located in ecologically sensitive regions in Brazil, as evidenced by its two major tailings dam failures in 2015 and 2019. As a result, I view the comparable Vale valuation approach as a conservative estimate for the value of Rio Tinto's operations in the Pilbara region of Australia.

Potential Return Spectrum

Nonetheless, Rio Tinto is trading in the $74 range today. The $74 to $90 valuation estimate for the iron business accounts for much, if not all of Rio Tinto's current valuation. Recall that the range of estimates for the copper and aluminum businesses were $53, $79, and $106 when looking out several years.

Finally, Rio Tinto produced $2.6 billion of EBITDA in its minerals segment in 2021, for which I have not estimated a per share valuation. I apply a 4.4x EV/EBITDA, which is BHP Group's ( BHP) current valuation. Thus, the minerals business adds $7 per share to Rio Tinto's valuation estimate.

The following table summarizes the potential return spectrum based on the valuation estimates herein. I added technical targets to estimate the potential downside. The lower section provides additional upside targets using Rio's historical average and median PE applied to the 2022 consensus earnings estimate.

I have highlighted in blue the upside return potential and in yellow the downside estimates. The upside return potential is +104% to +161%. This appears to be well-supported by fundamentals looking out to mid-decade. I view the -38% technical downside potential as highly unlikely given the healthy outlook for industrial metals and Rio Tinto's discounted valuation. The -19% return potential is the most likely near-term downside scenario in my view.

Please keep in mind that Rio Tinto pays a large dividend. The base dividend for 2021 equates to a 10%+ yield at today's price. This is a substantial return in its own right and is additive to the above estimates. Given the enormity of the dividend payment, it is highly likely that Rio has maxed out its payout capacity for the foreseeable future. Regardless of the short-term payout policy, Rio should remain a top income producing stock.

Lithium

Before a brief technical overview and concluding remarks, it is important to note that Rio Tinto is pursuing substantial growth opportunities in lithium mining.

Lithium prices are skyrocketing as the automobile industry ramps up EV production. For example, Sociedad Quimica y Minera de Chile S.A. ( SQM) reported that lithium prices grew by 576% in Q1 2022 compared to Q1 2021.

Lithium is an excellent example of global commodity production capacity being stressed by the energy transition and tight supply conditions. It also illuminates the very real possibilities for other metals in a commodity bull market, as was suggested by the opening Weisenthal quotes.

Rio Tinto has two large projects in the pipeline which are each capable of producing roughly 50,000 tonnes of battery-grade lithium per year. One project is moving forward while one is on pause and is being reevaluated by the Serbian government. The bottom line, lithium is an exceptional growth opportunity and Rio Tinto's actions suggest that it intends to become a leading market participant. Rio Tinto has excellent growth prospects in the unfolding energy transition.

Technicals

Rio Tinto's technical backdrop is one of incredibly strong long-term support combined with little in the way of visible resistance. The strong support zone is highlighted by the green and blue horizontal lines on the 20-year monthly chart below.

The 13-year inverse head and shoulders pattern suggests a bottom formation of significant importance. Given the length of time involved in establishing this foundation, incredibly strong support near the green line at $60 is the most likely scenario on the downside. This represent -19% downside potential from current levels and is in the realm of possibilities given short-term dynamics.

Upside resistance levels are highlighted by the orange horizontal lines. The return potential to each level is as follows: 22% ($90), 57% ($116), and 89% ($140). Importantly, there has been no trading above $90 since the 2008-time frame. As a result, the amount of expected resistance on the upside is minimal. Zooming into the 5-year weekly chart below, things begin to look more bullish technically.

Rio Tinto has clearly broken out of the sideways consolidation pattern and is rallying strongly off long-term support levels. The lack of technical overextension combined with little visible resistance, as well as strong support nearby, creates a technically asymmetric risk/reward opportunity.

Summary

With what looks to be a solid support base near $60, Rio Tinto offers an incredibly asymmetric risk/reward profile considering its 104% to 161% fundamental upside potential and current 10%+ dividend yield. The coming global infrastructure and energy transition boom is highly likely to support robust industrial metals markets over the coming decade. Rio Tinto is a best of breed blue chip sitting on the cusp of a historic growth cycle while offering perfect diversification for all portfolios.

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Rio Tinto Is A Perfect Portfolio Diversifier (NYSE:RIO)

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I am reaffirming a positive risk/reward rating for Rio Tinto () based on its unique portfolio diversification benefits, its leverage to secular growth trends, and its exceptionally asymmetric risk/reward profile. Rio's investment case is bolstered by its top-tier copper growth potential, industry leading aluminum profitability, and arguably the world's highest quality iron ore assets.

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Since the beginning of the year, the major market indexes have faced intense selling pressure due to in large measure to the Federal Reserve's tightening monetary policy to control high inflation, rising energy and commodity prices, supply disruptions arising from the Russian-Ukraine war, and the potential for the economy to slip into recession.

A stronger-than-expected jobs report is not expected to revive investor sentiment because it may bolster the Fed's commitment to its hawkish stance. According to the labor department, the U.S. economy added 390,000 jobs in May , which was better than the 328,000 estimated by Dow Jones. The benchmark 10-year Treasury yield also climbed above the 2.96% level after the report.

Since the stock market is expected to remain highly volatile in the coming months on concerns over the lingering issues, it could be wise to bet on high-dividend stocks from ZIM Integrated Shipping Services Ltd. ( ), Western Midstream Partners, LP ( ), Stellantis N.V. ( ), and Turkcell Iletisim Hizmetleri A.S. ( ) to generate a steady income stream.

Headquartered in Haifa, Israel, ZIM provides international container shipping and related services. The company offers seaborne transportation and logistics services. It operates a fleet of 118 vessels, including 110 container vessels and eight vehicle transport vessels, of which four vessels are owned by it and 114 vessels are chartered.

On March 30, 2022, ZIM announced a new charter transaction with a group of investors initiated by MPC Capital AG. Eli Glickman, ZIM President & CEO, said, "We continue to advance our strategy of chartering in highly versatile vessels to strengthen our commercial prospects, maintain our flexibility and enhance our position as an innovative provider of seaborne transportation."

While its four-year average dividend yield is 7.5%, its current dividend translates to a 17.9% yield. Its payout ratio is 46.7%.

ZIM's revenues increased 210% year-over-year to $3.72 billion for its fiscal first quarter, ended March 31, 2022. The company's adjusted EBITDA grew 209% year-over-year to $2.53 billion, while its net income came in at $1.71 billion representing a 190% year-over-year increase. Also, its EPS was $14.19, up 190% year-over-year.

For the quarter ending June 30, 2022, analysts expect ZIM's EPS and revenue to increase 72.8% and 61.9% year-over-year to $12.76 and $12.76 billion, respectively. In addition, it surpassed the Street's EPS estimates in each of the trailing four quarters. The stock has gained 56.8% in price over the past year to close yesterday's trading session at $66.37.

ZIM's POWR Ratings reflect this promising outlook. The company has an overall B rating, which translates to Buy in our proprietary ratings system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.

The stock has an A grade for Value and Quality and a B grade for Momentum. Within the B-rated industry, ZIM is ranked #5 out of 46 stocks.

To see the additional POWR Ratings for ZIM (Stability, Growth, and Sentiment), .

WES in The Woodlands, Tex., acquires, owns, develops, and operates midstream assets primarily in the United States. It engages in gathering, compressing, treating, processing, and transporting natural gas. The company manages assets located in Texas, New Mexico, the Rocky Mountains, and North-Central Pennsylvania.

On May 10, 2022, Craig Collins, SVP and COO of WES, said, "We continue to attract incremental volumes from Occidental and third parties due to our superior position in the Delaware Basin, improved cost structure, and commitment to customer service."

While its four-year average dividend yield is 11.1%, its current dividend translates to a 7% yield. Its annual dividend is $2, with a payout ratio of 57.5%.

WES' revenues increased 12.3% year-over-year to $758.30 million for its fiscal first quarter, ended March 31, 2022. The company's operating income grew 38.5% year-over-year to $404.82 million, while its net income came in at $317.67 million representing a 66.1% year-over-year increase. Also, its EPS was $0.75, up 70.5% year-over-year.

For its fiscal 2022, analysts expect WES's EPS to come in at $3.11, representing a 42.7% year-over-year increase. Its revenue is expected to rise 17.9% year-over-year to $803.97 million for the quarter ending June 30, 2022. Over the past six months, the stock has gained 45.9% in price to close yesterday's trading session at $28.61.

WES's strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system. It has an A grade for Momentum and Quality and a B grade for Stability and Sentiment.

to access WES' ratings for Value and Growth as well. WES is ranked #2 of 34 stocks in the A-rated MLPs - Oil & Gas industry.

Based in Hoofddorp, the Netherlands, STLA designs, engineers, manufactures, distributes, and sells automobiles and light commercial vehicles, engines, transmission systems, metallurgical products, and production systems worldwide. It sells its products directly, as well as through distributors and dealers.

On May 30, 2022, STLA and Toyota Motor Europe N.V. announced the expansion of their existing partnership with an agreement for a new large-size commercial van. Carlos Tavares, STLA's CEO, said, "This agreement strengthens our leadership in the EU30 for LCVs and low emission vehicles and moves us a step closer to realizing our Dare Forward 2030 goal of becoming the undisputed global light commercial vehicle leader, in terms of technology, manufacturing, market share and profitability."

STLA's dividend payouts have grown by a 17.3% CAGR over the past three years. While its four-year average dividend yield is 9.2%, its current dividend translates to a 7.3% yield.

STLA's net revenues increased 12% year-over-year for the quarter ended March 31, 2022. Its shipments declined 12% to 1,347K units.

STLA's revenue is expected to increase 14.6% year-over-year to $43.66 billion for the quarter ending Sept. 30, 2022. The stock has gained 14.5% in price over the past month to close yesterday's trading session at $15.34.

STLA's POWR Ratings reflect solid prospects. The company has an overall B rating, which translates to Buy in our proprietary ratings system. It has an A grade for Value and a B grade for Sentiment.

to see the additional POWR Ratings for STLA (Growth, Momentum, Quality, and Stability). STLA is ranked #8 out of 67 stocks in the Auto & Vehicle Manufacturers industry.
Click here to check out our Automotive Industry Report for 2022
Headquartered in Istanbul, Turkey, TKC provides digital services internationally and operates through Turkcell Turkey and Turkcell International segments. The company offers voice, data, and video communication solutions to its individual and corporate customers, and broadband services.

TKC's four-year average dividend yield is 6.4%.

TKC's net revenues increased 36.7% year-over-year to TRY 10.70 billion ($649.19 million) for its fiscal first quarter, ended March 31, 2022. The company's EBITDA grew 30.1% year-over-year to TRY 4.30 billion ($261.13 million). Also, its EBIT came in at TRY 2.22 billion ($134.57 million), up 34.4% year-over-year.

Analysts expect TKC's EPS and revenue to increase 19% and 26.7%, respectively, year-over-year to $0.75 and $4.23 billion in its fiscal 2023.

It is no surprise that TKC has an overall B rating, which equates to Buy in our POWR Ratings system. The stock has an A grade for Value and a B grade for Quality.

to see TKC's ratings for Momentum, Sentiment, Growth, and Stability. TKC is ranked #10 out of 45 stocks in the A-rated Telecom - Foreign industry.

ZIM shares were trading at $67.02 per share on Friday afternoon, up $0.65 (+0.98%). Year-to-date, ZIM has gained 47.15%, versus a -13.14% rise in the benchmark S&P 500 index during the same period.

About the Author: Nimesh Jaiswal

Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock's price is the key approach that he follows while advising investors in his articles. More...

More Resources for the Stocks in this Article

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ZIM: 4 Buy-Rated Stocks with Massive Dividends | StockNews.com

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As the better than expected jobs report is unlikely to give the Federal Reserve reason to pause its aggressive monetary policy tightening, and thus the economy could witness a slowdown, we think it could be wise to scoop up shares of high-dividend companies ZIM Integrated (ZIM), Western Midstream (WES), Stellantis (STLA), and Turkcell (TKC) for a steady portfolio income stream.

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Just under a year ago, one of the biggest production facilities for cultured meat opened in Israel. Future Meat Technologies' Rehovot plant produces 500 kilograms of lab-grown meat per day (that's equivalent to about 5,000 burger patties). Last week, plans for an even bigger facility were revealed, this one in the US. Its specific location has yet to be finalized, but the project will bring cultured meat production to an unprecedented scale.

The bioreactors planned for the US facility will be over 40 feet tall and will hold 250,000 liters (that's 66,043 gallons) of meat. This is a massive scale-up from existing technology; the same manufacturer that's making the US equipment, ABEC, is also making a 6,000-liter bioreactor for a facility in Singapore, and when it goes online in 2023 it will be the biggest of its kind installed to date. Multiplying that by more than a factor of 40, then-and making sure the quality of the final product is still the same-will be no small feat.

The company behind the project is California-based Good Meat. Though the company has been selling its lab-grown chicken in Singapore since 2020, it's still awaiting FDA approval to sell its products in the US. That's not stopping it from going ahead with the ambitious plans for the new facility, though.

"The bioreactors will be far and away the largest, not only in the cultivated meat industry, but in the biopharma industry too," said Josh Tetrick, CEO of Good Meat's parent company, Eat Just. "So the design and engineering challenges are significant, the capital investments are significant, and the potential to take another step toward shifting society away from slaughtered meat is significant."

Cultured meat-not to be confused with plant-based meat-is grown from animal cells and is biologically the same as meat that comes from an animal. The process starts with harvesting muscle cells from an animal, then feeding those cells a mixture of nutrients and naturally-occurring growth factors (or, as Good Meat's process specifies, amino acids, fats, and vitamins) so that they multiply, differentiate, then grow to form muscle tissue-in much the same way muscle grows inside animals' bodies.

According to Good Meat's website, they use cells from only "the best" chickens and cows (what makes them the best isn't spelled out), and carefully choose cells most likely to produce flavorful, sustainable meat. Besides being used as starters to grow edible meat in bioreactors, the cells are also "immortalized," growing and dividing over and over; cells from one chicken could end up producing thousands of breasts.

"Cultivated meat matters because it will enable us to eat meat without all the harm, without bulldozing forests, without the need to slaughter an animal, without the need to use antibiotics, without accelerating zoonotic diseases," Tetrick said.

Meat can be "harvested" (their word, not mine) just four to six weeks after initiating the growth process-but it's not a matter of plucking a ready-to-package breast from a vat and shipping it off to the grocery store. Besides going through safety and regulatory reviews, the harvested cells need to be turned into something resembling traditional meat. Good Meat says it uses 3D printing, extrusion cooking, and molding to refine the shape and texture of the product.

This all starts to sound a little Franken-meaty, but the company emphasizes that its products have nutritional profiles identical to those of conventionally-raised meat. A few of the "final formats" the meat comes in include chicken nugget bites, sausages, shredded chicken, and chicken breasts.

It's going to take a long time for factory farming to stop being a thing, but as cultured meat continues to become more scalable, that day could be on the horizon. Tetrick thinks it'll happen within his generation's lifetime. "I think our grandchildren are going to ask us about why we ate meat from slaughtered animals back in 2022," he said.

Good Meat is expected to finalize the location of its US plant before summer's end, and they're aiming for domestic production to start by late 2024.

Vanessa is senior editor of Singularity Hub. She's interested in biotechnology and genetic engineering, the nitty-gritty of the renewable energy transition, the roles technology and science play in geopolitics and international development, and countless other topics.

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The World's Biggest Cultured Meat Factory Will Soon Be Built in the US

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Just under a year ago, one of the biggest production facilities for cultured meat opened in Israel. Future Meat Technologies' Rehovot plant produces 500 kilograms of lab-grown meat per day (that's equivalent to about 5,000 burger patties). Last week, plans for an even bigger facility were revealed, this one in the US.

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My Investing Philosophy & Strategy explained in 5 Key Points | How I Make Passive Income FOREVER

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SVOL: Simplify Volatility Premium ETF: UNIQUE 15%+ Dividend Yield | Make Money off FEAR Itself (VIX)

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Top 3 (+1 Bonus) Stock Picks of the Month for Passive Income + Stock Market Update | Ep.27 June 2022

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Published on December 16, 2019 at 4:38 pm by in Hedge Funds, News

A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended September 30, so let’s proceed with the discussion of the hedge fund sentiment on Spok Holdings Inc (NASDAQ:SPOK).

Hedge fund interest in Spok Holdings Inc (NASDAQ:SPOK) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare SPOK to other stocks including InnerWorkings, Inc. (NASDAQ:INWK), Timberland Bancorp, Inc. (NASDAQ:TSBK), and Panhandle Oil and Gas Inc. (NYSE:PHX) to get a better sense of its popularity.

Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Noam Gottesman of GLG Partners

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. We’re going to review the latest hedge fund action surrounding Spok Holdings Inc (NASDAQ:SPOK).

What have hedge funds been doing with Spok Holdings Inc (NASDAQ:SPOK)?

At Q3’s end, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. By comparison, 10 hedge funds held shares or bullish call options in SPOK a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

When looking at the institutional investors followed by Insider Monkey, Renaissance Technologies has the most valuable position in Spok Holdings Inc (NASDAQ:SPOK), worth close to $18.4 million, amounting to less than 0.1%% of its total 13F portfolio. Coming in second is Arrowstreet Capital, led by Peter Rathjens, Bruce Clarke and John Campbell, holding a $2.2 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Remaining professional money managers with similar optimism consist of Noam Gottesman’s GLG Partners, Israel Englander’s Millennium Management and David E. Shaw’s D E Shaw. In terms of the portfolio weights assigned to each position Tudor Investment Corp allocated the biggest weight to Spok Holdings Inc (NASDAQ:SPOK), around 0.02% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, designating 0.02 percent of its 13F equity portfolio to SPOK.

Due to the fact that Spok Holdings Inc (NASDAQ:SPOK) has witnessed bearish sentiment from the entirety of the hedge funds we track, it’s easy to see that there was a specific group of hedge funds that slashed their positions entirely in the third quarter. At the top of the heap, Frank Slattery’s Symmetry Peak Management sold off the largest stake of the “upper crust” of funds followed by Insider Monkey, worth close to $0.2 million in stock. Gavin Saitowitz and Cisco J. del Valle’s fund, Springbok Capital, also dropped its stock, about $0.1 million worth. These bearish behaviors are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s now take a look at hedge fund activity in other stocks similar to Spok Holdings Inc (NASDAQ:SPOK). These stocks are InnerWorkings, Inc. (NASDAQ:INWK), Timberland Bancorp, Inc. (NASDAQ:TSBK), Panhandle Oil and Gas Inc. (NYSE:PHX), and L.B. Foster Company (NASDAQ:FSTR). This group of stocks’ market valuations resemble SPOK’s market valuation.

Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position
INWK | 14 | 39181 | 0
TSBK | 3 | 30150 | 0
PHX | 3 | 34248 | -1
FSTR | 11 | 52504 | -4
Average | 7.75 | 39021 | -1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 7.75 hedge funds with bullish positions and the average amount invested in these stocks was $39 million. That figure was $27 million in SPOK’s case. InnerWorkings, Inc. (NASDAQ:INWK) is the most popular stock in this table. On the other hand Timberland Bancorp, Inc. (NASDAQ:TSBK) is the least popular one with only 3 bullish hedge fund positions. Spok Holdings Inc (NASDAQ:SPOK) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately SPOK wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on SPOK were disappointed as the stock returned 4.2% during the fourth quarter (through the end of November) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

Disclosure: None. This article was originally published at Insider Monkey.

Is SPOK A Good Investment Right Now? Is SPOK A Good Stock To Buy? NASDAQ:SPOK Yahoo Finance

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Is Spok Holdings Inc (SPOK) A Good Stock To Buy?

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A whopping number of 13F filings filed with U.S.

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"Obtén la rentabilidad del mercado y paga menos comisiones ". "La gestión pasiva tiene sentido porque captura la rentabilidad del mercado sin influir en la formación de precios". Estos son mensajes que venden las entidades que comercializan productos de inversión pasiva.

La primera gran mentira está en los análisis de rentabilidad histórica: Comparan los resultados a muy largo plazo de los fondos activos con los índices con dividendos. Como la inmensa mayoría de los fondos no supera la rentabilidad de los índices, la conclusión que sacan es que es mejor "invertir en los índices" y ahorrarse la comisión de gestión.

El problema es que invertir sin ningún tipo de gastos y sin pagar impuestos es una utopía. Quienes invierten en ETFs o fondos indexados incurren en muchos gastos -además de los impuestos-: cambios de divisa, cánones de bolsa, coste bid-ask en las operaciones, gastos de liquidación, auditoría, depositaría, retenciones en origen y destino, tasa Tobin, etcétera. Blockchain y otras tecnologías continuarán reduciendo significativamente este tipo de costes, pero la mayoría de ellos seguirán existiendo.

La estadística, como el algodón, no engaña: cuando utilizas datos a muy largo plazo, estos pequeños gastos incurridos a lo largo de décadas representan una losa enorme sobre la rentabilidad, por ello muy pocos fondos superan en rentabilidad a largo plazo a los índices.

