Shipping market insights for 2026

0:10J Mintzmyer:J Mintzmyer of Value Investors Edge, shipping sector expert extraordinaire. Welcome back to Investing Experts. Welcome back to the show. Absolutely, Reena. Thank you so much. And of course, we're recording the holiday season here. So happy holidays and looking forward to the new year, 2026 here. Yes, I think everybody is looking forward to a new year. Why don't you catch listeners up as we're heading into 2026? Value Investors Edge has been a place on Seeking Alpha that people have been able to come and learn about shipping, get real insights into shipping stocks with this new year. What do you have going on and what are you looking forward to in 2026?

0:48Yeah, no, absolutely. 2025 was a big year for us. We launched the platform in the middle of 2015. So we celebrated our 10-year anniversary as a platform. This past summer, we were able to have a big meetup in New York City alongside the Marine Money Conference. We hosted about 40, 45 members out there for that. So that was a nice celebration of the team. And of course, it's grown. It was just myself in 2015. We added to someone in James Catlin in 16. And now we have a full team of 11. So, you know, just what a year of growth and it hit that 10-year milestone. So that's been good on the big picture business front.

1:26In terms of shipping investments, 2025 was a good year for us, but it was not an excellent year. I mean, I think we've been spoiled a little bit in the shipping markets where we were putting up returns. In 2021, we did 133 % with just long only stocks. in 22 and 23, we put up 50 % to 55 % those years. And so this year, we're recording on December 30th. So we're about as close to the end of the year as we can get possibly, unless we want to work on the holidays. But we're here at 23 % year to date. And that's long only stocks. So I mean, in the shipping markets, it's a good year. Russell was only up 12 % and I think S &P was up 16.

2:10So we beat the market, beat it quite handily, but it's not the 55, it's not the 133%. So, you know, we're always striving for bigger and better. But that's kind of the big rundown there, you know, between, you know, celebrating the community, just a fantastic community. We have over 700 active members and research team of 11 celebrating the 10-year anniversary and then, you know, putting up another good year in the markets.

2:34J Mintzmyer:What would you say, because you're not alone in, you know, the returns haven't been as good as you would have liked. what would you say in terms of navigating downturns in the market, sector downturns, when things you know aren't going to go as well despite your investing strategy? What do you keep in mind? And are there particular stocks that you're more focused on? Are there particular metrics that you're more focused on? Are there particular stories that you're more focused on? What do you keep in mind as the downturn happens as a way to see yourself out of it? Yeah, no, absolutely. that is the right question.

3:10And in this year, in 2025, that was a totally pertinent question for us when we got into March and April, right? Think back to so-called Liberation Day, right? And that was when, you know, if we go and look at our models, we were down 15 or 20 % year to date at that point. And, you know, pretty much anything in the market was down about that amount. So it wasn't like shipping did any worse necessarily, but it was a time of testing our convictions. And I think when we get into a period of time where there's either greater macro risk from tariffs or from economic slowdown, or maybe some of the stocks look a little bit more heavily valued, you really got to focus into quality.

3:50And that's one thing we're setting up as we set up our 2026 top picks. We will be publishing those to the Value Investor's Edge platform tomorrow afternoon, right on the 31st to get ready for the new year. And as we construct those models, we have a value model and a speculative model. And we're really looking at, and we always try to look at high quality, but we're really looking a little bit more defensive, a little bit more higher quality, a little bit bigger backlogs, stronger balance sheets. We're taking a little bit more of a, again, I don't know if defensive is the right word or cautious.

4:22I mean, these can be loaded words, but I think we're definitely going a little bit more in that direction as we look at a more uncertain global macro setup.

4:29J Mintzmyer:You've been on previously talking about tanker stocks. I know that you also released an article around Thanksgiving about CMB Tech as being one of your outperformed picks for 2026. What would you say about the different columns within shipping, be it tankers, etc.? Yeah, I think the big, exciting, flashy sector for the last couple of years has been tankers. And there's been several reasons for that. You had the Russian invasion of Ukraine, which led to lots of sanctions and rerouting of the ships. And then you had the Houthis disrupting the Red Sea. And that particularly impacted some of the smaller tankers, the products.

5:15They carry gasoline, diesel, jet fuel, that kind of stuff. And that sector was really top of mind for the last couple of years. rates were at multi-year highs asset values were at record highs more recently and you alluded to it you mentioned the cmbt tech article that we put out that is our top public pick of course we have private picks as well we i just finished building the list with my head of research today we have seven names in our value model and six names in our speculative so 13 picks there of course cmbt is indeed in the models, of course. It was a top public pick. It is a private pick as well.

