Tuesday, April 30, 2013

Why I Sold Globus Maritime

Globus Maritime (GLBS) reported Q4 earnings yesterday. And it was quite a revelation to me. Their operating loss was to be $2.8 mil. However, they took a $80 mil write down of top of the small loss! I bought this stock a year ago because its book value was more than 5x its market cap. Now, with one stroke of a pen, it is less than 3x.

GLBS is a small shipping company. The company owns only 7 bulk ships. As with all shipping companies recently, the company's earnings were hit hard by the global glut of ships. The report says they expect the situation to persist until 2014. But the company has $10 mil of current assets. So cash flow is not a problem in the short term while management waits for the end of the shipping glut.

However, all this makes me realize that shipping is a hard, competitive business. Something that all veterans of the business know. While companies like GLBS are trying to wait out the downturn, others like Diana Shipping are using this opportunity to buy ships on the cheap.

For me, this is a lesson learned. GLBS may actually be cheap right now. I really don't know. But I know shipping investments are risky and they aren't for me, like airlines aren't for Buffett. And so, as a result, I have sold out my GLBS position, at a 10% loss.

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