Comparar la evolución de los ETFs con la media de los fondos activos tampoco es honesto. Los ETFs incluyen parte de los costes mencionados, pero no los más relevantes para el inversor como son, por ejemplo, la comisión de depositaría que cobran las entidades comercializadoras por mantener la inversión; por asesoramiento; por gestión de carteras; por el cobro de dividendos o por los cambios de divisas de ida y vuelta. Todos esos costes que quedan fuera de los gráficos en el caso de los ETFs y dentro de la rentabilidad neta en el caso de los fondos activos en euros, que no suelen llevar aparejados otros gastos adicionales.

No niego que los costes de la gestión pasiva sean, en general, mucho más bajos que los de la gestión activa; es más barato ahorrar en el coste de decidir en qué invertir. Pero debo destacar que la comparación entre ambas opciones de inversión debe hacerse en ambos casos con rentabilidades netas de gastos y auditadas. No rentabilidades de carteras teóricas con índices o ETFs que dejan gran parte de los costes de inversión fuera.

La segunda gran mentira es que la gestión pasiva compra todo el mercado por igual. No es cierto y es fácil de entender por qué. En primer lugar, no hay el mismo porcentaje de inversores pasivos en Renta 4 banco que en Telefónica, porque no pertenecen a los mismos índices y porque no tienen la misma estructura accionarial de partida.

En segundo lugar, los inversores indexados se pierden siempre la revalorización que la mayoría de los valores tienen cuando se especula que entrarán en un índice relevante. Por otro lado, se suelen "comer" la caída previa a la exclusión de los valores que salen de los índices. Estos efectos son más relevantes cuanto mayor es el volumen que se invierte en índices.

El mercado se está adaptando al nuevo tipo de inversores, que ya representa una parte muy importante de la demanda

Un claro ejemplo es Tesla: los inversores que compraron en junio de 2010, cuando salió a bolsa, han multiplicado por 223 su inversión inicial hasta el 31 de mayo de 2022. Sin embargo, los que invierten desde entró en el S&P 500 en diciembre de 2020 -la mayoría de los inversores indexados- solamente ganan un 9%. Este tipo de diferencias seguirán produciéndose en el futuro por puro sentido común, por cómo se seleccionan los valores que entran y salen de los índices.

La tercera gran mentira es que la gestión pasiva no influye en la formación de precios. Todo inversor que participe en cualquier mercado influye en la formación de precios, quiera o no. No es lo mismo comprar en una lonja de pescado una lubina, que 7 cajas de lubinas o 7 camiones de lubinas. Es obvio que no se influye lo mismo en la formación de precios ni en las decisiones de los vendedores.

El mercado se está adaptando al nuevo tipo de inversores, que ya representa una parte muy importante de la demanda, y está creando tres grandes trampas: i) Empresas descontroladas por sus accionistas: los principales accionistas son inversores pasivos y aceptantes de todo tipo de comportamientos de los directivos; ii) posibilidad de mantener compañías zombis que constantemente amplían capital para cubrir pérdidas o con planes de negocio poco atractivos: los inversores pasivos están obligados a acudir a las ampliaciones porque las propias ampliaciones hacen aumentar la capitalización y el peso de los valores en los índices; iii) salidas a bolsa para inversores pasivos: un claro ejemplo fue la salida a bolsa de Aramco en diciembre de 2021. Colocando solamente un 1,5% del capital consiguieron un peso muy significativo en los índices de Arabia Saudí, Oriente Medio, petróleo y gas, emergentes y globales. Los traders e inversores a corto plazo que acudieron a la colocación sabían de antemano que habría demanda de inversores indexados en cuanto la compañía entrase en los índices.

Por otro lado, es justo también destacar la gran contribución de la gestión pasiva ha traído al mundo de la inversión. La más relevante es que los inversores, por fin, se empiezan a fijar en las comisiones y la consecuencia se ve en los nuevos fondos de inversión activa: han bajado las comisiones.

Cuando empecé a gestionar fondos hace 18 años en una gestora que pertenecía a un banco, y que solamente vendía fondos de la propia gestora, había un fondo de renta fija con una comisión de gestión del 2% que invertía en bonos de alta calidad crediticia (AA en media), la mayoría de los fondos de renta variable cobraban la comisión de gestión máxima permitida (2,25% o 1,35% más 9% sobre resultados) y se imponían límites internos sobre el "tracking error" respecto a los índices. Es decir, te pedían que no te separases mucho de la evolución de los índices. Esto era lo habitual en el sector en España. Por su parte en Estados Unidos imperaba el modelo de comisiones 2% fijo más 20% sobre resultados.

La situación actual ha cambiado mucho y seguirá haciéndolo para bien. Las comisiones medias son sensiblemente más bajas, ha proliferado la gestión independiente y la arquitectura abierta está intensificando la competencia en calidad y precio.

Termino destacando que la narrativa de la gestión pasiva no debería basarse en estadísticas que comparan los resultados de fondos creados hace más de dos décadas con índices con rentabilidades brutas en entornos de mercados pasados. Los fondos de gestión activa a los que puede acceder hoy el inversor, cuyos resultados no aparecen en esos estudios de rentabilidad porque no tienen 20 años de histórico, son en media de mejor calidad y tienen menores comisiones. El mercado, por su parte, es diferente porque los intervinientes toman las decisiones de manera diferente.

"Obtén la rentabilidad del mercado y paga menos comisiones ". "La gestión pasiva tiene sentido porque captura la rentabilidad del mercado sin influir en la formación de precios". Estos son mensajes que venden las entidades que comercializan productos de inversión pasiva.

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Las tres grandes mentiras de la gestión pasiva

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"Obtén la rentabilidad del mercado y paga menos comisiones ". "La gestión pasiva tiene sentido porque captura la rentabilidad del mercado sin influir en la formación de precios". Estos son mensajes que venden las entidades que comercializan productos de inversión pasiva.

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En este artículo te explicaré cuáles son los principales riesgos de invertir en bolsa y cuál es la mejor forma de evitarlos o reducirlos en la práctica.

Y es que las grandes ventajas que ofrece la bolsa frente a otros tipos de inversión, hacen que realmente merezca la pena que destines una parte de tus recursos a estos mercados, a pesar de los mencionados riesgos.

✅ Invertir en bolsa sin riesgo: ¿es posible?

Antes de nada, hay que partir de un dato que no por evidente resulta menos importante: como cualquier otro tipo de inversión, el hecho de invertir en bolsa conlleva riesgos.

El riesgo cero no existe.

Por tanto, siempre deberías desconfiar de cualquier promesa en sentido contrario. No hay productos "milagrosos" que te permitan invertir en acciones y lograr elevadas rentabilidades sin riesgos.

En este sentido, el nivel de riesgo de una inversión suele estar correlacionado con su potencial de rentabilidad. En consecuencia, si quieres obtener mayores rendimientos, debes estar dispuesto a asumir riesgos también más altos.

Finalmente, la clave está en conocer a fondo dichos riesgos y adoptar las medidas necesarias para minimizarlos, como luego veremos.

En cualquier caso, si quieres partir de una buena base teórico-práctica antes de empezar a invertir, te recomiendo descargar mi toolkit de bolsa. Es 100% gratuito.

✅ ¿Cuáles son los riesgos de invertir en la bolsa de valores?

Con carácter general, el riesgo más habitual al invertir en bolsa es el de experimentar una disminución del valor de los activos.

En determinados casos, como por ejemplo una quiebra o un fraude, incluso se podría llegar a perder el total de la inversión, aunque no sea lo más habitual.

No obstante, como veremos más adelante, existen muchas técnicas y estrategias para reducir el riesgo de nuestras inversiones de forma realmente significativa.

Los principales riesgos de invertir en bolsa y otros activos cotizados se clasifican en dos grandes grupos:

1. Riesgos de mercado

2. Riesgos específicos

A continuación, te explicaré en qué consiste cada una de estas categorías y cuáles son los riesgos concretos que se incluyen en ellas.

De todos modos, si quieres seguir profundizando en estos temas, te recomiendo suscribirte a mi newsletter gratuita para estar al día de todos los artículos que vaya publicando.

➡️ #1. Riesgos de mercado o sistemáticos

Llamamos riesgos de mercado o sistemáticos a aquellos que afectan a todo un mercado en su conjunto, con independencia de los activos concretos en los que se invierta.

Por tanto, es un tipo de riesgo que no puede evitarse diversificando nuestra cartera en distintas acciones de dicho mercado.

No obstante, sí puede minorarse a través de la inversión en otros mercados o bien en combinación con la inversión en renta fija, u otros tipos de activos distintos de las acciones.

Algunos de los factores de riesgo sistemático más conocidos son los relacionados con guerras, catástrofes naturales, ataques terroristas, crisis políticas o económicas, cambios en los tipos de interés, etc.

En este sentido, existen fundamentalmente dos formas en las que pueden manifestarse estos riesgos sistemáticos:

A. Riesgo de divisa

El riesgo de divisa o de tipo de cambio es el riesgo financiero que surge del cambio en el precio de una moneda en relación con otra.

Por ejemplo, si la moneda de tu país es el euro e inviertes en acciones americanas que cotizan en dólares, van a afectarte las oscilaciones del tipo de cambio entre ambas monedas.

De este modo, si el dólar bajase, tu inversión tendría menor valor (incluso aunque no hubiese variado el precio de la acción).

B. Riesgo de inflación

Como sabes, la inflación es un aumento generalizado en los precios de los bienes y servicios de una economía durante un determinado período de tiempo.

Por tanto, el riesgo de inflación es aquel que se refiere a la incertidumbre sobre el valor futuro real de una inversión, después de descontar la inflación.

Así, por ejemplo, si tus acciones se hubiesen revalorizado el 5% en un determinado período, pero la tasa de inflación fuese del 6% en ese mismo plazo, realmente habrías perdido el 1% del valor de tu inversión.

➡️ #2. Riesgos de invertir en bolsa específicos o no sistemáticos

Esta segunda categoría de riesgos está directamente relacionada con el rendimiento de una empresa concreta o de un sector o industria específicos.

Por tanto, son riesgos que pueden disminuirse a través de una adecuada diversificación, como luego veremos.

Existen seis grandes tipos de riesgos específicos o no sistemáticos:

A. Riesgo de quiebra

Se trata del riesgo de que una empresa quiebre en un momento dado. En consecuencia, esto podría implicar que los inversores perdiesen el total de su inversión.

Sin duda, es el riesgo más grave dentro de los no sistemáticos, ya que puede suponer la pérdida completa del capital.

No obstante, también existiría la posibilidad de que la compañía lograse recuperarse de la quiebra, a través de una reestructuración, o bien que fuese adquirida por otra empresa. De todos modos, su cotización experimentaría una enorme caída, con las consiguientes pérdidas para los inversores.

B. Riesgo por fraude o estafa

Sin duda, es uno de los riesgos más graves y también más difíciles de evitar, dado que se basa en un engaño o mala práctica, que incluso podría ser constitutivo de delito.

Así, por ejemplo, puede darse el caso de estafas piramidales cometidas por empresas o intermediarios financieros, fraudes contables o, directamente, engaños sobre los productos o actividades que desarrolla la compañía.

En estos casos, es improbable que los inversores lleguen a recuperar el total de su dinero, ya que es difícil que la empresa cuente con activos suficientes.

C. Riesgo por operar en corto

De una forma muy simple, podemos decir que las operaciones en corto son aquellas en las que se vende un activo antes de comprarlo.

Para llevarlas a cabo, el bróker nos presta temporalmente las acciones (a cambio de una comisión), hasta que decidamos cerrar la posición (comprando las acciones al precio en que coticen en ese momento).

Por tanto, este tipo de inversión se basa en la expectativa de que la cotización va a bajar.

Así, la idea es vender las acciones al precio de hoy, para comprarlas más adelante a un precio más bajo, ganando la diferencia (menos las comisiones).

Sin embargo, operar en corto es una práctica muy arriesgada, no apta para principiantes, ya que es uno de los pocos casos donde puedes perder más de lo que hayas invertido. Y es que, mientras que una acción no puede cotizar a menos de cero, sí podría subir ilimitadamente.

Por tanto, podrías encontrarte con enormes pérdidas, además de tener que asumir las comisiones propias de operar en corto, que son más elevadas que las de operar al alza.

D. Riesgo por operar con productos apalancados

En pocas palabras, el apalancamiento consiste en utilizar productos financieros que te permiten realizar inversiones por un importe superior al del capital que realmente aportas.

Es decir, se trata de incrementar tu exposición a un determinado mercado o activo, pero sin aumentar el capital que efectivamente inviertes.

Un típico producto con apalancamiento son los CFDs o contratos por diferencia. Así, por ejemplo, podrías invertir 1.000 € en CFDs referenciados a acciones de Telefónica, pero que realmente representen una inversión de 5.000 €.

De este modo, tus ganancias o pérdidas se calculan como si efectivamente invirtieses esos 5.000 €. Por tanto, el potencial de ganancia o de pérdida es mucho mayor que con inversiones no apalancadas.

Así, si las acciones bajan un 10%, tu inversión valdría 4.500 €. Sin embargo, respecto de tu inversión real, la pérdida sería del 50%, ya que te quedarías tan solo con 500 €. Por tanto, esto es muy peligroso en el caso de pérdidas, ya que podrías perder todo o gran parte del capital invertido con relativa rapidez.

Otros productos en los que se puede utilizar el apalancamiento son las opciones o la inversión en Forex, entre otros.

E. Riesgo por sobreoperar

El hecho de realizar demasiadas operaciones de compra y venta en el mercado suele arrojar un balance negativo en el medio y largo plazo.

De este modo, prácticas como el day trading, el scalping y otras similares exigen una experiencia y un control psicológico que no suelen estar al alcance de los principiantes. Además, a esto se suman los elevados costes en comisiones que suelen acarrear este tipo de estrategias.

De hecho, se calcula que en torno al 80% de los inversores intradía pierden dinero y apenas un 1% logra ganancias consistentes a largo plazo.

F. Riesgo de liquidez

El riesgo de liquidez se refiere a la dificultad (o incluso imposibilidad) de transformar tus inversiones en dinero líquido en el momento que lo desees. Es decir, se trata del riesgo de no encontrar contrapartida para recomprar tus acciones cuando quieras venderlas.

Este factor de riesgo está directamente vinculado con el tamaño de la empresa y el volumen de negociación de sus acciones en bolsa, aunque también puede venir influenciado por factores que afecten al mercado en su conjunto.

Así, por ejemplo, suele ser más difícil encontrar contrapartida para empresas con baja capitalización bursátil, como small caps o micro caps, que para las de gran capitalización, sobre todo en determinados momentos del mercado.

Aunque este riesgo es casi siempre específico, podría haber casos extraordinarios en los que, por motivos macroeconónimos, llegase a disminuir la liquidez de todo el mercado, debiéndose entonces considerar como riesgo sistemático.

No obstante, este es un supuesto muy poco habitual.

✅ ¿Cómo controlar los riesgos de invertir en bolsa?

Las principales formas de minimizar los riesgos de invertir en bolsa son las siguientes:

Diversificar: sin duda, es la mejor forma de beneficiarse de la rentabilidad de la inversión en acciones, manteniendo los riesgos bajo control. De este modo, es aconsejable diversificar por mercados y zonas geográficas, por divisas, por sectores y por empresas. Una buena opción para llevarlo a cabo de forma sencilla y barata es invertir en ETFs o fondos indexados.

Invertir el capital que no se necesite a corto plazo: sin duda, esta es la mejor forma de evitar la necesidad de cerrar una operación antes de tiempo porque se necesite el dinero para otra finalidad. Por tanto, si no quieres sobreoperar ni desaprovechar oportunidades, invierte solo aquellos fondos que no vayas a necesitar en los próximos meses o años.

Invertir según el perfil de riesgo: deberías estructurar tu cartera de inversión en función de cuál sea tu situación personal, laboral y familiar, así como tu tolerancia intrínseca al riesgo.

Formarse: desde luego, cuanto mayores sean tus conocimientos sobre bolsa e inversión, más probable es que elijas acertadamente tus inversiones y que gestiones el riesgo de forma adecuada.

Si tienes en cuenta estos cuatro aspectos esenciales, será más probable que puedas aprovechar los beneficios de la inversión en acciones, manteniendo bajo control los riesgos que antes mencionamos.

✅ ¿Y cuáles son los beneficios de invertir en bolsa?

Las principales ventajas que puede aportarte la inversión en bolsa son las siguientes:

Rentabilidad: las acciones son uno de los activos con mayor potencial de rentabilidad. Así lo han demostrado a lo largo de muchas décadas, en distintos mercados. Por ejemplo, el índice de renta variable más conocido de Estados Unidos, el S&P 500, ha tenido un rendimiento superior al 8% anual de media durante el último siglo. Aunque no lleguen a alcanzar las enormes rentabilidades de las criptomonedas, siguen siendo muy atractivas.

Diversificación: como acabamos de mencionar, una buena cartera es una cartera diversificada en activos, mercados, áreas geográficas, divisas, etc. Por tanto, no deberías prescindir de las acciones si quieres conseguir un buen equilibrio entre riesgo y rentabilidad. Otros activos que podrían estar presentes en tu cartera son los bonos, los activos inmobiliarios, las criptomonedas, el oro y otras materias primas, el whisky, etc.

Protección frente a la inflación: sin duda, las acciones pueden ser un buen activo para disminuir el efecto negativo de la inflación, ya que las empresas suelen trasladar las subidas de precio a los productos o servicios que comercializan.

Posibilidad de generar ingresos pasivos: además de las posibles ganancias por revalorización, muchas acciones permiten obtener ingresos pasivos a través del reparto de dividendos. Si te interesa esta opción, te animo a echarle un vistazo a mi membresía de dividendos.

Por tanto, estos potenciales beneficios compensan sobradamente los riesgos de comprar acciones, siempre y cuando estos se gestionen de forma adecuada.

✅ [Conclusión] Un tipo de inversión que merece la pena

En definitiva, a pesar de todos los riesgos de invertir en bolsa, se trata de un tipo de activos que realmente deberían estar presentes en tu cartera, siempre que encajen con tu perfil y situación.

De hecho, los riesgos reales probablemente son menores de lo que piensas, siempre que inviertas a través de una estrategia probada, construyas una cartera bien diversificada y evites los errores más graves.

Además, como te comentaba al inicio, cualquier activo conlleva ciertos riesgos, incluso el dinero en efectivo. De hecho, mantener el efectivo en cuentas o depósitos bancarios suele conllevar una clara pérdida de poder adquisitivo por efecto de la inflación.

Espero que este artículo te haya animado a seguir investigando sobre el tema para, poco a poco, empezar a introducirte en el apasionante mundo de la inversión en bolsa. En cualquier caso, me encantará leer tu opinión en los comentarios.

Hasta el próximo artículo, ¡te deseo unas muy felices inversiones!

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Riesgos de invertir en bolsa ✅ ¿Cómo evitarlos?

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En este artículo te explicaré cuáles son los principales riesgos de invertir en bolsa y cuál es la mejor forma de evitarlos o reducirlos en la práctica. Y es que las grandes ventajas que ofrece la bolsa frente a otros tipos de inversión, hacen que realmente merezca la pena que destines una parte de tus recursos a estos mercados, a pesar de los mencionados riesgos.

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Just under a year ago, one of the biggest production facilities for cultured meat opened in Israel. Future Meat Technologies' Rehovot plant produces 500 kilograms of lab-grown meat per day (that's equivalent to about 5,000 burger patties). Last week, plans for an even bigger facility were revealed, this one in the US. Its specific location has yet to be finalized, but the project will bring cultured meat production to an unprecedented scale.

The bioreactors planned for the US facility will be over 40 feet tall and will hold 250,000 liters (that's 66,043 gallons) of meat. This is a massive scale-up from existing technology; the same manufacturer that's making the US equipment, ABEC, is also making a 6,000-liter bioreactor for a facility in Singapore, and when it goes online in 2023 it will be the biggest of its kind installed to date. Multiplying that by more than a factor of 40, then-and making sure the quality of the final product is still the same-will be no small feat.

The company behind the project is California-based Good Meat. Though the company has been selling its lab-grown chicken in Singapore since 2020, it's still awaiting FDA approval to sell its products in the US. That's not stopping it from going ahead with the ambitious plans for the new facility, though.

"The bioreactors will be far and away the largest, not only in the cultivated meat industry, but in the biopharma industry too," said Josh Tetrick, CEO of Good Meat's parent company, Eat Just. "So the design and engineering challenges are significant, the capital investments are significant, and the potential to take another step toward shifting society away from slaughtered meat is significant."

Cultured meat-not to be confused with plant-based meat-is grown from animal cells and is biologically the same as meat that comes from an animal. The process starts with harvesting muscle cells from an animal, then feeding those cells a mixture of nutrients and naturally-occurring growth factors (or, as Good Meat's process specifies, amino acids, fats, and vitamins) so that they multiply, differentiate, then grow to form muscle tissue-in much the same way muscle grows inside animals' bodies.

According to Good Meat's website, they use cells from only "the best" chickens and cows (what makes them the best isn't spelled out), and carefully choose cells most likely to produce flavorful, sustainable meat. Besides being used as starters to grow edible meat in bioreactors, the cells are also "immortalized," growing and dividing over and over; cells from one chicken could end up producing thousands of breasts.