5:54And that one is primarily dry bulk. So the segue there is the dry bulk sector has been kind of beaten down for most of the past decade. So the shipping companies have not properly invested in new tonnage and replacement capacity. At the same time, there's new mines opening up across the world. The biggest one is a iron ore mine in Guinea. It's sponsored by China. and China wants to diversify away from Australia and Brazil into a more friendly corner of the market. And so this iron ore mine in Guinea is a national security priority for China. And so we're going to see them shift a lot of their cargos in that direction.

6:32And, you know, for shipping nerds, we always look at the distance on the map. And whenever the imports and exports are very far away, shipping owners are very happy. And Guinea, you have to pull out a map of Africa and look, it's Western Africa. is a lot further away from China than Australia. And so every cargo that is displaced that China replaces Australia with Guinea is very bullish for the dry bulk sector, particularly the big ships. And CMBT is the stock symbol. The name of the company is CMBTech. It's kind of a silly name in my opinion, but they are 60 % dry bulk and they are about 30 % tankers.

7:12So it's a shipping company, not a tech company. They're just getting a little hokey with the company name there. But they are extremely well positioned to benefit from an upturn in dry bulk. And not only that, we got the 30 % in tankers that is riding a very, very strong tanker market. We are at multi-year highs in current rates for both VLCCs, the largest tankers, and Suez Max is the size. So tankers were hot the last couple of years. They're still hot right now. We believe 2627 dry bulk is the place to be. And that public article, I'm sure it'll be linked in our interview or in the transcript, but that's available on Seeking Outfits.

7:48A public article, public pick for 26. Totally stand by that. It is indeed going to be in our top models for 2026. But keep in mind, we will have 13 total picks in those top models.

7:58J Mintzmyer:One of the things that you mentioned in that article was that the headwinds that were coming for the shipping sector are shifting into tailwinds, particularly around the tariff conversation and the international picture. What else would you add to that geopolitical international conversation about why the headwinds are becoming tailwinds? Yeah, I think it's all sort of related. But earlier this year, as I mentioned, we had the Liberation Day and sort of the panic involved in that. And at the time, it didn't even seem like panic. It just seemed like a rational market reaction to increasing tariffs and global confrontation.

8:35But as I mentioned, and you mentioned your question, we believe those headwinds are shifting to tailwinds as the U.S. and China are negotiating more and more and we're seeing more agreements and backing off. There was a lot of talk of port fees for ships. Those got canceled or at least delayed. There's been an endorsement with China for them to buy more strategic minerals, coal and things like that. And then not only that, we have the upcoming Supreme Court decision right on the tariffs. So we'll see what goes on with that. But regardless of the Supreme Court one way or another, it's clear that President Trump wants to strike trade deals with these countries.

9:13You could say, you know, better trade deals than we've had. You could frame it in that way. But we're not trying to turn off or destroy trade. And I think there are some voices in the administration, some advisors who you could say they're more hawkish on trade. And I think some of those voices were louder in April and May of this year. And those voices have taken a backseat in the last few months. And so I think that's the headline, but I think so much of that is related. So you have global economic growth that is so dependent on growing trade and proper negotiations, as opposed to just shutting down the ports and doing confrontational things.

9:52And so I think we'll see higher than expected economic growth, both in the United States in terms of GDP. We already saw that, right? The preliminary numbers for GDP came out, I think it was about a week ago. It was kind of highlighted as like an early Christmas gift, and it was very strong, over 4 % GDP. And so some of that is related to the trade flows coming back. But those are stronger economic numbers than even I had anticipated. And I think we'll also see a potential for some stronger numbers out of Asia. Because a lot of folks were saying that Asia could enter a recession based on US trade confrontation.

10:26I don't think that's the case. And so I think we're going to see stronger macro stuff going on in 2026. I think Drybulk, I've kind of outlined the basic case. It's also in the free public article. James Catlin did a phenomenal macro article on Drybulk that I recommend everybody should read. But we're very bullish on that into 26. And then finally, sorry, I get long winded on these things, Arena. I appreciate your patience. But finally, I think we are due for a potential, I call it a thematic rotation. I think the MAG7 and big tech and the AI themes had such a strong run. I don't want to talk negative about that.

11:04That's not my lane or take away from that. But a lot of classic value stocks and small cap stocks and commodity stocks have been totally left behind. And we're seeing some of that rotation start to play out in weird different ways. We're seeing it in precious metals. We're seeing a very, very strong run in gold. The silver markets are crazy. I don't understand them. I'm not the expert, but we're seeing more push towards commodities, towards minerals and things like that, and more classic value stocks. And I think shipping benefits if we do indeed see a thematic rotation. And I think, you know, Mag7 tech, AI, it's kind of had its day.

