For those investors that want exposure to shipping stocks the list below is a good starting place. It shows all the shipping stocks in the Bloomberg Global Marine Shipping Index that can be traded on Saxo’s trading systems. We have included the consensus price target from analysts covering the stocks and calculated the spread in percentage to the current price. Analysts are quite positive on the industry with an average price target 21% above current market prices.

Source: Bloomberg and Saxo Group

Is a new momentum crash on the horizon?

Equities are grinding higher everyday and the speculative fever is running high with Bitcoin price action and the short squeeze in GameStop and other shorted stocks as recent evidence. If we look at the Russell 3000 Index in the US, we observe 720 stocks with a one-year total return above 50%. Yes, you read correctly and note that the starting point for the calculation is before the major selloff started. In the finance literature, many different authors have covered a concept called momentum crashes (read here, here, and here). Momentum crashes mean different things to different investors. The ones that implement equity factor strategies in long-short versions tend to view momentum crashes when the equity market bounces back from a huge selloff as the one in 2008 when the losing stocks shorted suddenly reverses big time creating large losses in the short component of the portfolio relative to the gains on the long component.

In a paper from the quant investment firm Robeco it is shown how generic momentum stocks (sorted on simple 1-year total return metric) suffered greatly in the subsequent 36 months. Long-only momentum strategies are part of an overreaction and buying on narratives aggravating the mispricing which drastically lowers the expected returns (they become negative) on such stocks and is realised when the market reverses. The recnt erratic behaviour in financial markets and equity valuations getting inflated across what we call tier-2 and tier-3 companies (those with little earnings) are a cause for concern. We could very well soon be experiencing a momentum crash in combination with a normal and healthy equity market correction. In this case the inspirational list below shows the stocks in Russell 3000 that are up the most the past year.

Source: Bloomberg and Saxo Group