"Cultivated meat matters because it will enable us to eat meat without all the harm, without bulldozing forests, without the need to slaughter an animal, without the need to use antibiotics, without accelerating zoonotic diseases," Tetrick said.

Meat can be "harvested" (their word, not mine) just four to six weeks after initiating the growth process-but it's not a matter of plucking a ready-to-package breast from a vat and shipping it off to the grocery store. Besides going through safety and regulatory reviews, the harvested cells need to be turned into something resembling traditional meat. Good Meat says it uses 3D printing, extrusion cooking, and molding to refine the shape and texture of the product.

This all starts to sound a little Franken-meaty, but the company emphasizes that its products have nutritional profiles identical to those of conventionally-raised meat. A few of the "final formats" the meat comes in include chicken nugget bites, sausages, shredded chicken, and chicken breasts.

It's going to take a long time for factory farming to stop being a thing, but as cultured meat continues to become more scalable, that day could be on the horizon. Tetrick thinks it'll happen within his generation's lifetime. "I think our grandchildren are going to ask us about why we ate meat from slaughtered animals back in 2022," he said.

Good Meat is expected to finalize the location of its US plant before summer's end, and they're aiming for domestic production to start by late 2024.

Vanessa is senior editor of Singularity Hub. She's interested in biotechnology and genetic engineering, the nitty-gritty of the renewable energy transition, the roles technology and science play in geopolitics and international development, and countless other topics.

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The World's Biggest Cultured Meat Factory Will Soon Be Built in the US

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Just under a year ago, one of the biggest production facilities for cultured meat opened in Israel. Future Meat Technologies' Rehovot plant produces 500 kilograms of lab-grown meat per day (that's equivalent to about 5,000 burger patties). Last week, plans for an even bigger facility were revealed, this one in the US.

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0:00 / 50:12•Watch full video

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My Entire $1 Million Portfolio Unveiled: $11K/Month of Passive Income, 12% Yield | Update #14

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Que más vale pájaro en mano se ha convertido en una de las máximas predilectas de los inversores en este primer tramo de 2022. En medio de las incertidumbres desencadenadas por la guerra de Ucrania y las fuertes presiones inflacionistas, que han forzado un brusco viraje de las políticas monetarias, los inversores han buscado refugio en las acciones que ofrecen mejores dividendos.

Así lo evidencian los números: desde que se inició 2022, el índice MSCI World acumula un rendimiento 12 puntos inferior al MSCI World High Dividend Yield, un índice que integra a 337 compañías con elevados niveles de rentabilidad por dividendo a nivel global y entre las que se incluyen las españolas Enagás, Red Eléctrica e Iberdrola.

Tradicionalmente, contar con un buen dividendo se ha entendido como un gran reclamo para los inversores. Al fin y al cabo, la lógica de la inversión bursátil se basa, en última instancia, en la posibilidad de ser partícipe de los beneficios que genere la empresa en cuestión. Sin embargo, existe una visión ambivalente hacia estos pagos, ya que con frecuencia afloran voces que consideran una opción más deseable que las empresas destinen sus recursos hacia inversión y desarrollo, en aras de maximizar sus ganancias futuras, más que a remunerar a sus accionistas.

Esta es la postura que suele imperar en el sector tecnológico y, en general, entre las compañías llamadas de crecimiento, con un potencial de desarrollo futuro que justifica posponer los dividendos para centrarse en el afianzamiento de sus planes de negocio. Compañías como Amazon, Netflix o Tesla, que se cuentan entre las estrellas del mercado en los últimos años, nunca han abonado un dividendo en efectivo, mientras que gigantes como Apple o Microsoft están muy lejos de los primeros puestos en los rankings de rentabilidad por dividendo.

Estas han sido las apuestas favoritas de los inversores durante el último lustro, lo que explica que, entre 2017 y 2021, el rendimiento total del MSCI World Index haya superado en más de 40 puntos el del índice de grandes dividendos (107% frente a 63,4%).

A primera vista, el vuelo de los inversores hacia la seguridad del dividendo en las circunstancias actuales cuenta con una lógica discutible. No en vano, en un entorno de elevadas inflaciones que consumen el valor del efectivo, parecería más razonable mantener el patrimonio dentro del mercado, con la esperanza de obtener una revalorización que compense (al menos en parte) el efecto de la subida de los precios.

En el último lustro, el MSCI World superó en más de 40 puntos al de grandes dividendos

Sin embargo, los temores económicos generados por las circunstancias actuales han motivado que los inversores prioricen la seguridad que otorga el cobro presente del dividendo más que las promesas de futuro que suelen rodear la historia de inversión de las acciones menos 'generosas' con sus accionistas.

Además, ante el incremento de los costes de productos y servicios, los inversores pueden ver en el cobro de dividendos una manera de redirigir parte de los fondos destinados a inversiones a cubrir gastos cotidianos.

"El dividendo resulta un refugio muy frecuente en momentos de volatilidad del mercado y, en esta ocasión, el atractivo crece en un contexto de alta inflación", apunta Patricia García, socia fundadora de Macroyield.

No es casualidad que el último año en que las acciones de alta rentabilidad por dividendo batieron al conjunto del mercado fuera en 2018, otro ejercicio convulso en los mercados a causa de los temores económicos y las subidas de tipos por parte de la Fed.

El mayor apetito por el dividendo es una de las cuestiones que puede ayudar a explicar el renacimiento del Ibex. El índice español ha presumido durante años de ser uno de los grandes selectivos internacionales con mejor rentabilidad por dividendo, un reclamo que no ha impedido un desempeño relativo muy inferior al de sus pares.

Este año, sin embargo, el Ibex ha logrado resarcirse con un retorno total, incluido dividendos, que ronda el 4%, casi 17 puntos por encima de la bolsa mundial, que acarrea pérdidas próximas al 13% desde que arrancó el ejercicio. El índice español luce actualmente una rentabilidad por dividendo estimado para 2022 que supera el 4%, una tasa que prácticamente duplica la de la bolsa mundial y que supera en un 18% la del EuroStoxx 50.

Entre las compañías del mercado español que mejor comportamiento han mostrado desde que se inició 2022 se encuentran firmas como CaixaBank, Telefónica y ACS, que se encontraban al término del año anterior entre los cinco valores del Ibex con mayor rentabilidad por dividendo estimado, según los registros de Bloomberg.

Entre los expertos se suele explicar el mejor tono relativo del Ibex por una cuestión de composición. En el índice nacional tienen un peso relevante sectores que, por las características de su negocio, suelen salir beneficiados en un entorno de elevada inflación, como banca, materias primas o telecomunicaciones. Casualmente o no, estos grupos suelen englobar muchas de las empresas que históricamente han tendido a ser más generosas con sus accionistas.

Un trimestre récord

El Informe Janus Henderson Global Index, publicado recientemente, mostraba que los dividendos globales se dispararon durante el primer trimestre del año un 11%, hasta registrar una cifra récord de 302.500 millones de dólares. Sectores muy beneficiados por las circunstancias económicas más recientes, como la minería y las petroleras, lideraron el repunte de estos pagos, con incrementos que rondaron el 30%. La minera australiana BHP protagonizó el pago más elevado, mientras que el grupo naviero Moller-Maersk firmó el mayor aumento de la remuneración al accionista. Ninguna empresa española figura entre los veinte mayores pagadores del mundo en términos absolutos.

El apetito de los inversores por los dividendos ha sido notorio en distintos indicadores, como la estadística de flujos de inversión de los clientes de banca privada de Bank of America. Según los datos publicados por la entidad norteamericana, la variable de los dividendos se ha mantenido durante meses como una de las que mayores incrementos ha registrado en las carteras gestionadas por el banco.

En cualquier caso, y pese a la aparente bonanza de la que viene disfrutando este factor, los expertos insisten en la necesidad de no dejarse llevar por los grandes números y ser muy selectivos a la hora de intentar cazar los dividendos más atractivos. No puede obviarse que, en ocasiones, una elevada rentabilidad por dividendo es más reflejo de la debilidad de una acción (a igual dividendo, una caída de la cotización eleva su rentabilidad) que de la generosidad de la empresa. Y este es un factor a tener muy en cuenta en un contexto como el actual, en el que la recesión se mantiene como una amenaza nada desdeñable y puede sumir en dificultades a muchas empresas, que podrían verse forzadas a reducir o, incluso, a suspender sus pagos.

"A veces una alta rentabilidad por dividendo puede ser un signo de justo lo contrario, de una mala asignación del 'cash flow' generado, que es percibida por los inversores como no sostenible en el tiempo. La clave, como siempre, está en analizar esa recurrencia y ese crecimiento en el tiempo de los dividendos", explica Óscar del Diego, director de inversiones de Ibercaja Gestión.

La entidad aragonesa cuenta con un fondo de inversión enfocado a los dividendos, el Ibercaja Dividendo Global, que acumula ganancias superiores al 5% desde el inicio del ejercicio. Del Diego explica que, a la hora de seleccionar las compañías en cartera, "les exigimos algo más que un dividendo alto: analizamos la generación de caja, la deuda, las prioridades del equipo directivo y le pedimos un sesgo de calidad que nos trate de salvar de esas trampas de liquidez de las empresas con dividendos superatractivos, pero que posiblemente tengan que recortar en un futuro cercano".

En el fondo, que trata de evitar un sesgo hacia las empresas más pequeñas, están incluidas las españolas Iberdrola, Repsol, Endesa y Red Eléctrica. Además, según el último informe mensual del fondo, compañías como Sanofi, Axa, Merck, Total Energies o Pepsico también ocupan un lugar destacado en la cartera.

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Los inversores se refugian en el dividendo en plena tormenta bursátil

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Que más vale pájaro en mano se ha convertido en una de las máximas predilectas de los inversores en este primer tramo de 2022. En medio de las incertidumbres desencadenadas por la guerra de Ucrania y las fuertes presiones inflacionistas, que han forzado un brusco viraje de las políticas monetarias, los inversores han buscado refugio en las acciones que ofrecen mejores dividendos.

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Hoy te traigo la grabación de una charla que he impartido, en la que cuento cómo y dónde invertir para los hijos o si eres joven. Este webinar está encuadrado en una jornada de conferencias sobre educación financiera para padres y jóvenes que ha organizado Value School, donde varios expertos en educación financiera y yo hemos hablado sobre cómo educar en el ahorro y la inversión a nuestros hijos.

Si te interesa el tema, te animo a que veas esta conferencia, ya que está en un lenguaje muy sencillo y entendible para cualquier persona, incluso si no sabes nada sobre inversiones.

En ella, entre muchas otras cosas, te hablo sobre:

Para padres:

Invertir para mis hijos: comprar acciones o fondos de inversión para mis hijos. ¿Es buena idea? ¿Cómo se hace? Precauciones que se deben tomar en cuenta.

Fondos indexados vs gestión activa, el lastre de las comisiones a largo plazo.

Finanzas en pareja: cómo proponer a tu pareja que vais a empezar a invertir en bolsa.

Tus hijos y las plataformas de inversión que se anuncian en YouTube: qué debes saber y cómo funcionan.

¿Comprar criptomonedas a mis hijos? ¿Inversión? ¿Especulación? ¿Qué puedo hacer?

Para jóvenes:

Invertir en criptomonedas: ¿me voy a forrar?

“Invertir en bolsa es cosa de viejos.”

No tengo experiencia invirtiendo: ¿está bien empezar por criptos?

«Me voy a comprar una máquina para minar una criptomoneda porque parece que se gana mucha pasta».

Como ves, se trata de un repaso muy completo donde, con un enfoque tanto teórico como práctico, doy consejos e ideas de inversión para los más jóvenes y trato de contestar todas las dudas que muchos padres e hijos se plantean a la hora de invertir.

✅Descubre dónde invertir el ahorro de tus hijos, cómo iniciarlos en el mundo de las inversiones, y otras cosas que debes saber si eres padre o joven:

(Si quieres ir directamente a mi parte, empieza a las 2 horas 11 minutos del vídeo)

✅¿Cuál es tu opinión sobre la inversión para niños?

Me encantaría saber qué opinas tú sobre este tema, si ya estás invirtiendo para el futuro de tus hijos o si eres joven y quieres empezar a invertir o lo has hecho ya.

Si quieres decir algo sobre esto o tienes alguna duda sobre lo que te cuento en la conferencia, no tienes más que dejarme un comentario y estaré encantada de responderte.

Y para no perderte los artículos y vídeos sobre finanzas e inversión que publico semanalmente, te animo a suscribirte a mi newsletter gratuita (además al hacerlo recibirás una guía con las 4 mejores formas de generar ingresos pasivos).

Hasta el próximo artículo, ¡te deseo unas muy felices inversiones!

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➡️ Entrevista a Andrea Redondo👨‍👨‍👧💰 Invertir para los hijos ​​💻​ Webinar

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✅ Descubre cómo y dónde invertir para tus hijos o si eres joven en esta conferencia de Andrea Redondo en Value School👆

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On April 28th, 2022, we listed the Global X Metaverse ETF (VR) on Nasdaq. VR is designed to provide exposure to companies that are positioned to benefit from the development and commercialization of the metaverse. The metaverse is a set of virtual, three dimensional (3D), real-time rendered spaces and simulations that can be experienced simultaneously by users regardless of the users’ physical location.

On Meta Platform’s Q4 2021 earnings call, CEO Mark Zuckerberg and others mentioned the metaverse 11 different times.¹ Microsoft mentioned the metaverse seven times on its call and Nvidia did so five times.² But they’re not the only ones. In the last six months, companies around the world have mentioned the word “metaverse” more than 240 times during their earnings calls.³ Why are so many companies enamored with this term? It’s because many expect the metaverse to emerge as the next evolution of the internet, presenting today’s leading platforms and tech giants a trillion-dollar opportunity.⁴

But what is the metaverse? Why is it the likely successor to today’s internet? And which segments are best positioned to benefit from this evolution? In this piece, we explore these questions and more as we discuss how the metaverse could reshape the future of how we experience the digital world.

Key Takeaways

The metaverse represents an internet in which users are immersed and virtually present. The metaverse consists of several key features including real-time persistency, economies, communities, digital avatars, and accessibility across multiple devices.

Early versions of the metaverse exist already with short track records of success, offering investors a glimpse of its enormous potential. In time, we expect the most successful metaverses to feature decentralized, open architecture platforms powered by blockchain technology.

With continued development, we believe the metaverse can create revenue opportunities for companies across multiple verticals, particularly for those companies involved in building virtual reality (VR), augmented reality (AR), as well as mixed reality (MR) hardware and software.

Defining the Metaverse

In today’s internet, digital platforms typically help facilitate physical-world experiences. We buy goods on Amazon that are shipped to our home, we share pictures on Instagram of our latest dinner out, and we buy tickets online to a concert at Madison Square Garden that we attend with friends.

In the metaverse, digital platforms facilitate largely digital-world experiences. By jumping into an immersive experience using a VR headset, we will be able to work, play video games, buy digital items, socialize with friends, and consume media. The metaverse is not a technology per se, but a vision of a new way of engaging with our world. Succinctly, Meta Platforms’ Zuckerberg describes the metaverse as a virtual environment where you can be present with other people in digital spaces.⁵

Broadly, we identify six main characteristics that define a metaverse:

Identity: While digitally present in the metaverse, users can express themselves as whoever or whatever they want to be with their own avatar. To quote the science-fiction film Ready Player One, which depicts an infinite metaverse called the Oasis: “People come to the Oasis for all the things they can do, but they stay for all the things they can be: tall, beautiful, scary, a different sex, a different species, live action, cartoon, it’s all your call.”⁶

Multi-device: The ability to access the metaverse from anywhere is a key feature, whether it’s your phone, PC, tablet, or other devices. One of the biggest leaps forward will likely be the immersive VR experience, which uses a head-mounted display to engulf users in a computer-generated environment where they can manipulate virtual objects. Lighter versions of the metaverse will also exist via traditional screens and devices.

Immersive: A truly immersive experience engages all of a person’s senses: sight, hearing, touch, smell, and taste. Today, VR mostly involves surround sound and images. The next generation of VR devices could include haptic body suits and omnidirectional treadmills that give users physical sensations through electro-stimulation as they navigate a digital environment.

Economy: A fully developed metaverse has a functioning economy where users can earn and spend in digital or fiat currencies. An early example of a metaverse with an online economy is the gaming platform Roblox and its currency, the Robux. Users who purchase Robux can spend it on experiences and items for their avatar. Developers and creators can earn Robux by building engaging experiences and compelling items that users want to purchase and converting those Robux back into fiat currencies, such as the U.S. dollar.

Community: Users are not alone in the metaverse. They interact and share experiences with others. In looking at video games as an early form of the metaverse, enabling social experiences seems to be a core trait of successful titles. Activision Blizzard CEO Rob Kotick mentioned that players who play in groups with friends spend over three times more hours in the game and invest roughly three times more on in-game content compared to other players.⁷

Real-time persistent: The metaverse is expected to be real-time persistent, with no ability to pause the experience, meaning that it will continue to exist and function even after users leave. Unlike other digital experiences, this trait puts the focus on the continued development of the virtual world itself rather than the user.

Early Days of the Metaverse Show Its Potential

The metaverse is not some futuristic idea; early versions already exist. Epic Games’ Fortnite has hosted virtual concerts with Ariana Grande and Travis Scott, where users attended as their digital avatars. The success of events like these has been staggering, drawing millions of fans and far outnumbering in-person shows.

In August 2021, Meta Platforms took a major step towards a metaverse when it unveiled “Horizon Workrooms,” a virtual meeting space where co-workers can interact with each other in the form of their digital avatars.⁸ Entering the workroom requires an Oculus VR headset and downloading the free app. These examples offer small glimpses of what a full metaverse could ultimately look like.

As companies invest further in building metaverse-related initiatives, it’s important to remember that what we call “the metaverse” isn’t necessarily a centralized monopoly. Metaverse development may yield more centralized and distinct experiences currently, but it’s working towards an end-state that is fully decentralized. And unlike in Ready Player One, which depicts a metaverse where the real world is left behind for one infinite virtual world, in our world, several metaverses are likely to emerge.

The Metaverse of the Future Expected to Move From Closed to Open Architecture

Today, companies offer their metaverse experiences primarily through closed architecture systems, which means that their software and/or hardware is not compatible with other platforms. Different platforms are often designed for different primary use cases, such as gaming, working, shopping, or socializing. Eventually, we expect the most successful metaverse platforms to evolve toward a more open architecture that allows many, if not all, users, developers, and companies to participate on equal terms.

An example of a truly open metaverse would be a decentralized virtual reality platform powered by blockchain technology. Such a concept already exists with Decentraland, Somnium Space, Sandbox, and others, which are built on the Ethereum blockchain. Unlike other virtual worlds and social networks, no single agent has the power to modify the rules of these virtual worlds’ software, land, or the economics of its currency. Community members can create, experience, and monetize content and applications. In some instances, community members can buy, develop, and sell land, which, like in the real world, is finite, making it more valuable.

When inside the most popular metaverse platforms, we expect users to find functioning economies where they can spend or earn currency. Many will view the metaverse as a space for entertainment and leisure, using the digital space to meet with friends, shop, and/or consume media. These types of platforms will likely benefit from network effects: the more users start to participate in the metaverse, the richer the digital experiences become, and the more these users start to attract their family, friends, and acquaintances to the platforms. But the metaverse isn’t all play. For developers and creators initially, and others eventually, the metaverse will be their place of work, where they participate in the business of these virtual worlds.

For users to participate, they will simply need an entry point, whether it’s a VR set, smartphone, or computer, and an internet connection. But the next generation of hardware could include haptic body suits, omnidirectional treadmills, and brain sensing wearables, making the virtual world even more realistic.

Haptic body suits: Whether full body, vest-only, or gloves, these wearables provide users with a sense of touch in VR and AR settings through electro-stimulations or vibration motors. As users delve into experiences, the suits mimic sensations, such as a hug or raindrops.

Omnidirectional treadmills: The ability to walk, run, and jump in any direction will allow users to bring physicality to their VR experiences. Today, best-in-class omnidirectional treadmills only feature the ability to walk. However, we expect future technologies to create more immersive experiences.

Brain-sensing devices: Users could eventually control a virtual environment in real time through devices that analyze, interpret, and translate their own neural signals into digital commands. In some leading devices, machine learning algorithms decode brain activity and recognize the active visual focus, allowing the object in focus to move in the virtual world.

The Metaverse Could Be a Trillion-Dollar Opportunity

Evidence suggests that the metaverse could create wide-ranging revenue opportunities across multiple verticals, particularly for those companies involved in building virtual reality, augmented reality, and mixed reality hardware and software, semiconductors, as well as creator platforms and economies. The opportunity could potentially exceed $1 trillion, when including advertising, social commerce, digital events, hardware, creating and developing content, and more.⁹ Below, we define the metaverse’s most prominent verticals and some of companies leading the way in them.

AR, VR, MR, and spatial computing: Companies involved in the development of hardware and/or software that allow users to experience or interact with extended digital realities. These companies include those involved in VR, which is a fully immersive simulated experience; AR, which is a real-world environment enhanced by computer generated information; and MR, which is a hybridized display that allows users to experience and interact with the physical and virtual world simultaneously. These technologies can simulate or relay visual, audio, haptic, or movement-driven information, among others.