11:40And I think we're seeing stagnation in that momentum. And if some of that money rotates into these more value oriented, real money, real industry sectors, I think that will be very positive for shipping. So I mentioned we're conservative or cautionary in some ways in our model picks, but we're not cautious or scared or pulling back in shipping. Not even at all. In fact, we're deploying a higher percentage of our cash in the models. We are very optimistic. It's just that companies we're picking are higher quality than I think ever before.

12:12J Mintzmyer:There's definitely a big play for the rotation out of tech and certainly interesting to see what the new year will bring vis-a-vis that. Or is there anything else you would add in terms of particular metrics that you're using to call these top picks for the new year? And is there anything different when you're looking at stocks that you're picking for the new year as opposed to along the way? like is there something in particular that you're keeping in mind for the whole year yeah so i think the metrics that we use see we cover almost 50 shipping companies on value investors edge and when we pick our models you know the picks should not be too surprising to our current members because we we start with our fair value estimates which are basically like price targets this is what we believe the companies are worth and we look at those with the most upside and then we We curate those.

13:07We take out some that have maybe sketchier management teams or riskier balance sheets, or maybe we already have two tanker companies. So we exclude the third one, right? We look a little bit at diversification, but really all those picks are fundamentally based and they're based on where the fleet is positioned, what's the value of the fleet? What are the current spot rates? What are the long-term rates? What are projected earnings and dividends for the upcoming year? So all the initial picks is embedded in fundamental research. We don't do a lot of trading, at least not in our models. Some of our members are more active traders.

13:42Our chat room is very active with people talking about trades. But that's not really how we set up our models. Now, you asked, is there a big difference between the annual portfolio and the monthly updates? Because every month we do a monthly update. We post a letter. We do a short video. We rotate some of our picks. we rebalance? Yes and no. No, in the sense that there's a similar type update, nothing's going to be a total surprise. We're not going to just totally delete all of, you know, picks from last month and start anew. Like most of the, a lot of the picks are going to carry over. So in that sense, it's not that much different.

14:18However, one of the things we try to do at Value Investors Edge is reduce our turnover because we know people look at our models and try to follow those names. and we don't want to be trading in and out of a name every month or two months. Our normal holding period for our picks is anywhere from about six to 24 months. And so we've had a couple picks in our models that we picked as top ideas of 2025 and they've done well for us, but the upside is not as big as it used to be. But instead of cutting it out in December or November, we just let it ride for the year. It's a year-long pick, right? And we just show the year-long performance and then we'll get to 2026, we replace it.

14:54So there are a couple names that we're taking out of last year's picks and a couple new names that we're bringing in. But we're sticking to the same recipe and we're looking at the same kind of category of stocks. So I guess it's kind of a yes and no, but hopefully that helped expand on that.

15:09J Mintzmyer:Yeah, definitely. Anything that you would say a note about dividends in this space in particular? The biggest thing with dividends is just be really cautious on and don't just bite off on a high percentage income yield. So there's a lot of shipping companies, especially in the past, they've had, you know, 10, 11 % yields. And they brag about how they have, you know, fixed contracts. But what they might not say is that the contracts are only maybe a year and a half long or maybe only half the fleet is on contract. And so then if you have a market downturn and the ships need to be recontracted, they can't cover the big dividend anymore.

15:44And we've seen so many stories where the dividend, it was almost like a rug pull, right? People got in these income stocks and then suddenly they couldn't make the payments. So be really careful in income. It's not something where you should ever, in my opinion, in shipping screen by dividend yield. Never. The dividend yield can be incidental. You can find a good company and then be happy that they also have a good dividend. But that should not be a starting point. There's just too many. And I'm speaking to just people on a generalist audience who aren't necessarily familiar with the sector. I mean, if you're on Value Investor's Edge and you have access to our analytics and you have access to our team, you can sort out some of the good names, right?

16:22But if you're just a generalist and you're just generally looking at shipping, I would not start with dividend yield. I would definitely try to search for quality companies and read the quality research and then only after that, figure out what sort of dividend they have, if that makes sense.

16:39J Mintzmyer:The dividend being the cherry on top, not the sundae itself. Exactly. That's exactly right. And in terms of risks that you see coming, is it mostly uncertainty or how would you define the risks that you're concerned about or looking at? You know, I think the biggest risk to shipping is the same it's been all year. It's really a broad macro, broad market pullback risk. You know, it's no secret that the S &P 500 is trading at close to all time highs. It depends on what metric you use. But and I think at 98, 99 might be higher. But if you exclude 99.com bubble, we're close to all-time record highs in valuations in the S &P 500.

