We recently compiled a list of the 8 Best Marine Shipping Stocks to Invest In.In this article, we are going to take a look at where SFL Corporation Ltd. (NYSE:SFL) stands against the other marine shipping stocks.
The Maritime Freight Transport industry plays a significant role in global trade as it handles about 90% of it. The expansion of seaborne trade is benefiting consumers worldwide by providing competitive freight rates. According to Mordor Intelligence, the industry is projected to grow from approximately $381.69 billion in 2024 to around $471.81 billion by 2029, at a compound annual growth rate (CAGR) of 4.33%.
The Evolution of Shipping in a Changing World
According to a KPMG report posted in May, the global shipping industry is on an upward trend despite challenges like vessel accessibility, labor shortages, and geopolitical instability. Around 83% of the world fleet consists of small to medium-sized ships, with small vessels making up 38% by number but only 1% by tonnage. Increasing container ship availability is expected to stabilize freight rates and restore the supply-demand balance.
Port delays and logistical bottlenecks are expected to ease, but geopolitical conflicts, especially in Ukraine and the Middle East have disrupted some important shipping routes, which have led to longer, costlier voyages. The industry faces a potential shortage of maritime officers by 2026 and women make up only 2% of the workforce.
Despite these challenges, global economic growth of 3% annually will support seaborne trade expansion. Freight rates have returned to pre-pandemic levels, as tanker demand remains strong due to a 1.9% fleet growth in 2023. Additionally, LNG demand is expected to stabilize the market, while container freight rates are recovering due to voyage restrictions and reduced vessel availability.
Trends Shaping the Industry
According to the above-mentioned KPMG report, the shipping and port industries are experiencing transformative trends that are influenced by decarbonization, digitalization, and evolving supply chains. Despite 6% of post-COVID stimulus efforts targeting greenhouse gas (GHG) emission reductions, rising fuel prices due to the Russia-Ukraine conflict pose challenges, as the maritime sector accounts for 2.8% of global GHG emissions, with over 40% of marine cargo being fossil fuels.
Digital adoption is on the rise, with the smart ports market expected to grow from $1.9 billion to $5.7 billion at a CAGR of 24.3% from 2022 to 2027. The pandemic has highlighted supply chain vulnerabilities, which has prompted the companies to diversify sourcing and rethink logistics.
Our Methodology
For this article, we used stock screeners to identify 25 marine shipping stocks with a market cap of above $50 million. We narrowed our list to 8 stocks most widely held by hedge funds, as of Q2 2024. The 8 best marine shipping stocks to invest in are listed in ascending order of their hedge fund sentiment.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A fleet of enormous cargo ships entering an estuary, demonstrating the company's rich maritime freight industry.
SFL Corporation Ltd. (NYSE:SFL) is a prominent maritime and offshore asset-owning and chartering company, engaged in the ownership, operation, and chartering of vessels across a wide range of sectors, including oil transportation, dry bulk shipments, chemical transportation, and drilling rigs.
It has a substantial fleet comprising 81 vessels, including tankers, bulkers, container ships, and energy assets, and has built a robust portfolio supported by long-term charters. The company is one of the best marine stocks to invest in.
The company was founded in 2003 and has evolved from a primarily tanker-owning company into one of the largest ship-owning companies globally. It has expanded its investments across various maritime segments and has maintained a significant charter backlog, which ensures a steady income for the foreseeable future. It was listed on the New York Stock Exchange in 2004, and the company has demonstrated its focus on shareholders by paying dividends every quarter since its listing.
In the second quarter, 17 hedge funds held positions in SFL Corporation (NYSE:SFL) worth $38.023 million.
In 2024, it made notable advancements by securing new long-term charters with major shipping companies, which improves its revenue stability. In July, the company announced five-year time charters for four 8,700 twenty-foot equivalent unit (TEU) container vessels, which will add approximately $240 million to its fixed-rate charter backlog. The vessels have been chartered to A.P. M?ller - M?rsk since they were new, with current agreements set to expire in 2025.
Additionally, the company is expanding its fleet with the construction of five 16,800 TEU container vessels, scheduled for delivery in 2028. The vessels come with a minimum of ten-year charters to a leading liner company, potentially adding around $1.2 billion to the charter backlog. There are options to extend these charters and purchase options after ten and twelve years, which include a profit-sharing feature, further expanding the company’s revenue potential.
In April, SFL Corporation Ltd. (NYSE:SFL) announced the acquisition of two LNG dual-fuel chemical carriers for approximately $114 million, built in 2022/2023 and equipped with stainless steel cargo tanks. The vessels will be employed for at least eight years with affiliates of Stolt Tankers, a leader in chemical logistics.
Earlier in March, the company secured three new LR2 product tankers for about $230 million, which also come with long-term charters to a prominent energy and commodities company.
In the second quarter, the company generated a charter hire of $198.8 million, including $4.4 million from profit-sharing arrangements. CEO Ole B. Hjertaker highlighted the company’s successful execution of its growth strategy, reporting an addition of over $2 billion to its charter backlog this year. The total charter backlog now stands at nearly $5 billion, which points to a strong revenue foundation moving forward.
Overall SFL ranks 7th among the best marine shipping stocks to invest in. While we acknowledge the potential of SFL as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is promising and trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