One example of a VR set is Meta Platforms’ Oculus Quest. We estimate combined sales of over 10 million Oculus Quest 1 and 2 devices since their launches back in 2019 and 2020, respectively.¹⁰ These sales totals are notable, as Meta Platforms believes reaching a sustainable and profitable ecosystem for developers requires precisely 10 million devices.¹¹ App development in the VR ecosystem is well behind other type of devices, such as smartphones, resulting in a lack of quality content currently. As the number of VR users grows, likely too will the incentives for developers to support the space.

Creator platforms: Companies involved in the development of immersive digital platforms that enable users to create, share, and consume content and digital goods. Content includes: social networking; online video games, video game engines, and esports; live streaming; digital live events; as well as other media delivered in three dimensional simulations, environments, or worlds.

Unity Technologies and Epic Unreal Engine (40% owned by Tencent) offer a case study of how creator platforms bring content to the market. The two companies control approximately two-thirds of the game and virtual world engine market for mobile devices.¹² The out-of-the-box solutions that they provide serve as building blocks for the virtual world’s development. Among their main attributes, their solutions help lower the total cost and time it takes to bring a video game to the market.

For example, in 2021, Unity Technologies spent $696 million in research and development (R&D), a cost that the company spread across 1,052 developers who generated over $100,000 in sales during the year.¹³ These developers simply focus on the creative aspect of the game, not the time-consuming engine-building and maintenance. Business models in this segment can vary. Unity charges a monthly subscription, while Epic charges a 5% fee on sales.¹⁴

Creator economy: Companies involved in the development of infrastructure and applications for the metaverse’s digital payment services, including cryptocurrency payments, blockchain technologies, decentralized finance solutions, the creation and distribution of non-fungible tokens (NFTs), as well as digital asset payment gateways.

Coinbase is an example of a company that operates within this segment. Coinbase not only facilitates access to thousands of cryptocurrencies, but it is also making inroads in the NFT ecosystem. Since announcing its NFT marketplace in October 2021, more than 2.5 million users have registered on the company’s waiting list to join the platform.¹⁵ The company wants to capitalize on a market that has historically garnered over $50 billion in trading volume.¹⁶ The NFTs are important for the metaverse’s development because they can be used to purchase virtual land plots, spaces, and avatars, among other items.

Digital infrastructure/hardware: Companies that produce: semiconductors; cloud computing technologies such as edge computing and cloud computing security; as well as 5G infrastructure for digital media consumption and/or the development and maintenance of metaverse and related devices.

Within this segment, semiconductors are getting ready for a world beyond smartphones. Semiconductors are the foundational element to VR, AR, and MR fulfilling their promise, given the massive computing power they require. Companies such as Nvidia, Samsung Electronics, and TSMC are integral to this space. For example, TSMC is in line to manufacture custom 4nm and 5nm chips for Apple’s VR and AR ambitions.¹⁷

Conclusion

Like the internet once was, the metaverse is in its early days. But the metaverse’s foundational infrastructure is in place and companies are increasingly vocal about their participation in its advancement, both in word and capital commitment. As each piece is built and accessibility increases, we expect consumer appetite for this next iteration of the internet to increase. Important to the development of a thriving metaverse will be recognition that the metaverse is an immersive, real-time persistent economy. The metaverse will be as much a place of economic development as it will be a place for leisure and entertainment. It will take several years for fully formed, immersive metaverse experiences to become ubiquitous, but we believe that earlier stage investment opportunities are emerging already.

Related ETFs

VR: The Global X Metaverse ETF seeks to invest in companies that are positioned to benefit from the development and commercialization of the Metaverse. This includes companies involved in the development of hardware and software that allow users to experience extended digital realities; creator platforms, where live streaming and other media content is shared in 3D simulations; creator economies, involving the development of applications involving digital payments, such as the creation and distribution of Non-Fungible Tokens (NFTs) and other digital asset payment gateways; as well as digital infrastructure/hardware, such as semiconductors, cloud computing technology and 5G infrastructure supporting digital media consumption.

Click the fund name above to view current holdings. Holdings are subject to change. Current and future holdings are subject to risk.

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Introducing VR: The Case for the Metaverse

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On April 28th, 2022, we listed the Global X Metaverse ETF (VR) on Nasdaq. VR is designed to provide exposure to companies ...

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Star Bulk Carriers Corp. ( NASDAQ:SBLK - Get Rating) declared a quarterly dividend on Tuesday, May 24th, Zacks reports. Shareholders of record on Friday, June 3rd will be paid a dividend of 1.65 per share by the shipping company on Thursday, June 16th. This represents a $6.60 dividend on an annualized basis and a yield of 20.70%. The ex-dividend date of this dividend is Thursday, June 2nd.

Star Bulk Carriers has a payout ratio of 135.1% meaning the company cannot currently cover its dividend with earnings alone and is relying on its balance sheet to cover its dividend payments. Analysts expect Star Bulk Carriers to earn $5.24 per share next year, which means the company may not be able to cover its $8.00 annual dividend with an expected future payout ratio of 152.7%.

SBLK opened at $31.89 on Thursday. The business's 50 day moving average is $29.57 and its 200-day moving average is $25.51. The stock has a market cap of $3.26 billion, a PE ratio of 4.79 and a beta of 0.89. The company has a current ratio of 2.35, a quick ratio of 2.09 and a debt-to-equity ratio of 0.64. Star Bulk Carriers has a twelve month low of $16.56 and a twelve month high of $33.88.

Star Bulk Carriers ( NASDAQ:SBLK - Get Rating) last released its quarterly earnings results on Tuesday, May 24th. The shipping company reported $1.72 earnings per share for the quarter, beating analysts' consensus estimates of $1.47 by $0.25. Star Bulk Carriers had a return on equity of 37.79% and a net margin of 47.67%. During the same quarter in the previous year, the firm earned $0.36 EPS. As a group, analysts forecast that Star Bulk Carriers will post 6.22 EPS for the current year.

Several brokerages recently commented on SBLK. Jefferies Financial Group initiated coverage on Star Bulk Carriers in a report on Wednesday, April 27th. They set a "buy" rating on the stock. Pareto Securities cut shares of Star Bulk Carriers from a "buy" rating to a "hold" rating and set a $30.00 price objective on the stock. in a research report on Wednesday, February 23rd. StockNews.com lowered shares of Star Bulk Carriers from a "strong-buy" rating to a "buy" rating in a research note on Wednesday, April 20th. HC Wainwright lifted their target price on shares of Star Bulk Carriers from $35.00 to $40.00 in a research note on Friday, February 18th. Finally, Zacks Investment Research raised shares of Star Bulk Carriers from a "hold" rating to a "buy" rating and set a $30.00 target price for the company in a research note on Thursday, April 28th. One equities research analyst has rated the stock with a hold rating and six have issued a buy rating to the company. According to data from MarketBeat.com, the company currently has an average rating of "Buy" and an average target price of $34.00.

A number of institutional investors have recently added to or reduced their stakes in the business. Captrust Financial Advisors lifted its position in Star Bulk Carriers by 29.2% during the 1st quarter. Captrust Financial Advisors now owns 2,656 shares of the shipping company's stock worth $79,000 after acquiring an additional 600 shares during the last quarter. Advisory Services Network LLC increased its holdings in shares of Star Bulk Carriers by 3.2% during the 1st quarter. Advisory Services Network LLC now owns 25,305 shares of the shipping company's stock worth $751,000 after purchasing an additional 786 shares during the period. Invesco Ltd. increased its holdings in shares of Star Bulk Carriers by 4.0% during the 3rd quarter. Invesco Ltd. now owns 57,124 shares of the shipping company's stock worth $1,373,000 after purchasing an additional 2,211 shares during the period. Worth Asset Management LLC bought a new position in shares of Star Bulk Carriers during the 1st quarter worth about $73,000. Finally, BNP Paribas Arbitrage SA increased its holdings in shares of Star Bulk Carriers by 179,150.0% during the 1st quarter. BNP Paribas Arbitrage SA now owns 3,585 shares of the shipping company's stock worth $106,000 after purchasing an additional 3,583 shares during the period. 49.81% of the stock is owned by hedge funds and other institutional investors.

About Star Bulk Carriers ( Get Rating)

Star Bulk Carriers Corp., a shipping company, engages in the ocean transportation of dry bulk cargoes worldwide. The company's vessels transport a range of major bulks, including iron ores, coal, and grains, as well as minor bulks, such as bauxite, fertilizers, and steel products. As of December 31, 2021, it had a fleet of 128 vessels with an aggregate capacity of approximately 14.1 million deadweight tons, including 17 Newcastlemax, 24 Capesize, 7 Post Panamax, 41 Kamsarmax, 2 Panamax, 20 Ultramax, and 17 Supramax vessels.
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Star Bulk Carriers Corp. (NASDAQ:SBLK) Plans $1.65 Quarterly Dividend

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Star Bulk Carriers Corp. (NASDAQ:SBLK - Get Rating) declared a quarterly dividend on Tuesday, May 24th, Zacks reports. Shareholders of record on Friday, June 3rd will be paid a dividend of 1.65 per share by the shipping company on Thursday, June 16th. This represents a $6.60 dividend on an annualized basis and a yield of [...]

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When an oil company invests in an expensive new drilling project today, it's taking a gamble. Even if the new well is a success, future government policies designed to slow climate change could make the project unprofitable or force it to shut down years earlier than planned.

When that happens, the well and the oil become what's known as stranded assets. That might sound like the oil company's problem, but the company isn't the only one taking that risk.

In a study published May 26, 2022, in the journal Nature Climate Change, we traced the ownership of over 43,000 oil and gas assets to reveal who ultimately loses from misguided investments that become stranded.

It turns out, private individuals own over half the assets at risk, and ordinary people with pensions and savings that are invested in managed funds shoulder a surprisingly large part, which could exceed a quarter of all losses.

More climate regulations are coming

In 2015, almost every country worldwide signed the Paris climate agreement, committing to try to hold global warming to well under 2 degrees Celsius (3.6 F) compared to pre-industrial averages. Rising global temperatures were already contributing to deadly heat waves and worsening wildfires. Studies showed the hazards would increase as greenhouse gas emissions, primarily from fossil fuel use, continue to rise.

It's clear that meeting the Paris goals will require a global energy transition away from fossil fuels. And many countries are developing climate policies designed to encourage that shift to cleaner energy.

But the oil industry is still launching new fossil fuel projects, which suggests that it doesn't think it will be on the hook for future stranded assets. U.N. Secretary-General António Guterres called a recent wave of new oil and gas projects " moral and economic madness."

How risk flows from oil field to small investor

When an asset becomes stranded, the owner's anticipated payoff won't materialize.

For example, say an oil company buys drilling rights, does the exploration work and builds an offshore oil platform. Then it discovers that demand for its product has declined so much because of climate change policies that it would cost more to extract the oil than the oil could be sold for.

The oil company is owned by shareholders. Some of those shareholders are individuals. Others are companies that are in turn owned by their own shareholders. The lost profits are ultimately felt by those remote owners.

In the study, we modeled how demand for fossil fuels could decline if governments make good on their recent emissions reduction pledges and what that would mean for stranded assets. We found that $1.4 trillion in oil and gas assets globally would be at risk of becoming stranded.

Stranded assets mean a wealth loss for the owners of the assets. We traced the losses from the oil and gas fields, through the extraction companies, on to those companies' immediate shareholders and fundholders, and again their shareholders and fundholders if the immediate shareholders are companies, and all the way to people and governments that own stock in the companies in this chain of ownership.

It's a complex network.

On their way to ultimate owners, much of the loss passes through financial firms, including pension funds. Globally, pension funds that invest their members' savings directly into other companies own a sizable amount of those future stranded assets. In addition, many defined contribution pensions have investments through fund managers, such as BlackRock or Vanguard, that invest on their behalf.

We estimate that total global losses hitting the financial sector - including through cross-ownership of one financial firm by another - from stranded assets in oil and gas production could be as high as $681 billion. Of this, about $371 billion would be held by fund managers, $146 billion by other financial firms and $164 billion could even affect bondholders, often pension funds, whose collateral would be diminished.

U.S. owners have by far the largest exposure. Ultimately, we found that losses of up to $362 billion could be distributed through the financial system to U.S. investors.

Some of the assets and companies in an ownership chain are also overseas, which can make the exposure to risk for a fund owner even more difficult to track.

Someone will get stuck with those assets

Our estimates are based on a snapshot of recent global share ownership. At the moment, with oil and gas prices near record highs due to supply chain problems and the Russian war in Ukraine, oil and gas companies are paying splendid dividends. And in principle, every shareholder could sell off their holdings in the near future.

But that does not mean the risk disappears: Someone else buys that stock.

Ultimately, it's like a game of musical chairs. When the music stops, someone will be left with the stranded asset. And since the most affluent investors have sophisticated investment teams, they may be best placed to get out in time, leaving less sophisticated investors and defined contribution pension plans to join the oil and gas field workers as losers, while the managers of the oil companies unfold their golden parachutes.

Alternatively, powerful investors could successfully lobby for compensation, as has happened repeatedly in the U.S. and Germany. One argument would be that they couldn't have anticipated the stricter climate laws when they invested or they could point to governments asking companies to produce more in the short-term, as happened recently in the U.S. to substitute for Russian supplies.

However, divesting right away or hoping for compensation aren't the only options. Investors - the owners of the company - can also pressure companies to shift from fossil fuels to renewable energy generation or another choice with growth potential for the future.

Investors not only may have the financial risk, but also the related financial responsibility, and ethical choices may help preserve both the value of their investments and the climate.

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Who really owns the oil industry's future stranded assets? If you own investment funds or expect a pension, it might be you

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When an oil company invests in an expensive new drilling project today, it's taking a gamble. Even if the new well is a success, future government policies designed to slow climate change could make the project unprofitable or force it to shut down years earlier than planned.

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The world is in the grip of a food crisis. In many parts of the world, farmland is no longer cultivable due to the overuse of pesticides, droughts and extreme weather events brought on by a changing climate. Good-quality soil for growing crops to feed the swelling global population is becoming more scarce.

So, is there a way to produce food without the need to use soil? Several companies are doing just that, using a variety of methods such as growing crops underwater, using nutrient-rich moisture, or by reusing coffee grounds as fertiliser.

There are a few well-established methods, such as aeroponics, where the roots of the plants hang suspended and are sprayed with a nutrient-rich mist. Another is aquaponics, where fish are farmed alongside plants, and their waste-products are used to nourish the plants.

Not only does being able to grow food without the need for soil have implications for growing crops on Earth, it could also be key to sustaining our stay on the Moon or Mars. Being able to grow plants without soil will be key to having a reliable food source and helping us maintain a presence on other planets.

In this gallery, we bring you some of the projects that show that it is possible to grow food in a way that is sustainable and kinder to the environment.

Edo Radici Felici, Italy

Edo Radici Felici's facility at Quarrata, Italy, uses a tailor-made system of aeroponics to grow various vegetable species. Aeroponics is an alternative method of growing plants by suspending their roots in the air and irrigating them with a nutrient-dense solution, thus eliminating the need to use soils. In this image, Leonardo Lenzi, partner and head of research and development at Edo, checks the lettuces before they are harvested and sent to the market at Coldiretti. Photo by Vittoria Lorenzetti/Parallelozero

This image shows a section of the structure of the floating system. The plants have a life cycle of 18 days from planting to harvest. The roots hang in the air and are fed by an irrigation system with nozzles that spray nutrient substances onto the plant. Photo by Vittoria Lorenzetti/Parallelozero

Hydroponic village, Indonesia

A child walks down an alley with hydroponic vegetables on one side in Lolu Village, Palu, Central Sulawesi Province, Indonesia. The village is dubbed as Hydroponic Village because almost all households grow vegetables using a hydroponic system (the process of growing plants in liquid instead of soil), either for their own consumption or for sale. The Indonesian government encourages its citizens to use their home yards by growing crops using a hydroponic system as an effort to improve food security following the COVID-19 pandemic. Photo by Basri Marzuki/NurPhoto/Getty Images

A detailed image of food being grown by residents using hydroponic methods in Lolu Village, Palu, Central Sulawesi Province, Indonesia. Photo by Basri Marzuki/NurPhoto/Getty Images

Zero Farms, Italy

Anna Mastellaro and Anita Bonotto, agronomists in the Zero M facility at Zero Farms in Pordenone, Italy, check batches of basil, chives, mizuna and other vegetables. All the plants are grown in aeroponic facilities without the use of soil or substrates. Instead of using costly large industrial buildings, Zero uses a system of modular units which can be easily installed on a smaller scale. Photo by Vittoria Lorenzetti/Parallelozero

Biologist Francesco Dose works with mint cuttings from the experimental aeroponic system at Zero Farms, Pordenone, Italy. Photo by Vittoria Lorenzetti/Parallelozero

National agricultural demonstration zone, China

Victor Lo checks the water filtration system at his aquaponics production base in the national agricultural demonstration zone in Kaiping City, Jiangmen, China. Lo, Fung Leung and Mandy Tam came to the Kaiping national agricultural demonstration zone to research aquaponic methods of growing. During five years of research, the team managed to solve many problems associated with this system, and have applied for nearly 10 patents. To date, the base annually yields some 300 tonnes of organic vegetables, most of them sold to Hong Kong. Photo by Xinhua/Shutterstock

Nemo's Garden, Italy

Nemo's Garden in Noli, Italy, is an underwater garden located at a depth of 6-10 metres. It is composed of six plastic biospheres measuring two metres in diameter, and employs a hydroponic cultivation method to grow basil plants. The garden is designed to have a minimal impact on the local marine life, and also does not require any energy sources other than the Sun. Photo by Vittoria Lorenzetti/Parallelozero

Herbs growing in the underwater biospheres of the Nemo project, which are anchored to the sea bottom. The project was started in 2012, and now houses more than 300 plants grown with an automated hydroponic system. The main herb grown is basil but experiments are also carried out with mint and liquorice. Photo by Alessandro Rota/Getty Images

Upward Farms, USA

Upward Farms uses modern vertical farming techniques in conjunction with aquaponics, therefore growing crops in a complete ecosystem. Fish swim directly below these plants, which absorb nutrients from fish waste. The plants filter the water as they grow, thus reducing water use by 95 per cent. The crops and seafood produced here are exported around the world. Photo by Upward Farms

More images from Science Focus:

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Circle Food & Energy Solutions, Italy

The Circle Food & Energy Solutions is a farm on the outskirts of Rome. Here, with their vertical aquaponic systems housed in tents in the Italian countryside, this small company is able to grow a variety of edible crops without impacting on the environment. Aquaponics is a method of growing plants in water, using waste produced by fish and small marine creatures. The plants can extract the nutrients from this waste, and in turn can purify the water, therefore it is a system with almost no waste at all. Photo by Vittoria Lorenzetti/Parallelozero

The aquaponic system enables the cultivation of baby leaves and aromatic herbs. The system is built in such a way as to let the water flow downwards from above, thereby transporting nutrients to the plants. The plants themselves then purify the water and release it into the containers below. Photo by Vittoria Lorenzetti/Parallelozero

Crate to Plate, UK

Sebastien Sainsbury, CEO at Crate to Plate, is pictured inside the company's urban farm near Elephant and Castle, London, UK. Housed within two shipping containers, the company uses hydroponic technology and nutrient-rich water to grow greens vertically in urban environments all year round. Photo by PinPep/Shutterstock

Crate to Plate's urban farm near Elephant and Castle, London, UK. Photo by PinPep/Shutterstock

Sofia's Strawberries, Italy

Le fragole di Sofia (Sofia's Strawberries), in Crespino, Italy, grows and sells its own strawberries that have been grown using a soilless method in a specially constructed greenhouse. Sofia Michieli started to grow the strawberries on her parents' farm, and has since won awards for her innovation. Photo by Vittoria Lorenzetti/Parallelozero

A ferti-irrigation system supplies drops of water full of nutrients onto the growing substrate. This type of system means only the water required for the plants is used, and excessive irrigation (and therefore waste) can be avoided. Photo by Vittoria Lorenzetti/Parallelozero

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Could farming without soil help to solve our food crisis? | BBC Science Focus Magazine

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AndreyPopov/iStock via Getty Images

Introduction

Despite only having listed in early 2021, ZIM Integrated Shipping () wisely utilized the cash windfall from these booming operating conditions to enter a new era for dividends, as my previous article highlighted. Though at the time, it could have been argued that they were yet to be proven but thankfully, management followed through by declaring a massive dividend that if continued, amounts to a massive circa 20% yield on current cost. Whilst this may sound like a blip on the radar, when looking ahead, it seems that all roads lead to higher dividends, as discussed within this follow-up analysis that also reviews their subsequently released results for the fourth quarter of 2021 and more recently released results for the first quarter of 2022.

Executive Summary & Ratings

Since many readers are likely short on time, the table below provides a very brief executive summary and ratings for the primary criteria that were assessed. This Google Document provides a list of all my equivalent ratings as well as more information regarding my rating system. The following section provides a detailed analysis for those readers who are wishing to dig deeper into their situation.