17:20And that requires a couple things, right? It requires steady economic growth, 2 % or 3 % minimum of GDP. It requires a stable job market, a stable consumer environment. Inflation can't be running away. Interest rates probably have to be below. I don't want to name a number. I'm not the Fed, but lower than they are now, for sure. the current interest rates at the fed are not compatible with the broad market valuations the broad market valuations are pricing in at least half a percent if not a full percent in cuts in the next year or two and and so you know that that's the risk i think is that you know if the broad market catches a cold right everybody gets sick and and shipping tends to be a little bit more volatile has a little bit higher beta it might not impact the fundamentals of our companies which is how we analyze and invest.

18:12But if the S &P 500 drops 10%, you know, shipping stocks are going to go down too, right? And so that's our biggest concern and biggest thing that we're watching. And then of course, if the tariff situation goes back, if the temperature comes back up, if some of the hawks get a bigger voice, and I'm thinking of folks, and I don't mean to cast any shade, I'm just, you know, thinking of folks like Mr. Lutnick, some of President Trump's advisors who are more hawkish on trade. I'm not saying that's good or bad. obviously shipping we prefer more trade um you know if i'm a consumer i prefer more trade but if i'm an american worker i prefer more protections right so those those political realities are understood um but if those voices get a louder uh presence again um that's going to be challenging for the macro and shipping and so what we're doing is in our value inspector model we will have a cash component so we're not 100 invested we have a slight cash component And that's meant to reduce the volatility a little bit in the models and give us some optionality.

19:12Maybe we have some dips and we have opportunities to deploy that cash and see what happens there.

19:18J Mintzmyer:What would you say is most talked about with subscribers at Value Investors Edge? Is it macro concerns? Are they stock specific questions? What is most of the discussion centered on? So the discussion really ranges based on who it is, right? And how active they are in the chat platform. But like I mentioned, we have 700 members on the platform and every single day, I would say there's at least a hundred unique people discussing things on there. And it's anywhere from here's my super advanced model on like Zim, you know, what do you think? Or what's, what do you think about this earnings forecast?

19:51And I'm like, wow, you know, can I hire you to be an analyst on the team. This is awesome. Or, or it might be like, you know, Hey, um, I noticed all the oil tankers are down today. Why do you think that is? And we'll, you know, look at some of the news reports or discuss that, or there'll be discussion around, you know, the latest, uh, ceasefire or, or Ukraine peace deal rumors, or, you know, this new mind that just opened up, I was talking about that there'll be like people share news clips and there'll be debates about, you know, what it means for our companies. Um, anytime an earnings release comes out, people, you know, of course, the earnings release will be posted and there'll be dozens of people, you know, sharing their thoughts about, you know, good or bad or what do we think about it.

20:29And so it ranges. It depends. And I think the chat platform and the overall community we have, I'm just so grateful for it. It is just so enjoyable every day to log in and everyone has been so polite and professional. I think we have a very high, I would call it signal to noise ratio. So no one's posted pictures of their cats and their sports teams and there's no memes. And, you know, it's a very professional platform, but it's also a very cordial platform. And folks are so generous with sharing their own research and their own ideas and just a lot of idea generation that comes out. So I love the chat platform.

21:07I hope it just continues to grow and improve as our membership gets even larger.

21:12J Mintzmyer:High quality and kind. I can't really ask for anything more these days. My gosh, those are good things. It's true. That's tough. Jay, in investing and in life, are you the kind of person that takes a moment as the year ends and a new one begins to reflect or are you pretty much doing that all along the way? Well, you know, the right answer is that I constantly reflect. But we have, you know, creatures of habit and it's natural for us to get to the end of the year or the quarter or whatever and say, how did we do and how do we reflect? And one thing I do on VIE is every year I write a letter to the members, but it's almost like a diary post to my journal post to myself.

21:52You know, it's a letter to members, letter to the community. But it's a lot of kind of self-reflections about, you know, here are a couple of things that did well and here are a couple of things we can work on and here are some highlights. And so, of course, you know, one of the highlights this year will include a picture and talk about the great 10-year anniversary celebration that we had in New York City. And of course, that'll be one of the highlights. And then we'll talk about some of the investment successes we had in the year. And then some of the challenges. We'll probably reflect back on Liberation Day and how we handled that situation.

22:23If we could have done better, maybe we could have been a little bit more aggressive with the models in April and May. And we weren't, right? We had a lot of cash on the side. And maybe we could have been more aggressive. And you've got to be careful with hindsight bias and things like that. But now this is something we do almost ritualistically at Value Investors Edge at the end of the year. As an investor, I tend to reflect the most when I'm reviewing a position, right? I'm closing a position, I'm taking profits, or it's a loser and the thesis has changed and I'm dumping it. I tend to carve out some time to reflect on that.