*Instead of simply assessing dividend coverage through earnings per share cash flow, I prefer to utilize free cash flow since it provides the toughest criteria and also best captures the true impact upon their financial position.

Detailed Analysis

After seeing their cash flow performance explode during the first nine months of 2021 with operating cash flow of $3.966b that was already many magnitudes higher versus even the aggregate of their full-year results during 2018-2020, the fourth quarter of 2021 powered even higher with their operating cash flow closing out the year at a massive $5.971b. Whilst already extremely impressive, the good times have continued into 2022 with the first quarter seeing operating cash flow of $1.66b. Apart from being slightly more than twice as high year-on-year, it also annualizes to $6.64b and thus slightly more than 10% higher versus their result during 2021. When looking ahead into the remainder of 2022, the forecast earnings provided by management indicate that even stronger growth should be forthcoming throughout the coming quarters, as the slide included below displays.

It can be seen that management forecasts that 2022 should see an adjusted EBIT and an adjusted EBITDA of $6.5b and $8b at the midpoints respectively versus their results during 2021 of $5.82b and $6.597b respectively, as per slide eleven of their fourth quarter of 2021 results presentation. If these are achieved, they would represent increases of 11.68% and 21.67% year-on-year respectively. Given its positive correlations, their operating cash flow should follow in tandem and thus see at least the same increase as their adjusted EBIT but realistically, it should actually be closer to their even more impressive forecast adjusted EBITDA growth, as its exclusion of depreciation and amortization better reflects operating cash flow.

Since they have a variable dividend policy that aims to return 30% to 50% of their annual net income via dividends, as per my previously linked article, their forecast circa 10% to 20% earnings growth for 2022 should translate into comparably higher dividends, thereby forming the first metaphorical road that leads to higher dividends in the short-term. This creates the potential for shareholders to see an immense portion of their capital returned very quickly since 2021 already saw massive dividends, as per the commentary from management included below.

"Regarding our dividend, as discussed, our Board declared a dividend of $17 per share today. Together with the third quarter interim dividend of $2.5 per share, our annual 2021 dividend we totaled $19.5 per share..."

-ZIM Integrated Shipping Q4 2021 Conference Call.

If the dividends of $19.50 per share they declared in relation to 2021 are viewed against their current share price of circa $70, it sees a massive yield of almost 28% and thus given their strong guidance for 2022, this should easily be north of 30% when looking ahead. Whilst subsequent years may see weaker financial performance given the inherent volatility of their industry, there is still scope to see relatively higher dividends given their only modest payout ratio, thereby forming the second and third metaphorical roads leading to higher dividends in the medium to long-term.

Whilst they only saw $536.4m of dividend payments during 2021, this was due to their massive fourth quarter of 2021 dividend of $17 per share not being paid until early April 2022 and thus were not yet reflected within their financial statements. This should cost $2.037b given their latest outstanding share count of 119,810,688, which brings their dividend payments attributable for 2021 to a total of $2.573b. Since this remains well beneath their free cash flow of $4.801b during 2021, which stands to grow even higher during 2022, it foretells relatively higher dividends for whatever the future prevailing operating conditions entail.

Even though companies normally retain free cash flow, given the state of their subsequently discussed financial position, this seems unnecessary going forwards into the future. This means that they are able to deploy this free cash flow elsewhere, either through boosting their dividend relatively higher by increasing their payout ratio or alternatively, by boosting capital expenditure to drive fundamental growth, which in turn increases their earnings in the medium to long-term and thus by extension, also increases their dividends. It remains to be seen what road management ultimately takes but either way, the medium to long-term outlook improves for their shareholders.

When conducting the previous analysis that preceded their fourth quarter of 2021 results, their net debt of only $345.2m at the time was expected to be eliminated but alas, it now sits much higher at $1.581b, despite the very strong first quarter of 2022. This does not stem from acquisitions but rather during the fourth quarter of 2021 alone, they made $1.799b of contributions to their "other investments", which their SEC filing states as comprising "mainly bank deposits", as per their 2021 20-F. Despite not being included within the "cash and cash equivalents" on their balance sheet, they are not too dissimilar to cash from a practical standpoint. Since these other investments currently stand at $2.092b, if these were included, it would see all of their net debt eliminated with a net cash position of $515m and thus it would be pointless to assess their leverage in detail as practically speaking, they have no leverage.

It was unsurprising to see their liquidity remain strong given their continued very strong cash flow performance, which now sees their current ratio at 1.29 and even more importantly, their cash ratio at 0.55. Since they effectively have no leverage, it obviously means they fear no debt maturities and given their variable dividend policy that helps scale their cash outflows with their cash inflows, there are no reasons to expect their liquidity to deteriorate, even if central banks tighten monetary policy.

Conclusion

To borrow the odd adage that all roads lead to Rome, it could be said that in this situation, all roads lead to higher dividends in one way or another. In the short-term, their prospects to generate even more cash during 2022 than the already massive amount seen during 2021, almost guarantees their dividends for 2022 will climb circa 10% to 20% higher. Whereas in the medium to long-term, thanks to their very healthy financial position that sports practically no leverage, it seems reasonable to expect either relatively more free cash flow directed towards dividends or alternatively, higher capital expenditure to fundamentally grow their earnings and thus subsequent dividends. Following this very impressive outlook and management following through with a massive dividend earlier in the year, I now believe that upgrading to a strong buy rating is appropriate.

Notes: Unless specified otherwise, all figures in this article were taken from ZIM Integrated Shipping's SEC Filings, all calculated figures were performed by the author.

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ZIM Integrated Stock: All Roads Lead To Higher Dividends

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Despite only having listed in early 2021, ZIM Integrated Shipping () wisely utilized the cash windfall from these booming operating conditions to enter a new era for dividends, as my previous article highlighted.

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El 72,4% de la población española manifiesta una mayor preocupación por su salud desde que comenzó la pandemia. Ante el crecimiento tanto del interés como de la necesidad real, resulta indispensable poner la salud y el bienestar en el centro de cualquier estrategia -individual, familiar, social o empresarial-.

Sin embargo, la pandemia no es el único factor impulsor del cambio. Por un lado, las tensiones del sistema sanitario han llevado a los gobiernos a exigir mayor eficiencia y transparencia tanto a las instituciones públicas como a los proveedores privados, alentando la necesaria digitalización del sector. Por el otro, los actores tradicionales (grupos sanitarios, aseguradoras, farmacéuticas y fabricantes de dispositivos médicos) han visto florecer el interés por el sector de un nuevo tipo de entrantes: los tecnológicos -startups y gigantes digitales comoApple, Google o Amazon-.

¿Dónde queda el consumidor/paciente? La rápida adopción de las soluciones digitales por parte de la población general ha conllevado un aumento de sus expectativas en lo que a facilidad e inmediatez se refiere. El creciente interés por el bienestar ha generado una demanda que va más allá de los servicios médicos tradicionales. La empatía y la confianza se han convertido en factores clave para garantizar la fidelidad a los proveedores de servicios de salud. Pero con la transformación digital a medio hacer y el panorama de actores altamente fragmentado, construir propuestas de valor holísticas y ofrecer una experiencia del paciente homogénea y sin fisuras parece una misión imposible.

MAPFRE ha llevado a cabo un estudio en colaboración con Accenture sobre la situación y ha identificado las cinco tendencias que marcarán el futuro de la salud a partir de una lectura del presente: los movimientos de los principales actores, la madurez de las nuevas tecnologías y los puntos de vista expresados por expertos de todo el mundo. Como prácticamente todos los sectores, nos encontramos en el proceso de construcción de un nuevo paradigma que, sin duda, beneficiará a todos. Pero este proceso no está exento de desafíos que requieren de la colaboración de todas las partes.

El sector de la salud ha experimentado una inyección de liquidez sin precedentes. Solo en 2021 las startups de salud digital recibieron 31.000 millones de dólares en capital riesgo, un 60% más que el año anterior. Nadie quiere dejar escapar un mercado que alcanzará los 426.000 millones de dólares en 2027. Una de las principales consecuencias de la entrada de actores tecnológicos es la altísima especialización del ecosistema. En los últimos dos años este enfoque ha cambiado: el auge de la telemedicina y el apetito de los inversores por el sector han permitido la proliferación de los modelos B2C. Al mismo tiempo, el interés de los inversores ha pasado de las tecnologías orientadas a la mejora del rendimiento de los proveedores médicos (como las nuevas formas de diagnóstico) a soluciones digitales dedicadas al consumidor o paciente. Es el modelo del 86% de las startups de salud en España, el cuarto país con mayor número de empresas emergentes del sector a nivel global.

Ahora mismo el sector de la salud se encuentra en una situación paradójica: cuantas más compañías intentan convertirse en plataforma y construir una relación estrecha con los usuarios, más atomizada está la oferta y más complejo es crear experiencias homogéneas para los clientes. La necesaria especialización de los actores hace pensar que el ecosistema esquivará la concentración y, por el contrario, se consolidará en base a infinidad de alianzas multidireccionales.

Uno de los múltiples efectos colaterales de la pandemia ha sido la consciencia sobre los datos personales de salud y su acceso a ellos por imperativo legal. Todo ello mientras la confianza de los consumidores respecto a la privacidad está bajo mínimos: solo el 41% confía en la capacidad de sus proveedores de salud para custodiar adecuadamente sus datos. La primera ola de la digitalización en salud se centró en los sistemas de gestión hospitalaria e institucional. Una segunda ola, alimentada por los avances en inteligencia artificial, inició la disrupción en los sistemas de diagnóstico y asignación de tratamiento.

La pandemia propulsó una tercera, centrada esta vez en la digitalización de la relación médico-paciente (la telemedicina). La cuarta ola deberá romper con los silos de información, impulsando los estándares para el intercambio de información y actualizando las infraestructuras tecnológicas para hacerlo posible de manera eficiente y (sobre todo) segura. Esto solo será posible con la interoperabilidad de los datos, liberando el verdadero potencial de la era de la información en el ámbito de la salud, haciendo posible una experiencia del paciente continua y homogénea e impulsando exponencialmente el mundo de la investigación.

El aumento de la preocupación social respecto al bienestar y la reducción de los márgenes operativos de los proveedores de salud impulsan el crecimiento de los servicios de salud preventiva. Con un tamaño de 320.000 millones de dólares, se espera que el mercado de la salud preventiva crezca un 7,8% anual hasta rozar los 559.000 millones en 2028. Los avances tecnológicos han permitido poner a disposición de los pacientesinnumerables dispositivos para la automonitorización, ya sea con fines médicos, deportivos o de bienestar.

Al mismo tiempo, los avances en genética han saltado del uso científico a la salud de consumo, poniendo test moleculares y análisis genéticos a disposición del ciudadano medio que, más allá de descubrir su propensión a determinadas enfermedades, puede conocer su sensibilidad a determinadas sustancias y cambiar sus hábitos para cumplir sus objetivos de salud y bienestar: dormir mejor, perder peso, mejorar su capacidad cardiovascular, etc. Estos avances dotan al ciudadano de herramientas para tener más conocimiento y control sobre su bienestar, empoderándolo y convirtiéndolo en parte activa de la prevención y el camino hacia una salud mejor.

La inteligencia artificial es esencial para la medicina personalizada (también conocida como medicina de precisión). La clave está en combinar el acceso masivo a información agregada y anonimizada con fuentes de datos relativas a un individuo en concreto: su historia médica, los datos provenientes de la secuenciación de su ADN y su fenotipo molecular o factores contextuales y de comportamiento capturados mediante dispositivos.

Gracias a la inteligencia artificial, además, la medicina personalizada no se queda en el diagnóstico presente y en la elección del tratamiento, sino que se adentra en el mundo predictivo, ayudando al personal médico a prever futuras dolencias y a anticipar el impacto de un determinado tratamiento sobre el paciente.

En febrero de 2021, el uso de los servicios médicos remotos - que alcanzó su pico en abril de 2020, durante los confinamientos masivos en Europa- era 38 veces superior a los niveles prepandemia. Parece que la telemedicina ha venido para quedarse y, por tanto, una parte relevante de la atención primaria se traslade de los centros médicos a los hogares: se estima que en 2025 el gasto en atención domiciliaria representará el 25% del presupuesto total de salud. Esta tendencia no es nueva, pues ya en 2016 el Foro Económico Mundial acuñó el término home-spital.

Los factores que impulsan este movimiento son diversos. En primer lugar, la saturación de los sistemas de salud públicos (incluso antes de la pandemia) y la lentitud con la que las infraestructuras físicas se adaptan al crecimiento de la población en áreas urbanas. En segundo lugar, el envejecimiento de la población: en los países ricos de Europa, el porcentaje de población de más de 80 años se va a doblar de aquí a 2050. En tercer lugar, la necesidad de los prestadores de salud públicos y privados (incluyendo las aseguradoras) de aliviar los costes operativos para acomodar los precios de los nuevos tratamientos. Y en cuarto lugar, pero por encima de todos los anteriores, la necesidad de devolver a la atención sanitaria el trato humano, cercano y de calidad que las tensiones en el sistema han deteriorado en los últimos años.

Pero la descentralización de la atención sanitaria tampoco está exenta de retos. Por un lado, los proveedores de servicios de salud deben velar por el correcto cumplimiento de los tratamientos, por lo que es de vital importancia establecer soluciones de control respetuosas con la intimidad de los pacientes. Ello puede dar lugar a nuevos modelos de negocio en los que se incentive de forma proactiva la buena praxis de los pacientes. Por otro lado, no podemos infravalorar los retos logísticos inherentes al suministro de medicamentos a domicilio, la cesión de equipamiento médico o bien la realización de visitas presenciales a domicilio. Descentralizar el sistema de salud no solo significa conectar a médicos y pacientes de forma remota: esta transformación abarca todos los aspectos de la cadena de valor.

Hoy encontramos diferentes fórmulas de diagnóstico remoto, con aplicaciones que van de la medicina general hasta dolencias sofisticadas. Además, las nuevas formas de terapia digital han demostrado ser capaces de aumentar la calidad del servicio y al mismo tiempo contribuir a aliviar la escasez de recursos.

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Las cinco tendencias que marcan el futuro de la salud

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El 72,4% de la población española manifiesta una mayor preocupación por su salud desde que comenzó la pandemia. Ante el crecimiento tanto del interés como de la necesidad real, resulta indispensable poner la salud y el bienestar en el centro de cualquier estrategia -individual, familiar, social o empresarial-.

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Pgiam/iStock via Getty Images

Investment Thesis

The trade-commission-free automation progress achieved by markets in serving a continuing flow of individual investor internet-order small trades makes it necessary for Market-Makers to have capital at risk while handling the irregular huge-value "institutional" transactions. They protect their at-risk capital endangerment by hedging actions which reflects the coming price range expectations of the stocks involved - virtually all of the actively-traded issues.

The pricing and structure of such hedges reveal the coming-price expectations of both the MM protection-buyers and that of the MM industry protection-sellers.

Our selection of ZIM Integrated Shipping Services Ltd. (NYSE:ZIM) is prompted by its currently-attractive stock pricing coupled with a large following of Seeking Alpha readers.

Description of Subject Company

"ZIM Integrated Shipping Services Ltd., together with its subsidiaries, provides container shipping and related services in Israel and internationally. It provides door-to-door and port-to-port transportation services for various types of customers, including end-users, consolidators, and freight forwarders. The company also offers ZIMonitor, a premium reefer cargo tracking service. As of December 31, 2021, it operated a fleet of 118 vessels, which included 110 container vessels and 8 vehicle transport vessels, of which four vessels were owned by it and 114 vessels are chartered-in; and network of 70 weekly lines. The company was incorporated in 1945 and is headquartered in Haifa, Israel."

Source: Yahoo Finance

Risk~Reward Comparisons of Portfolio Investment Candidates
Figure 1

(used with prior permission)

The tradeoffs here are between near-term upside price gains (green horizontal scale) seen worth protecting against by Market-makers with short positions in each of the stocks, and the prior actual price drawdowns experienced during holdings of those stocks (red vertical scale). Both scales are of percent change from zero to 25%.

The intersection of those coordinates by the numbered positions is identified by the stock symbols in the blue field to the right.

The dotted diagonal line marks the points of equal upside price change forecasts derived from Market-Maker [MM] hedging actions and the actual worst-case price drawdowns from positions that could have been taken following prior MM forecasts like today's.

Our principal interest is in ZIM at location [3]. A "market index" norm of reward~risk tradeoffs is offered by SPDR S&P500 index ETF at [1].

Those forecasts are implied by the self-protective behaviors of MMs who must usually put firm capital at temporary risk to balance buyer and seller interests in helping big-money portfolio managers make volume adjustments to multi-billion-dollar portfolios. The protective actions taken with real-money bets define daily the extent of likely expected price changes for thousands of stocks and ETFs.

This map is a good starting point, but it can only cover some of the investment characteristics that often should influence an investor's choice of where to put his/her capital to work. The table in Figure 2 covers the above considerations and several others.

Comparing Alternative Investments
Figure 2

(used with permission)

Column headers for Figure 2 define elements for each row stock whose symbol appears at the left in column [A]. The elements are derived or calculated separately for each stock, based on the specifics of its situation and current-day MM price-range forecasts. Data in red numerals are negative, usually undesirable to "long" holding positions. Table cells with yellow fills are of data for the stock of principal interest and of all issues at the ranking column, [R]. Pink cell fills note below-desirable content of long-position holdings. Today market-circumstances create marginal conditions for the SPDR S&P500 ETF forecast, but are not intended as a market forecast.

Readers familiar with our analysis methods may wish to skip to the next section viewing price range forecast trends for INSP.

Figure 2's purpose is to attempt universally comparable measures, stock by stock, of a) How BIG the price gain payoff may be, b) how LIKELY the payoff will be a profitable experience, c) how soon it may happen, and d) what price drawdown RISK may be encountered during its holding period.

The price-range forecast limits of columns [B] and [C] get defined by MM hedging actions to protect firm capital required to be put at risk of price changes from volume trade orders placed by big-$ "institutional" clients.

[E] measures potential upside risks for MM short positions created to fill such orders, and reward potentials for the buy-side positions so created. Prior forecasts like the present provide a history of relevant price draw-down risks for buyers. An average of the most severe ones actually encountered are in [F], during holding periods in effort to reach [E] gains. Those are where buyers are most likely to accept losses.

[H] tells what proportion of the [L] sample of prior like forecasts have earned gains by either having price reach its [B] target or be above its [D] entry cost at the end of a 3-month max-patience holding period limit. [I] gives the net gains-losses of those [L] experiences and [N] suggests how credible [E] may be compared to [I].

Further Reward~Risk tradeoffs involve using the [H] odds for gains and the 100 - H loss odds as weights for N-conditioned [E] and for [F], for a combined-return score [Q]. The typical position holding period [J] on [Q] provides a figure of merit [ fom] ranking measure [R] useful in portfolio position preferences. Figure 2 is row-ranked on [R] among candidate securities, with ZIM yellow-row identified.

Along with the candidate-specific stocks these selection considerations are provided for the averages of over 3,000 stocks for which MM price-range forecasts are available today, and 20 of the best-ranked (by fom) of those forecasts, as well as the forecast for S&P500 Index ETF (NYSEARCA: SPY) as an equity market proxy.

Recent Trends in MM Price-Range Forecasts for ZIM
Figure 3

(used with permission)

This picture is not a "technical chart" of past prices for ZIM. Instead, its vertical lines show the past 6 months of daily price range forecasts of market actions yet to come in the next few months. The only past information there is the heavy dot of the closing stock price on the day of each forecast.

That data splits the price range's opposite forecasts into upside and downside prospects. Their trends over time provide additional insights into coming potentials, and helps keep perspective on what may be coming.

The small picture at the bottom of Figure 3 is a frequency distribution of the Range Index's appearance daily during the past 2 years of daily forecasts. The Range Index [RI] tells how much the downside of the forecast range occupies of that percentage of the entire range each day, and its frequency suggests what may seem "normal" for that stock, in the expectations of its evaluators' eyes. A RI of 21, about 1/5 th of the range, leaves the other 4/5ths (79%) of the price change potential to the upside.

Here the present level is near its least frequent, lowest-cost presence, encouraging the acceptance that we are looking at a realistic evaluation for ZIM. Nearly all past RIs have been above the present RI, indicating there is more room for an even more positive outlook.

The one reasonable caution for ZIM is that we have only slightly more than one 252-market-day year to produce prior forecast histories, when our standard is to accept only those stocks with market maturities of at least 3 years, or 750+ market days. The initial bullet-point comments of this article reinforce the essential nature of the Maritime Shipping industry to world commercial activities in a post-pandemic period with warfare disturbances. ZIM is evidently an effective competitor among alternative investment candidates for positions in a wealth-building portfolio focused on growth by capital gain holdings. You may feel differently and there are other choices with more history and smaller gain records.

Investment Candidates' Prior Profitability Prospect
Figure 4

(used with permission)

This comparison map uses an orientation similar to that of Figure 1, where the more desirable locations are down and to the right. Instead of just price direction, the questions are more qualitative: "how big" and "how likely" are price change expectations now?

Our primary interest is in ZIM's qualitative performance, particularly relative to alternative investment candidate choices. Here ZIM is at location [4], the intersection of horizontal and vertical scales of +24% gain and +100% assurance (ODDS) of a "win".

Golar LNG Limited (GLNG) at [8] offers a similar size payoff based on a limited number of examples, but over a full 5-year history. No perfect alternative is available, with Eagle Bulk Shipping (EGLE) providing a slower rate of gain due to longer holding periods, but with competitive odds of profitable outcomes.

As a market norm, SPY is at location [6] with a +6% payoff and a 75% assurance of profitability. ZIM tends to dominate all the return payoffs in this comparison.

Conclusion

Among these alternative investments explicitly compared, ZIM Integrated Shipping Services Ltd. appears to be a logical buy preference now for investors seeking near-term capital gain.

Question: Is this form of comparisons more or less useful to you in your investment choice selections than one geared to industry economics or competitive actions?

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Shipping Investments: ZIM, Golar LNG, Eagle Bulk, Star Bulk, Matson, Others (NYSE:ZIM)

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The trade-commission-free automation progress achieved by markets in serving a continuing flow of individual investor internet-order small trades makes it necessary for Market-Makers to have capital at risk while handling the irregular huge-value "institutional" transactions. They protect their at-risk capital endangerment by hedging actions which reflects the coming price range expectations of the stocks involved - virtually all of the actively-traded issues.

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0:00 / 29:01•Watch full video

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SVOL: Simplify Volatility Premium ETF: UNIQUE 15%+ Dividend Yield | Make Money off FEAR Itself (VIX)

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As the world rushes to stop burning fossil fuels and implement more renewable sources of power, there's a lot of hype around solar and wind. While they're comparatively easier to get up and running, these energy sources don't have nearly the same output capacity-or consistency-as hydropower. China is investing big in all of the above, most recently announcing construction of a massive dam on the Yellow River in Qinghai Province, which is located on the Tibetan plateau.

Once complete, Yangqu Dam is predicted to generate almost five billion kilowatt hours of electricity per year-that's half a billion more than Arizona's Hoover Dam -and plans are for it to be built entirely by robots, without any human labor.

A paper published last month in the Journal of Tsinghua University details a "3D printing system" that uses AI and robots for filling large construction projects. Based on the description, though, it's a bit of a misnomer to equate the system with 3D printing; while smaller construction projects like 3D printed houses use a printer that spits out a concrete mixture layer by layer, there's no mention of a printer in this project description.

Rather, a construction scheduling system evaluates a digital design model of the project section by section, calculating how much filling material is needed, then has a robot gather the material and transport it to its intended section. The robots do "intelligent paving and rolling" to finish a construction layer, then send feedback to the scheduling system. It's 3D printing in that a very tall structure will go up layer by layer using an automated process, but mostly, it's not 3D printing because there's not a printer.

The project isn't being undertaken from scratch-that is, there's already a dam at this location, which was built starting in 2010, along with a 1200-megawatt hydropower station. The existing facility is being expanded.

Human workers will be needed to mine some of the construction materials, but the project's heavy automation ideally means it will be completed faster and with fewer errors than human labor would allow; machines can work 12-hour shifts, or even around the clock. Plans are for the first section to become operational in 2024, and the entire project to be up and running the following year.

For comparison's sake, the Hoover Dam is 726 feet tall and took 5 years to build. And as it turns out, building a dam is treacherous work: 96 people died during construction of the Hoover Dam from causes like drowning, being struck by falling construction materials, or being injured in blasts to clear out natural rock. Another plus of machine labor, then, is that human safety won't be endangered.

The Chinese are no strangers to building massive dams; Three Gorges Dam on the Yangtze River in Hubei Province is the biggest hydroelectric power plant in the world. At 594 feet tall, it's almost exactly the same height as Yangqu will be once complete, but it's much wider.

China is aiming to reach carbon neutrality by 2060. To have any chance of meeting that target they're going to need a lot more than solar panels and wind turbines; this is one of several dams being built in the country (to add to the many thousand already there), and they're going all-in on nuclear too.

In China as in the rest of the world, the renewable energy transition is slowly but surely underway. The Yangqu Dam is highly ambitious, but if successful, it won't be the first time China proves naysayers wrong.
Image Credit: Wikimedia Commons

Vanessa is senior editor of Singularity Hub. She's interested in biotechnology and genetic engineering, the nitty-gritty of the renewable energy transition, the roles technology and science play in geopolitics and international development, and countless other topics.

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A 590-Foot-Tall Dam in China Will Be Built Entirely by Robots

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As the world rushes to stop burning fossil fuels and implement more renewable sources of power, there's a lot of hype around solar and wind. While they're comparatively easier to get up and running, these energy sources don't have nearly the same output capacity-or consistency-as hydropower.

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Invertir en dividendos: ¿con fondos o directamente con acciones?

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Los dividendos son uno de los recursos favoritos de los inversores en momentos de volatilidad de los mercados. El pago de dividendos es la forma más habitual para repartir beneficios entre los accionistas de una empresa cotizada.

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MAGNIFIER/iStock via Getty Images

Investing In Shipping Company Stock In 2022

Asia-U.S. shipping indexes are down approximately 20% to 30% from their peaks due to lockdowns in China and port congestion. There's a ton of pent-up demand for dry bulk and maritime shipping, and consumers are absorbing price increases given the high amounts of inventory at ports.

Because supply chain disruptions and the backlog have to work themselves out on the heels of the limited supply of vessels, we believe shipping stocks are a buying opportunity.

The global shipping crisis will take a while to work out, primarily when the world's second-largest economy, China, whose abysmal healthcare is resulting in extended lockdowns. While delivery delays for ocean freight have substantially increased since the pandemic, continued lockdowns in Asia as countries cannot support the outbreaks, and the backlogs and shipping demand will continue to serve as core growth drivers for shipping companies going forward. Hence, this growth, combined with incredible valuation frameworks, provide an excellent opportunity to buy these stocks.
Shipping Companies Are Setting Sail for A Rally
Shipping companies are price makers. Not only are GOGL, ZIM, and SBLK deep value stocks with excellent growth potential, the current environment should increase their revenue. Shipping companies can pass along costs to consumers, and the companies in need of goods will pay whatever it costs, including higher fuel prices, to receive their goods. It's also why inflation will persist at high levels because the logjam will take a long time to work out, and therefore, prices will stay high. The Fed cannot fix supply chain disruptions prompted by a pandemic-related shutdown in China, the world's second-largest economy, or resolve the supply chain disruptions from the war in Ukraine. Federal Reserve monetary policy and U.S. interest rates will do nothing to tame these issues. While the U.S. may see domestic demand curtailed due to a decrease in consumer spending, people still have to eat. When you have shortages of grain and other non-agricultural products, it's going to take a long time to work that through the system, and therefore, shipping stocks stand to see superior growth potential in the future compared to average stocks.

"The change in Covid prevention policies in different cities has imposed an extraordinarily severe impact on logistics," said Cui Dongshu, Secretary-General of the China Passenger Car Association. According to Bloomberg Shipping data, 230 cargo carriers off the coast of China are gridlocked, an increase of 35% from last year, with imported containers in Shanghai waiting an average of 12.1 days for pickup. And while a wave of imports is creating more backlogs in ports around Europe and the United States, inter shipping and delivery logistics are top of mind for nations searching for faster routes to offload containers and store inventory. While these "issues" may seem problematic, the three stocks we're mentioning in this article are set to benefit, especially in this inflationary environment.

Golden Ocean Group Limited (NASDAQ:GOGL)

Market Capitalization: $2.77B

Quant Rating: Strong Buy

Quant Sector Ranking (as of 5/17): 6 out of 583

Quant Industry Ranking (as of 5/17): 4 out of 25

Headquartered in Bermuda, dry bulk shipping company Golden Ocean Group Limited ( GOGL) operates and transports vessels that contain bulk commodities like ores, coal, grains, and fertilizers. On a longer-term upward trend, GOGL has stellar momentum, giving investors a reason to continue actively purchasing shares, which is driving the stock's price higher. Year-to-date, the stock is +56.12%. The company's quarterly price performance below shows that GOGL outperforms its sector peers by two, three, and four times. In addition to excellent momentum, GOGL comes at a severe discount.

GOGL Valuation

This stock has an incredible valuation framework. With an A+ valuation grade, GOGL's current P/E ratio of 5.97x is 64% below its sector peers. On a forward P/E basis, it also trades at a 75% discount to its 5-year historical average. The stock also showcases an excellent EV/EBITDA (TTM) of 6.31x and nearly 40% below its peers with a Price/Book ( TTM) ratio of 1.53x.

If the company's price point is not enough to convince investors, let's look at Golden Ocean Group's growth and profitability.

GOGL Growth And Profitability

Golden Ocean is experiencing tremendous growth, with tailwinds from increasing freight rates and expectations of dry bulk fleet demand outpacing its supply. For four consecutive quarters, GOGL has beat both top-and bottom-line earnings, with the most recent resulting in 4 FY1 Up revisions and an A- Revisions Grade. EPS of $0.98 beat by $0.15, and revenue of $312.87M beat by $15.34M, an increase of 148.69% year-over-year.

"We recorded an EBITDA just above $240 million, which translated into a net income of $204 million or $1.02 per share. This is the best quarterly result in the history of Golden Ocean...Iron ore prices are firming, demand from plants is also supporting while the energy crisis means demand for coal remains elevated. So, we remain very bullish for what lies ahead...we continue to pay out a significant portion of our net profit in dividend and that the supply and demand fundamentals remain in place for a sustained period of profitable markets" - Ulrik Andersen, GOGL CEO.

With its robust balance sheet and severely discounted valuation, GOGL is sitting pretty. Continued dry bulk demand and delivery logistics exceed supplies, benefiting shipping companies. Because Golden Ocean is a major coal and iron ore shipper, distant countries like South Africa and Australia, feeling the adverse effects of port jams, are in need. Those nations moving away from Russian supplies are also creating outsourcing opportunities for Golden Ocean's Capesize and Panamax fleets, reporting rates between $29,635 and $39,304 per day. In the words of fellow Seeking Alpha Contributor Pearl Gray Equity Research:

"This stock is a tremendously well-placed value play. Golden Ocean illustrates tremendous efficiency with its Panamax and Capsize vessels carrying essential dry bulk in the coal and iron ore space. I think Golden Ocean's gross margins illustrate its robust market position via economies of scale, which allows the stock to be a potential "best-in-class" pick in the current inflationary environment."

We believe our next stock pick is in a great position as well.

ZIM Integrated Shipping Services Ltd. ()

Market Capitalization: $7.62B

Quant Rating: Strong Buy

Quant Sector Ranking (as of 5/17): 7 out of 583

Quant Industry Ranking (as of 5/17): 5 out of 25

Like GOGL, ZIM Integrated Shipping Services Ltd. ( ZIM) is on a longer-term uptrend with a comparative strength that outperforms the S&P 500 by more than 80% over the last year.

With its subsidiaries, ZIM provides container shipping and port-to-port transportation services, which bodes well for this company, given that container shipping rates are sky-high, with global spot rates more than quadruple pre-pandemic levels. And while rates are beginning to come down, ZIM continues to have stellar A+ Momentum, with the stock's quarterly price performance substantially outperforming its peers.

The stock is up 18% YTD and is trading below $70 per share. With a valuation in single-digit multiples, a Forward A+ P/E ratio of 1.8x, nearly 90% better than its sector peers, PEG GAAP (TTM) -99.34%, investors better add this stock at its current valuation fast before this ship sails!

ZIM Growth And Profitability

In addition to the tailwinds outlined above, ZIM has stellar growth and profitability, translating into an excellent dividend yield to keep shareholders happy. Following another stellar earnings announcement, ZIM declared a $17/share dividend plus November's $2.50/share dividend from November 2021, for a total annual dividend of $19.50.

After reporting record full-year and Q4 2021 results, Yair Seroussi, ZIM Board of Directors Chairman stated,

"2021 was a transformative year for ZIM. We kicked off the year with listing our shares on the world's leading capital market in New York and have not looked back since. The many accomplishments of the past year and our remarkable performance, both financially and operationally, are the direct outcome of the unrivaled execution of our talented and dedicated management team and employees around the world, supported by the Board. In 2021, we took important steps to best position ZIM for long-term enduring growth and value creation for our shareholders. We remain focused on maintaining our strong execution and agility in 2022 and beyond, while advancing the highest standards of corporate governance and responsibility."

Consistent with ZIM's focus on profitability, shareholder's equity increased to $4.6B, the full-year 2021 EBITDA margins were 61%, and the company continues to outperform freightliners' industry averages. In addition to stellar profitability, the company's EPS of $14.16 beat by $0.96 and revenue of $3.47B beat by $101.23M. With significant cash on hand and investment into equipment to continue its best-in-class growth, ZIM is a top shipping stock to keep in mind, along with our next carrier, Star Bulk.

Star Bulk Carriers Corp. (NASDAQ:SBLK)

Market Capitalization: $3.07B

Quant Rating: Strong Buy

Quant Sector Ranking (as of 5/17): 9 out of 583

Quant Industry Ranking (as of 5/17): 7 out of 25

Star Bulk Carriers Corp. ( SBLK), the global cargo shipping company that transports bulk materials including iron ore, coal, grains, fertilizers, and steel products, is our final top shipping stock to consider amid the global shipping crisis. Shanghai, the world's busiest port, was recently shut down, creating a logistical traffic jam of containers and ships, creating bottlenecks everywhere, and ProShares CEO Michael Sapir says it best,

"The pandemic didn't just highlight the crisis facing the global supply chain, it identified a ripe opportunity to invest in the companies striving to provide real solutions and embrace new technologies that may revolutionize global trade."

There's no denying why this stock is rated a strong buy. And Star Bulkers and our other shipping stocks are ripe opportunities, as evidenced by their fundamentals, quant ratings, and factor grades. Check out SBLK's Factor Grades and quant ratings below, which characterize the stock's value, growth, profitability, momentum, and EPS revisions compared to the same metrics for other stocks in its sector.

This stock comes at an extreme discount, trading at $31/share, the stock's forward P/E ratio is 4.7x, a -70% difference to the sector, and its current PEG ratio is -99.81%. With continued A+ momentum quarterly, the stock is significantly outperforming its peers. When comparing six-month, nine-month, and one-year price performance, SBLK is two and three times better performing than its peers.

If the charts and figures above do not have you seeing green yet with this stock's stellar valuation and momentum, let's look at its growth and profitability.

SBLK Growth And Profitability

Over the last 60 days, SBLK has experienced an earnings increase of 2.3%. As we look at the company's most recent earnings, it's no surprise that Star Bulk beat estimates for both top and bottom lines, resulting in six FY1 Up analyst revisions. EPS of $2.96 beat by $0.44, and revenue of $427.64M nearly beat by 200%! SBLK has experienced the evolution of adjusted net income and adjusted EBITDA, the latter growing more than 10x over the last eight quarters to demonstrate its substantial operating leverage.

Following its recent Q4 earnings beat, SBLK increased its dividend by 60%, which prompted its stock to rally +6.6% post-market. Star Bulk has a solid 25.80% forward dividend yield, which is substantial compared to the industry average of 0.6%. As fellow Seeking Alpha Contributor SM Investor writes, "According to the iron ore demand, freight rates, and charter rates, Star Bulk is ready to stay profitable in the second quarter of 2022."

With continued demand for shipping and a backlog of goods jammed in ports, we expect that our shipping stocks will continue their bullish trend. The price of commodities, charter rates, iron ore, fertilizers, and grains continue to rally, and GOGL, ZIM, and SBLK are ready to stay profitable through 2022. These stocks are strong buys.

A Win-Win For Value And Growth Investors

Value stocks are excellent buys, and all three of our picks, GOGL, ZIM, and SBLK, are very attractive on value, growth, and profitability metrics. All three stocks possess forward revenue growth above 24% and EBITDA growth above 46%. Even with geopolitical circumstances that include lockdowns at the world's largest ports, our stocks benefit from tailwinds, including high demand and price competition that other industries are not experiencing, making them strong buys.

Where many investors are dedicated to finding discounted stocks that trade at lower prices relative to fundamentals like earnings, sales, cash, and book values, other investors seek growth opportunities. If you can find stocks representing both value and growth, it's a win-win, which is why we are recommending these shipping stocks. If you're interested in other value or growth stocks, feel free to search our Top Value Stocks or Top Growth Stocks for ideas. Our tools help to ensure your portfolio contains strong investments that stand to increase over time.

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Asia-U.S. shipping indexes are down approximately 20% to 30% from their peaks due to lockdowns in China and port congestion. There's a ton of pent-up demand for dry bulk and maritime shipping, and consumers are absorbing price increases given the high amounts of inventory at ports.

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After nearly a year of hearing and reading about challenges due to demand outrunning supply, there are indications that supply is catching up. Or perhaps demand is slowing due to inflation. The impact of recent COVID-19 lockdowns in China also has slowed demand in Shanghai for export vessels.

Two years ago, the Freightos Baltic Index (the spot market price for 40-foot shipping containers, or FEUs) was just under $1,500. The rate today is just over $8,200, but that is down from a peak price of $11,109 in early September of last year. Many shippers and industry analysts expect a sharp reduction in rates in the second half of this year.

U.S. retailers also are pulling their orders forward, stocking up now on expectations that inflation will continue to push their costs and the prices they charge their customers higher. There is also some uncertainty related to labor negotiations begun last week for workers at 29 ports on the west coast, including the country's two largest in Long Beach and Los Angeles. The existing bargaining agreement expires July 1.

For investors, shipping companies that are now paying fabulous dividends may be faced with a choice of cutting those dividends or funding them by borrowing. The speed with which shipping companies can raise, lower, eliminate or initiate dividend payments is faster than in most other industries. According to one study published last October, the shipping industry's speed of dividend adjustment "increases in recession states both in the macroeconomic and the shipping environment. The increased dividend flexibility of maritime companies appears to be in line [with] the sector's high-risk profile. It seems that as profitability and external financing opportunities deteriorate during recession states, maritime companies adjust dividends more flexibly to secure sufficient liquidity and investment capital."

Here is a look at seven maritime shipping companies that currently pay dividends of at least 9%.

ZIM Shipping

Zim Integrated Shipping Services Ltd. ( NYSE: ZIM) is an international container shipping that announced a dividend of $17.00 in early March and paid the dividend on April 4. The company's current dividend yield is 26.75%.

Net income for the last 12 months totaled $4.64 billion. Free cash flow per share for the period was $41.47, and the total return for the past year was about 135%.

Through the March quarter, the company had paid out common dividends of $299.4 million. The April dividend payment alone totaled about $2.04 billion. The company's payout ratio for the past year is about 6.5%.

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7 Shipping Companies Now Delivering Huge Dividends

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After nearly a year of hearing and reading about challenges due to demand outrunning supply, there are indications that supply is catching up. Or perhaps demand is slowing due to inflation. The impact of recent COVID-19 lockdowns in China also has slowed demand in Shanghai for export vessels.

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RichVintage/E+ via Getty Images

If you're not familiar with the Global X Nasdaq 100 Covered Call ETF (NASDAQ: QYLD), its distribution yield varies. Yes, you read the title correctly; its current yield is 13.18%. QYLD and the other Global X Covered Call funds have been debated on Seeking Alpha, and some investors love them while others make the case to stay away. One of the largest bear cases about how QYLD would perform in a bear market has now been debunked, but this fund isn't correct for every investor or investment style. I will go through the math and why QYLD is an interesting fund for income investors, but please be honest with your expectations from QYLD.

I want to be clear, if you're not seeking an income-generating vehicle, QYLD is not an investment that will satisfy your investment strategy. QYLD has become a very popular fund among income investors, but if capital appreciation is what your seeking, QYLD will only take you so far in the traditional sense. While nothing is impossible, there is a very strong probability that QYLD will not outperform an S&P 500 index fund or a total market fund on a per-share basis.

Since my first article on QYLD in August of 2021, QYLD's net assets have grown from $3.81 billion to $6.62 billion. Since that article was published on 8/8/21, the Invesco QQQ ETF ( QQQ) has declined by -17.3%, falling from $368.05 to $301.94. QYLD's net assets have not increased by $2.81 billion (73.8%) because of capital appreciation in the markets. More investors are allocating capital to QYLD as the monthly distributions continue to be paid, and its yield is consistently in the double digits. Investors have been in a yield-starved environment where there have been limited opportunities to generate large amounts of yield. While QYLD isn't a perfect investment, what really is? The facts are that QYLD delivers on its main objective of generating large amounts of income for its investors and that QYLD hasn't been the train wreck many have argued it would be during a bear market.

We're living in a bear market, not a correction, and QYLD is holding up better than the Nasdaq

There is no official declining percentage to classify a bear market. Many investment outlets consider this the start of a bear market when the markets decline by -20% or more from recent highs amid widespread pessimism and negative investor sentiment. Today the Nasdaq aligns with the characteristics of a bear market as the Nasdaq has declined by -25.44% YTD, and investor sentiment has been more negative than positive in 2022. External factors, including the war in Ukraine, inflation rising over 8%, gas prices at the highest levels in decades, and rising interest rates, have all negatively impacted the markets and investor sentiment in 2022 compared to 2021. The Invesco QQQ ETF ( QQQ) tracks the Nasdaq 100, and it's declined by -24.83% YTD, while the SPDR S&P 500 Trust ETF ( SPY) has declined by -15.91% YTD placing the S&P 500 close to a bear market as well.

One of the biggest criticisms of QYLD is that we haven't seen how it would hold up in a bear market. Several bears indicated that the pandemic crash didn't count because of the V shared recovery and that it wasn't actually a bear market. Many cited that the mechanics behind QYLD weren't optimal for volatility or declining markets, and we would see QYLD suffer more than its relative index in prolonged periods of adversity.

In 2022 the major indexes are all down, and many investors have seen nothing but red flooding their portfolios. Growth companies have suffered multiple compressions as share prices have been slashed by 50% or more. Big tech has all declined, and Amazon ( AMZN) has lost -33.65% of its value YTD. This is the perfect environment to see how QYLD will hold up during a bear market since the Nasdaq is actually in one.

YTD QYLD has declined by -16.24%, while QQQ has declined an additional -8.59% as it's down -24.83% in 2022. What's more interesting is that QYLD is within 0.5% of how far SPY has declined. QYLD tracks the Nasdaq 100 which is represented by QQQ and has held up significantly better from a capital preservation standpoint. Nobody wants to live through a declining market, but corrections and bear markets are part of long-term investing. While 2022 has been horrible for returns, it's validated the bull case for QYLD from a capital preservation standpoint as it hasn't declined more than the Nasdaq or QQQ. Nobody wants to be down by -16.24%, but it's better than 24.83%, even if the upside is capped.

QYLD delivers a continuous income stream that's providing double-digit yield in 2022

Since QYLD's inception at the end of 2013, it hasn't missed a monthly distribution to its investors. QYLD generates its distributable income by selling monthly at the money covered calls against its respective index which is backed by the holdings within its fund. QYLD isn't beholden to dividend farming, trading, or capital appreciation to generate its distributable income. If companies slash or cut their dividends, QYLD's distribution isn't impacted. These are some of the reasons why income investors have parked capital into QYLD.

Income investing is much different than looking for investments for capital appreciation. Income investors have a primary goal of generating a stream of income regardless of if they are taking the income as cash to live on or reinvesting it to grow their future income stream. Since QYLD is an income-producing vehicle, I want to treat it as one and see if it lives up to its reputation.

Since its inception, I have gone through QYLD's monthly distributions and created an annual grid. I will create several scenarios to illustrate how QYLD would have performed as an income investment.

Scenario 1: Income since inception

QYLD started trading at $25 per share at the end of 2013 and paid its first distribution in January of 2014. Hypothetically let's speculate that an investor purchased 100 shares at its inception for $2,500. You're 100 shares would be worth $1,867 today, and your investment would have declined by -25.32%. Since January 2014, you would have collected 100 monthly distributions from QYLD amounting to $1,990. Today, you would still have the 100 shares worth $1,867, which is currently paying $2.46 per share and collected $1,990 in distributions. Your $2,500 investment would have generated a distribution yield of 79.60% over the years. Overall your 100 shares and the distributions would equal $3,857, and even though your current investment is only worth $1,867, you are ahead of the game by $1,357, which is a 54.28% return.

It's all perspective and how you look at things. When you own a business, you don't have websites or people telling you every second what the business is worth. QYLD will fluctuate with the markets, but it's an income-producing investment, and each share since inception has produced $19.90 worth of income. In 2-3 years, each share will have produced $25 worth of distributable income, which will be a 100% yield on your investment. The spread between what your shares are worth today vs. what you bought them for will forever change. It will be better when markets are up and worse when markets are down. The bottom line is regardless of what these shares are worth, the income continues to roll in, and since its inception, QYLD has been a fantastic income-producing investment. Since its inception, QYLD has had an annual yield of 9.48% (79.6% yield on investment / 8.4 years of distributions), which has outpaced inflation every year it's been available.

Scenario 2: Income throughout 2020

2020 was one of the scariest times because, at the height of the pandemic, nobody knew what was happening. The country shut down, and companies were cutting or reducing their dividends. On 1/2/2020, QYLD was trading at $23.74. If you had purchased 100 shares of QYLD it would have cost $2,374. In 2020 QYLD delivered $2.54 per share in distributions, with its lowest monthly distribution coming in March of $0.18. If you had purchased 100 shares on 1/2/2020, it would have cost $2,374 and generated $254 in annual distributions. This would have been a 10.74% yield on investment throughout 2020. At the end of 2020, shares of QYLD were trading at $22.80, so you would have seen your shares decline by $94 or -3.96%. Between your 100 shares at $22.80 and the $254 in distributions, you would have had $2,534, which is $1.60 more than your original investment or 6.74%.

Scenario 3: Income since 2020

What if you didn't sell and still had the shares from scenario 2 that you purchased on 1/2/2020 for $2,374? Your 100 shares would be worth $1,867, which is a decline of -21.36%. Your shares would have generated $254 in distributions in 2020, $2.85 in 2021, and $0.82 for the first 4 months in 2022, for a total of $6.22 in total distributions. Your initial investment would have generated a 26.18% yield which would be 10.91% annualized over the timeframe (26.18% / 2.4 years). Overall your shares are worth $1,867, and the $622 in distributions would leave you with $2,489 on your investment which is $115 (4.82%) larger than your initial investment of $2,374. Your shares have declined in the downturn, but the distributions have made up for more than the deprecation of capital while still producing a 13.18% forward yield.

Conclusion

QYLD is not for everyone, and unless you're an income investor, it doesn't make a lot of sense. From an income standpoint, QYLD is an incredible investment. Since its inception, QYLD has had an annualized yield of 9.48% and has outpaced inflation yearly. The major bear thesis has been debunked as QYLD has declined less than the Nasdaq and QQQ during the bear market. QYLD has never missed a monthly distribution, and since its inception, each share has generated $19.90 in income through 100 monthly distributions. I plan to add to my position in QYLD for years to come and reinvest each distribution to increase my income stream. QYLD isn't a yield trap, and as long as you're okay with the fact that shares of QYLD will follow the markets, its monthly income should be quite enticing for any income investor.

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QYLD ETF: 13% Yield, Why Income Investors Love It (NASDAQ:QYLD)

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If you're not familiar with the Global X Nasdaq 100 Covered Call ETF (NASDAQ: QYLD), its distribution yield varies. Yes, you read the title correctly; its current yield is 13.18%. QYLD and the other Global X Covered Call funds have been debated on Seeking Alpha, and some investors love them while others make the case to stay away.

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In this article, we discuss 10 undervalued dividend stocks with over 10% yield. If you want to look at more high-yield undervalued stocks, click 5 Undervalued Dividend Stocks with Over 10% Yield.

The prospects for global dividend growth brightened in 2021, and experts projected dividend payments for the year to reach $1.4 trillion. In 2022, the macroeconomic uncertainties threw the stock market in a turbulent bind, with major driving forces being the Fed's tightened rising rates policy, the Russia-Ukraine war, the onslaught of COVID-19 in China and consequent broken global supply chains, the raging inflation, and ongoing fears of a recession.

Goldman Sachs dividends in 2022 to grow by 10%, with the energy sector leading the charge as these companies were the biggest gainers from high oil prices and resultantly had heavy influx of cash. In this uncertain stock market, investors have massively disposed of growth stocks and are shifting to value plays, since they have historically performed better during volatile macro backdrops.

Value stocks paired with high dividend yields are some of the most feasible hedges against inflation. While the most well-known dividend names include Johnson & Johnson (NYSE: JNJ), The Coca-Cola Company (NYSE: KO), and Altria Group, Inc. (NYSE: MO), we discuss undervalued dividend stocks with over 10% yield in this article.
Our Methodology
We selected securities with a P/E ratio of under 15, with a dividend yield of more than 10% as of May 13. We have mentioned metrics like the latest dividend payouts, number of hedge fund holders, Q1 earnings, and analyst ratings for the stocks, where available.

Data from more than 900 elite hedge funds tracked by Insider Monkey in Q4 2021 was used to identify the number of hedge funds that hold stakes in each company.

Undervalued Dividend Stocks with Over 10% Yield

10. AllianceBernstein Holding L.P. (NYSE:AB)
Dividend Yield as of May 13: 12.53% Number of Hedge Fund Holders: 5 P/E Ratio as of May 13: 9.73
AllianceBernstein Holding L.P. (NYSE:AB) is a New York-based investment manager that employs long/short investment strategies, investing primarily in the global public equity, fixed income, and alternative investment markets. AllianceBernstein Holding L.P. (NYSE:AB)'s dividend yield on May 13 came in at 12.53%.

On May 5, AllianceBernstein Holding L.P. (NYSE:AB) declared a $0.90 per share quarterly dividend. The dividend is payable on May 26, to shareholders of the company as of May 9. AllianceBernstein Holding L.P. (NYSE:AB) on April 29 posted earnings per share of $0.90 for Q1 2022, beating consensus estimates by $0.06. The EPS also increased from $0.81 in the same quarter last year. The company announced net inflows of $11.4 billion in Q1, representing 6% annualized organic growth.

For a purchase price of $750 million, AllianceBernstein Holding L.P. (NYSE:AB) announced on March 17 that it will acquire CarVal Investors. CarVal is a global private alternative investment manager, with about $14.3 billion in assets under management. The firm invests in opportunistic and distressed credit, renewable energy infrastructure, specialty finance, and transportation. Adding CarVal to its operations enhances AllianceBernstein Holding L.P. (NYSE:AB)'s Private Alternatives platform. AB's investment expertise in opportunistic and private credit can now expand to North America, Europe, Latin America, and Asia.

According to Insider Monkey's fourth quarter database, 5 hedge funds were bullish on AllianceBernstein Holding L.P. (NYSE:AB), with combined stakes worth $32.3 million. Peter Rathjens, Bruce Clarke, and John Campbell's Arrowstreet Capital is the biggest shareholder of the company, with 285,457 shares valued at almost $14 million.

In addition to Johnson & Johnson (NYSE:JNJ), The Coca-Cola Company (NYSE:KO), and Altria Group, Inc. (NYSE:MO), AllianceBernstein Holding L.P. (NYSE:AB) is one of the notable income stocks on the radar of institutional investors.

9. Star Bulk Carriers Corp. (NASDAQ:SBLK)
Dividend Yield as of May 13: 26.74% Number of Hedge Fund Holders: 20 P/E Ratio as of May 13: 4.49
Star Bulk Carriers Corp. (NASDAQ:SBLK) was incorporated in 2006 and is based in Marousi, Greece. The company specializes in ocean transportation of dry bulk cargoes worldwide. Star Bulk Carriers Corp. (NASDAQ:SBLK) is a notable undervalued dividend stock to consider, with a price to earnings ratio of 4.49 and a dividend yield of 26.74% as of May 13.

On February 16, Star Bulk Carriers Corp. (NASDAQ:SBLK) declared a $2.00 per share quarterly dividend, a 60% increase from its prior dividend of $1.25. The dividend was distributed to shareholders on March 15.

Jefferies analyst Christopher Robertson on April 27 reinstated coverage of Star Bulk Carriers Corp. (NASDAQ:SBLK) with a Buy rating and a $36 price target. The analyst observed that rates across many maritime industry sub-sectors went through normal seasonal pressures during the first quarter of 2022, but rates and asset values are now rising and the Jefferies shipping index has gained about 25% year-to-date, mostly owing to recent equity performance in the dry bulk and tanker space. The analyst remains positive on supply side fundamentals of the maritime shipping group.

According to Insider Monkey's Q4 data, Star Bulk Carriers Corp. (NASDAQ:SBLK) was found in the public stock portfolios of 20 hedge funds, who collectively held stakes worth over $733 million. Howard Marks' Oaktree Capital Management is the leading shareholder of the company, with approximately 26 million shares valued at $589.2 million.

is what Massif Capital has to say about Star Bulk Carriers Corp. (NASDAQ:SBLK) in its Q3 2021 investor letter:

"We initiated one long position, one short position and exited one position during the third quarter. Our new long position was in Star Bulk Carriers (SBLK), a pure-play dry bulk operator with roughly 120 controlled vessels and 14 million tons of combined cargo capacity globally.

SBLK has one of the better management teams in the maritime shipping industry and the lowest cost structure among all dry bulk names. After announcing their new dividend policy in May, SBLK now has one of the best payout structures in shipping. The firm has paid out $0.3 and $0.7 per share in dividends for the first and second quarters of 2021. SBLK will most likely announce a dividend for the third quarter somewhere in the $1.15-$1.25 per share range, depending on movement in net working capital.

We believe the best way to look at this business is through cash generation potential and how much is returned to investors. The current equity valuation does not reflect current rates for shipping (earnings), partly because of the velocity of the move in rates and because shipping cycles turn, and it's not clear whether this is a local top or the early innings of a multi-year cycle. Our belief is the latter. Part of our catalyst is the market re-rating the stock higher once the length of the increased earnings power becomes understood. It is a relatively strong catalyst in the sense that with a strong dividend policy, we can be patient for the market to underwrite this story as the cash is either returned to us via a high dividend yield if the market is either slow or chooses not to join our side of the trade.

Our estimates suggest a time-charter equivalent rate (net profit or loss of operating a vessel daily) of at least $30,000 for SBLK in Q4, with the firm earning a potential annual average of $26,000. Our base case is that this is a strong floor going into next year, with little need to articulate much more upside. If rates hold, which we expect them to do, we could see a 20+% annual dividend next year for SBLK. If the market priced the equity such that the dividend yield was 8%, that implies a $62 stock. Today our base case target for the firm is $37 per share. This is likely conservative as we know that third-quarter rates are higher than the second quarter, and third-quarter dividends will most likely reflect that. We are cautious about diving too deep into the sensitivities to the upside with this position as we are arriving at some pretty remunerative torque using current contracted values and seemingly conservative forecasts..." ( Click here to see the full text )

8. AFC Gamma, Inc. (NASDAQ:AFCG)
Dividend Yield as of May 13: 12.28% Number of Hedge Fund Holders: 4 P/E Ratio as of May 13: 10.29
AFC Gamma, Inc. (NASDAQ:AFCG) is a Florida-based company that underwrites and invests in senior secured loans and debt securities for stable companies in the legalized cannabis industry. AFC Gamma, Inc. (NASDAQ:AFCG) is qualified to be taxed as a real estate investment trust for income tax purposes.

On May 10, AFC Gamma, Inc. (NASDAQ:AFCG) reported a Q1 non-GAAP EPS of $0.62, beating market estimates by $0.08. The net interest income of $16.9 million climbed 259.6% year-over-year, outperforming analysts' predictions by $0.71 million. AFC Gamma, Inc. (NASDAQ:AFCG)'s book value on March 31 stood at $17.04 per share, an increase of 2.6% compared to December 31, 2021.

AFC Gamma, Inc. (NASDAQ:AFCG) announced on May 2 that it has entered into a senior secured revolving credit facility worth $60 million with two FDIC-insured banks. The company can extend the facility to $100 million. This money will finance commitments under loans to AFC Gamma, Inc. (NASDAQ:AFCG)'s existing borrowers, originate commercial loans to cannabis operators that are in-line with its investment strategy, and other general corporate purposes.

AFC Gamma, Inc. (NASDAQ:AFCG) declared on March 11 a $0.55 per share quarterly dividend, a 10% increase from its earlier dividend of $0.50. The dividend was distributed to shareholders on April 15. AFC Gamma, Inc. (NASDAQ:AFCG)'s dividend yield as of May 13 stood at 12.28%.

According to Insider Monkey's Q4 data, 4 hedge funds placed long calls on AFC Gamma, Inc. (NASDAQ:AFCG), with combined stakes valued at $8.50 million. Jim Simons' Renaissance Technologies is the leading shareholder of the company, with a position worth $3.2 million.

7. Great Ajax Corp. (NYSE:AJX)
Dividend Yield as of May 13: 11.94% Number of Hedge Fund Holders: 9 P/E Ratio as of May 13: 8.38
Great Ajax Corp. (NYSE:AJX) is an American real estate investment trust managing a portfolio of residential mortgage and small balance commercial mortgage loans. Great Ajax Corp. (NYSE:AJX) declared on May 5 a $0.26 per share quarterly dividend, in line with previous. The dividend is distributable on May 31, to shareholders of the company as of May 6.

On April 26, JMP Securities analyst Trevor Cranston maintained an Outperform rating on Great Ajax Corp. (NYSE:AJX) but lowered the price target on the shares to $11 from $15 as part of his broader thesis previewing Q1 performance for the Residential Mortgage REIT sector. The analyst cited sharp moves in interest rates as Fed policy expectations "shifted dramatically" and the geopolitical instability for his price target drop.

Among the hedge funds tracked by Insider Monkey, 9 funds were long Great Ajax Corp. (NYSE:AJX) at the end of Q4 2021, with combined stakes of $17.2 million, compared to the same number of funds in Q3, holding stakes in the company valued at about $13 million. Michael Platt and William Reeves' BlueCrest Capital Mgmt is a significant shareholder of Great Ajax Corp. (NYSE:AJX), with 206,890 shares worth $5.3 million.

6. Broadmark Realty Capital Inc. (NYSE:BRMK)
Dividend Yield as of May 13: 11.43% Number of Hedge Fund Holders: 11 P/E Ratio as of May 13: 12.17
Broadmark Realty Capital Inc. (NYSE:BRMK) is a Seattle-based commercial real estate finance company that offers underwriting and funding, in addition to managing a portfolio of short-term trust loans to finance the construction, development, or investment in residential and commercial properties.

Broadmark Realty Capital Inc. (NYSE:BRMK) announced on April 18 a $0.07 per share monthly dividend, in line with previous. The dividend is payable on May 16, to shareholders of record on April 29. Broadmark Realty Capital Inc. (NYSE:BRMK)'s dividend yield of 11.43% is notably higher than the average real estate yield of 4.46%. On May 13, the stock's price to earnings ratio came in at 12.17.

Among the hedge funds tracked by Insider Monkey, 11 funds reported owning stakes in Broadmark Realty Capital Inc. (NYSE:BRMK) at the end of December 2021, with total stakes worth approximately $60 million. Thomas Steyer's Farallon Capital is the largest shareholder of the company, with 4.85 million shares valued at $45.7 million.

Like Johnson & Johnson (NYSE:JNJ), The Coca-Cola Company (NYSE:KO), and Altria Group, Inc. (NYSE:MO), elite hedge funds are flocking to Broadmark Realty Capital Inc. (NYSE:BRMK) for dividend income.
Click to continue reading and see 5 Undervalued Dividend Stocks with Over 10% Yield.
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Disclosure: None. 10 Undervalued Dividend Stocks with Over 10% Yield is originally published on Insider Monkey.

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10 Undervalued Dividend Stocks with Over 10% Yield

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In this article, we discuss 10 undervalued dividend stocks with over 10% yield. If you want to look at more high-yield undervalued stocks, click 5 Undervalued Dividend Stocks with Over 10% Yield. The prospects for global dividend growth brightened in 2021, and experts projected dividend payments for the year to reach $1.4 trillion.

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NEW YORK, May 16, 2022 (GLOBE NEWSWIRE) -- Cornerstone Strategic Value Fund, Inc. (NYSE American: CLM) (CUSIP: 21924B302) (the "Fund") announced today that the rights offering of shares of the Fund's common stock (the "Rights Offering") will be suspended until further notice.

In accordance with an undertaking made by the Fund in the Registration Statement it filed with the Securities and Exchange Commission in connection with the Rights Offering, the Fund is suspending its Rights Offering until further notice due to the Fund's net asset value having declined more than 10% from $9.01 on April 8, 2022 (the effective date of the Fund's registration statement) to $7.76 on May 13, 2022. Subscribing stockholders will be permitted to cancel their exercise of rights until such as time as the Rights Offering is resumed.

The Rights Offering will be suspended until such time as the Board of Directors of the Fund determines that market conditions and other factors make it appropriate to resume the Rights Offering. The Fund will continue to review market conditions and will make an announcement if it decides to resume the Rights Offering. There can be no assurance that the Fund will resume the Rights Offering.

This press release is not intended to and does not constitute an offer to sell or the solicitation of an offer to subscribe for or buy or an invitation to purchase or subscribe for any securities in any jurisdiction, nor shall there be any sale, issuance or transfer of securities in any jurisdiction in contravention of applicable law. The offering is subject to an effective registration statement covering the rights and shares to be issued and to other customary regulatory filings and approvals. Any rights offering conducted by the Fund will be made only by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended.

Cornerstone Strategic Value Fund, Inc. is a closed-end, diversified management investment company and is registered with the U.S. Securities & Exchange Commission ('SEC") under the Investment Company Act of 1940, as amended.

Cornerstone Strategic Value Fund, Inc. is traded on the NYSE American LLC under the trading symbol "CLM". The Fund's investment adviser is Cornerstone Advisors, LLC, which also serves as the investment adviser to another closed-end fund, Cornerstone Total Return Fund, Inc. (NYSE American: CRF). For more information regarding Cornerstone Strategic Value Fund, Inc. or Cornerstone Total Return Fund, Inc. please visit www.cornerstonestrategicvaluefund.com, and www.cornerstonetotalreturnfund.com.
Past performance is no guarantee of future performance. An investment in the Fund is subject to certain risks, including market risk. In general, shares of closed-end funds often trade at a discount from their net asset value and at the time of sale may be trading on the exchange at a price which is more or less than the original purchase price or the net asset value. An investor should carefully consider the Fund's investment objective, risks, charges and expenses. Please read the Fund's disclosure documents before investing. In addition to historical information, this release contains forward-looking statements, which may concern, among other things, domestic and foreign markets, industry and economic trends and developments and government regulation and their potential impact on the Fund's investment portfolio. These statements are subject to risks and uncertainties, including the factors set forth in the Fund's disclosure documents, filed with the U.S. Securities and Exchange Commission, and actual trends, developments and regulations in the future, and their impact on the Fund could be materially different from those projected, anticipated or implied. The Fund has no obligation to update or revise forward-looking statements.
CONTACT: Contact: (866) 668-6558

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Cornerstone Strategic Value Fund, Inc. Announces the Suspension of its Rights Offering

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NEW YORK, May 16, 2022 (GLOBE NEWSWIRE) -- Cornerstone Strategic Value Fund, Inc. (NYSE American: CLM) (CUSIP: 21924B302) (the "Fund") announced today that the rights offering of shares of the Fund's common stock (the "Rights Offering") will be suspended until further notice.

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William_Potter/iStock via Getty Images

2022 has been a very tumultuous year for financial markets. Thus far, stocks and bonds have declined dramatically, causing many popular investment strategies to fail investors' expectations. One of the clearest examples has been the rapid demise of many supposed "high-yield" investment products and assets, including junk bonds (s Global X NASDAQ 100 Covered Call ETF (NASDAQ: JNK), preferred equities ( PFF), and covered call ETFs such a enerally speaking, most high yield funds are down around 15-20% this year as the combined increase in credit risk and interest rates has dramatically lowered their discounted fair value. QYLD). G

As market volatility rises, assets that "sell" volatility, such as covered call ETFs like QYLD, have particularly significant risks. Covered call ETFs can also hemorrhage principal during choppy bear markets with large bear market rallies since they have tightly capped upside (and no downside cap). At the same time, when volatility is high and the market nears its bottom, covered call ETFs such as QYLD can deliver extreme positive returns as high option premiums (i.e., a high VIX index) cause covered call yields to soar. Most often, these high option premiums can partially offset downside risk. Indeed, QYLD materially outperformed the Nasdaq 100 ETF ( QQQ) during the bear market. See below:

Data by YCharts

Since the Nasdaq 100 peaked around last November, QYLD's total losses (after dividends) have been around 12%, while the Nasdaq's is closer to 22%. While this outperformance trend may continue, covered call ETFs can be tricky and have far less stable dividends than other high-yield assets such as corporate bonds and preferred equities. In my view, many investors may not understand these mechanics and can find themselves investing in unsuitable assets or doing so at a less proper time. As market volatility rises, QYLD could deliver even more significant outperformance than the Nasdaq 100, particularly once the market reaches its final bottom.

The Nasdaq 100 Is Likely Still Overpriced

QYLD owns the Nasdaq 100 index with direct stock ownership of each company, such as Apple ( AAPL) and Microsoft ( MSFT). The top risks facing the fund are the same as those facing other Nasdaq 100 funds ( QQQ). This includes the fact that it is highly concentrated in a few giant technology companies, with the top four firms (Apple, Microsoft, Alphabet, and Tesla) controlling around 40% of the index. Given these firms generally have high valuations and have been declining of late, the Nasdaq 100 is not a very safe index. Although less expensive than in the recent past, the Nasdaq 100 still carries a higher weighted-average "P/E" ratio of ~26X.

Additionally, most larger technology firms have seen their revenue growth slow dramatically over the past year and have been having labor issues regarding remote work and high living costs around technology hubs. Even more, with China still in extreme despotic lockdowns, technology firms' high dependence on China is a significant short-term (and potentially long-term) risk factor to earnings as many Chinese factories may be seeing immense production stalls today. That issue and general supply chain issues, not to mention growing social media backlash, significantly increase risks in Nasdaq 100 stocks today.

In my view, although the Nasdaq 100 is "cheaper" than it was in the past, the high potential for long-term declines in many "Big Tech" firms' earnings means the Nasdaq 100 is still overpriced. While the Nasdaq 100 has declined more than most, rising interest rates may also contribute to excess declines, particularly if growth outlooks decline. Overall, I believe the Nasdaq 100 may decrease much more. Although QYLD has some cushioning, I do not think option premiums are high enough to offset the many downside risk factors facing mega-cap technology companies today.

How Much "Cushion" Does QYLD Have?

QYLD offers such risk protection via dividends through its call option sales. The ETF periodically sells at-the-money short-term call options on the Nasdaq 100 index. Doing so "caps" the upside potential of the fund, generating a variable premium instead. Essentially, QYLD is acting as an "upside risk" insurer. Since high downside risk also means high upside risk (for short sellers), any rise in volatility generally means a higher dividend yield for QYLD. Investors should not closely consider QYLD's TTM dividend yield as its future yield depends entirely on where the Nasdaq's VIX index is (which is measured using option premiums). For this reason, I believe QYLD is highly unsuitable for fixed income investors since, during volatile periods like today, its dividend can change very dramatically in either direction.

Generally, QYLD has underperformed the Nasdaq 100, though this may be changing with the new " market regime." QYLD has capped upside while the Nasdaq 100 does not, so sustained bull markets typically mean QYLD will have a decent and stable dividend yield but will still underperform overall. This situation has been the case for most of QYLD's existence. Also, sharp rapid crashes such as that of 2020 are not great for QYLD since option risk premiums rise so rapidly that QYLD hardly gets to sell options at high levels during the crash. However, after the crash, such as later in 2020, as option premiums remain high, QYLD can be decent as option premiums are excessively high compared to realized volatility. See below:

Data by YCharts

Today, we are seeing a different situation than in the recent past as it appears we are now in a sustained bear market. Thus far, the market is not in a rapid 2020-style crash but more of a typical long-term bear market. During such periods, QYLD is likely to outperform the Nasdaq 100 as many option-investors look to use derivative contracts to offset risk, causing option premiums to rise over realized volatility for an extended period.

Though QYLD has a TTM yield of around 12-13% today, looking at the greatly heightened Nasdaq 100 VIX index, its actual yield today is likely far higher as option premiums have risen dramatically over recent weeks. Unfortunately, it is nearly impossible to measure this as those option premiums are fluctuating so rapidly due to the current volatility. That said, as long as the Nasdaq 100 VIX remains so elevated, call option premiums will likely be very high, potentially giving QYLD a "yield" closer to 15-20% today.

Of course, there is truly no easy "free lunch" since, when option premiums are high, so too is downside risk. As mentioned earlier, the Nasdaq 100 may still have significant downside risk in front of it. If the Nasdaq crashes, QYLD will as well, and although it has some cushioning, it will almost certainly still lose money during a bear market. Even more, if there is a strong "bear market rally," QYLD will not take part in all of those gains since its upside is capped on a short-term basis. Over time, this factor can cause QYLD's principal to depreciate dramatically.

The only environment where QYLD will consistently outperform the Nasdaq 100 and deliver positive net returns is during a flat market. For example, if the Nasdaq 100 continues to move up and down in a "channel" without any sustained change, QYLD will earn decent yields without losses or underperformance (due to upside capping). Historically, the Nasdaq 100 is not known for remaining flat for long periods. Still, once the Nasdaq 100 reaches a bottom, QYLD may be more decent for yield-seeking investors since option premiums usually remain elevated for months after market bottoms.

The Bottom Line

Personally, I would not invest in QYLD today because I firmly believe the Nasdaq 100 has a significant downside in front of it. Of course, that is a personal view, and I imagine many readers may feel the Nasdaq 100 has reached a correctional bottom or may stay around today's levels for some time. If you believe the Nasdaq 100 has bottomed and will soon rally to new highs, then QYLD is a worthy investment, though it may be better to buy the Nasdaq 100 as QYLD's upside is capped.

Finally, if you believe the Nasdaq 100 has reached a bottom but will not enter a new bull market, then QYLD would be very suitable based on that view since it is very likely to outperform with strong yields and little underperformance during a choppy and trendless market. Again, I believe that the Nasdaq 100's bear market will be sustained, but there are very fair reasons to think it could remain flat today. Most notably, the fact the Nasdaq 100's trailing "P/E" ratio is now within "normal" levels. To me, the tumult in China and within the U.S domestic technology space will hamper the technology firm's earnings, so I see the trailing valuation as somewhat meaningless. Even still, the situation could shift to keep technology firms' earnings stable.

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QYLD ETF: Sustainably Outperforming The Nasdaq 100, Still May Have Downside Ahead Of It

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2022 has been a very tumultuous year for financial markets. Thus far, stocks and bonds have declined dramatically, causing many popular investment strategies to fail investors' expectations.

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En los últimos tres años, la India ha soportado con creces su cuota de malas noticias y sufrimiento. La pandemia se ha cobrado la vida de entre 2,2 y 9,7 millones de personas. Los confinamientos han contraído temporalmente la economía en una cuarta parte y desencadenado las mayores migraciones internas desde la partición en 1947, con la huida de los trabajadores urbanos a sus pueblos. Las tensiones religiosas se han agudizado, avivadas por el sentimiento antimusulmán del Partido Popular Indio (BJP), en el poder desde 2014 y dirigido por el primer ministro Narendra Modi. En la actualidad, una ola de calor arrasa el norte del país y la crisis mundial de los precios del petróleo y los alimentos golpea a los pobres.

Ahora bien, si retrocedemos un poco, vemos que una novedosa confluencia de fuerzas podría transformar la economía de la India a lo largo de la próxima década mejorando la vida de 1.400 millones de personas y alterando el equilibrio de poder en Asia. Los saltos tecnológicos, la transición energética y los cambios geopolíticos están creando nuevas oportunidades y nuevas herramientas para solucionar problemas de difícil solución. La mayor amenaza para todo ello es la incendiaria política nacional.

Desde que el país se abrió en 1991, su economía ha suscitado tanto euforia como desesperación. En un momento dado, se considera que es la próxima China: una superpotencia en ascenso repleta de genios emprendedores. Y, al siguiente, es una bomba de relojería demográfica incapaz de generar esperanza para sus jóvenes; o un salvaje oeste donde son estafadas Vodafone y otras multinacionales ingenuas. En la última década, India ha superado a la mayoría de los grandes países, pero esa situación se ha visto ensombrecida por un sentimiento de decepción. No ha logrado el aumento de la fabricación que enriqueció a Asia oriental ni ha creado suficientes grandes empresas que reúnan capital para el desarrollo. Sus mercados fragmentados y sus compañías informales crean pocos empleos de calidad.

Con todo, a medida que el país emerge de la pandemia, se aprecia un nuevo patrón de crecimiento. No se parece a nada de lo visto con anterioridad. La clave es el esfuerzo tecnológico autóctono. Con la caída del coste de la tecnología, India ha desplegado una estructura tecnológica nacional: un conjunto de servicios digitales patrocinados por el Estado que vinculan a los indios de a pie con una identidad electrónica, sistemas de pagos e impuestos y cuentas bancarias. La rápida adopción de esas plataformas digitales está obligando a entrar en el siglo XXI a una enorme y ineficiente economía informal basada en el efectivo. Ello ha impulsado el tercer escenario mundial de startups, después de los de Estados Unidos y China.

Lee también Antonio Cerrillo

Al mismo tiempo, las tendencias mundiales están creando núcleos empresariales más grandes. El sector de los servicios de tecnología de la información ha duplicado su tamaño en una década gracias a la nube y la escasez mundial de trabajadores de software. ¿En qué otro lugar pueden las empresas occidentales encontrar medio millón de nuevos ingenieros al año? Hay una oleada de inversiones en energías renovables: la India ocupa el tercer lugar en instalaciones solares y es pionera en el uso de hidrógeno verde. A medida que las empresas de todo el mundo reconfiguran las cadenas de suministro para reducir su dependencia de China, aumenta el atractivo de la India como lugar de fabricación gracias a un plan de subvenciones de 26.000 millones de dólares. Los gobiernos occidentales están dispuestos a establecer vínculos en materia de defensa y tecnología. La India también ha encontrado una solución para una mayor redistribución que beneficie a la gente corriente que vota pero que rara vez ve los beneficios inmediatos de las reformas económicas: un sistema asistencial digital, directo y en tiempo real, que en 36 meses ha transferido 200.000 millones de dólares a unos 950 millones de personas.

Esos cambios no conducirán a un auge manufacturero tan grande como los de Corea del Sur o China, que crearon suficientes puestos de trabajo para vaciar los campos de agricultores. No resuelven problemas profundos como el clima extremo o el atasco en los tribunales. Sin embargo, sí que ayudan a explicar por qué se prevé que la India sea la gran economía de mayor crecimiento del mundo en 2022 y por qué tiene posibilidades de mantener dicho lugar durante años. El crecimiento genera más riqueza para invertir en el capital humano del país; sobre todo, en hospitales y escuelas.

¿Sobre quién recae el mérito? El azar ha desempeñado un papel importante: la India no ha creado la nube ni la división sino-estadounidense, pero se beneficia de ambas. También lo ha hecho la constante acumulación de reformas parciales a lo largo de muchos gobiernos. El sistema de identidad digital y el nuevo sistema fiscal nacional se concibieron hace una década o más.

El gobierno de Modi también ha acertado en muchas cosas. Ha apoyado la estructura tecnológica y la asistencia social directa; también ha perseverado en la dolorosa tarea de reducir la economía informal. Ha encontrado soluciones pragmáticas. Las compras de energía solar por parte del gobierno central han impulsado las energías renovables. Las reformas financieras han facilitado la creación de empresas jóvenes y la quiebra de las disfuncionales. La destreza electoral de Modi proporciona continuidad económica. Incluso la oposición espera que siga en el poder mucho después de las elecciones de 2024.

El peligro reside en que en la próxima década ese dominio se convierta en autocracia. Uno de los riesgos es la deplorable hostilidad del BJP hacia los musulmanes, utilizada para aglutinar a la base política. Las compañías tienden a restarle importancia y a considerar que Modi puede mantener las tensiones bajo control y que la fuga de capitales será limitada. Sin embargo, la violencia y el deterioro de los derechos humanos podrían dar lugar a un estigma perjudicial para el acceso de la India a los mercados occidentales. El deseo del BJP de lograr la conformidad religiosa y lingüística en un país enorme y diverso podría resultar desestabilizador. Si el partido impusiera el hindi como lengua nacional, crecerían las presiones secesionistas en algunos estados ricos que pagan gran parte de los impuestos.

Lee también Ramon Aymerich

También podría deteriorarse la calidad de la toma de decisiones. El gobierno, quisquilloso y vengativo, ha cooptado a la burocracia para intimidar a la prensa y a los tribunales. La decisión fallida de abolir los billetes en 2016 mostró el lado impulsivo de Modi. Un hombre fuerte sin controles y equilibrios puede acabar poniendo en peligro no solo la democracia, sino también la economía: pensemos en el presidente turco Recep Tayyip Erdoğan, cuyas extrañas opiniones sobre la inflación han provocado una crisis monetaria. Y, dada la ambivalencia del PBJ hacia el capital extranjero, la campaña de renovación nacional corre el riesgo de retroceder hacia el proteccionismo. Al partido le encantan los cheques en blanco de Silicon Valley, pero recela ante el hecho de que las empresas extranjeras compitan en la India. Los subsidios actuales podrían degenerar en autarquía y clientelismo, unas tendencias que han frenado durante mucho tiempo a la India.

Que la India crezca a un ritmo del 7-8% durante los próximos años será de suma importancia. Sacará a un gran número de personas de la pobreza. Generará una base manufacturera y un mercado nuevos y enormes para las empresas mundiales, y cambiará el equilibrio de poder mundial al crear un mayor contrapeso a China en Asia. El destino, la herencia y las decisiones pragmáticas han creado una nueva oportunidad en la próxima década. La India y Modi tienen que aprovecharla.
© 2022 The Economist Newspaper Limited. All rights reserved. Traducción: Juan Gabriel López Guix

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La reconfiguración de la economía india, una oportunidad inmensa

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En los últimos tres años, la India ha soportado con creces su cuota de malas noticias y sufrimiento. La pandemia se ha cobrado la vida de entre 2,2 y 9,7 millones de personas. Los confinamientos han contraído temporalmente la economía en una cuarta parte y desencadenado las mayores migraciones internas desde la partición en 1947, con la huida de los trabajadores urbanos a sus pueblos.

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Today we have a guest post! The guest post is written by Brendan Lee Young is one of the founders of Passiv, an automated portfolio management tool that helps DIY investors be their own wealth manager using their brokerage accounts. He follows a core-and-explore investment strategy but loves the feeling of getting paid dividends. Please note that this article was written for informational and educational purposes. It should not be taken as financial or investment advice.

In this post I'd like to show you how you can undercut robo-advisors and build your own dividend-focused robo-advisor using a proper broker and Passiv. Robo-advisors are essentially software that asks you a bunch of questions to determine what levels of risk you're willing to take, then based on your answers they invest your money into ETFs and they charge you a scaling fee for portfolio rebalancing. This fee is charged on top of the underlying fees for the ETFs in your portfolio. For the ordinary person with no financial knowledge, this may sound like an ideal solution for building long-term wealth.

However, if you are a DIY investor with knowledge of your desired risk tolerance and portfolio make up, then you can get all of the advantages of a robo-advisor without having to pay a scaling fee. Here's how to do it.

Step 1: Get Yourself a Proper Broker

By proper, I mean one that has free trades and an API. What's an API? It's basically a way for Passiv to securely access your account and get information that will help you manage your portfolio. Below is a list of brokers that have free trades and can integrate with Passiv:

*Questrade offers $0 trade commissions on ETF purchases.

Step 2: Know what stocks and/or ETFs you'd like to hold and your target asset allocation for each asset in your portfolio.

If you're not sure what stocks to buy, I suggest reading up on The Dividend Aristocrats , which maintain a list of S&P 500 stocks that regularly pay increasing dividends.

If stock picking isn't your jam, there are several ETFs with low fees (in no particular order) that you can use in place of or in combination with individual stocks. For example:

VYM - Vanguard High Dividend Yield ETF:

This ETF tracks the FTSE® High Dividend Yield Index. With a low expense ratio of 0.06% and a broad diversification, this is the most popular high dividend ETF with over $25B of Assets Under Management (AUM). As of 03/31/2020, its current is 4.15%.

VIG - Vanguard Dividend Appreciation ETF:

This ETF tracks the performance of the NASDAQ US Dividend Achievers Select Index, which comprises companies consistently growing their dividends every year. It also has a low expense ratio of 0.06% and as of 03/31/2020, its current SEC yield is 2.20%.

This ETF tracks the Dow Jones U.S. Dividend 100™ Index. It also has a low expense ratio of 0.06% and as of 04/29/2020, its current SEC yield is 3.66%.

This ETF tracks an index composed of relatively high dividend paying U.S. equities that have been screened for financial health. It also has a low expense ratio of 0.08% and as of 03/31/2020, its current SEC yield is 5.21%.

Of course there are plenty other good options for high paying dividend ETF but low fees is usually a good place to start. If you want to find more ETFs other than low fee dividend-focused ETFs, then check out . It's a great resource that maintains a comprehensive database of as well as other categories of ETFs. all dividend paying ETFs in the USA

Step 3: Use Passiv to help you manage your portfolio

is a web app that helps you manage your portfolio and maintain a desired target allocation in one or multiple accounts. It's what you'll use to turn your brokerage account into your own personalized robo-advisor.

Getting started with Passiv is simple:

1. Create a Passiv account

2. Connect Passiv to your brokerage account using a secure API. You can even manage your whole family's investments with a Passiv Elite subscription as it allows you to connect multiple accounts and manage them as one portfolio.

3. Set up your target portfolio by entering which securities you'd like to hold and their relative allocation in your portfolio. If you already hold securities, you can also import your current portfolio allocation from your brokerage to start with.

4. Set up automatically recurring contributions to your broker.

5. Sit back and let Passiv do the work.

Using Passiv will free you from having to create and maintain spreadsheets to manage your investments. It shows you what trades are needed to maintain your target allocation and rebalance your portfolio. Once you've got the trades, simply login to your brokerage to place them. By default it will prioritize buying the underweight assets in your portfolio. However, you can adjust the settings to sell the overweight assets and purchase the underweight ones in your portfolio. Also, you'll get notifications that let you know when cash hits your account and your portfolio drifts. Passiv is free to use but, if you go with the paid version, you'll get access to more advanced features like the ability to link and combine multiple accounts into one portfolio. Likewise, the ability to use One-Click trades which lets you place the calculated trades in your brokerage account for you. Our goal at Passiv is to make DIY investing easier to follow so that more people can have the confidence to invest on their own and build long-term wealth. With the rise of passive investing, low-cost ETFs, zero stock trades and brokerages investing in APIs, we hope to see more software products out there serving the needs of DIY investors.

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How to build your own dividend-focused robo-advisor - Dividend Diplomats

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Today we have a guest post! The guest post is written by Brendan Lee Young is one of the founders of Passiv, an automated portfolio management tool that helps DIY investors be their own wealth manager using their brokerage accounts. He follows a core-and-explore investment strategy but loves the feeling of getting paid dividends.