Maritime investments: ZIM, Golar LNG, Eagle Bulk, Star Bulk, Matson, Others (NYSE: ZIM)

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Investment thesis

Advances in commission-free trading automation made by marketplaces to serve a continuous stream of small trades from individual investors on the Internet require market makers to have capital at risk while processing high-value irregular “institutional” trades. . They protect their capital at risk by putting at risk hedge stocks that reflect expectations of the future price range of the stocks concerned – virtually all actively traded issues.

The price and structure of these hedges reveals the future price expectations of both MM protection buyers and MM industry protection sellers.

Our selection of ZIM Integrated Shipping Services Ltd. (NYSE: ZIM) is driven by its currently attractive stock price coupled with a large audience of Seeking Alpha readers.

Subject business description

“ZIM Integrated Shipping Services Ltd., together with its subsidiaries, provides container shipping and related services in Israel and abroad. 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 cold cargo tracking service. As of December 31, 2021, it operates a fleet of 118 vessels, including 110 container ships and 8 vehicle transport vessels, of which 4 vessels belong to it and 114 vessels are chartered; and network of 70 weekly lines. The company was incorporated in 1945 and is headquartered in Haifa, Israel.

Source: Yahoo Finance

Street analyst forecasts

Yahoo finance

Risk-reward comparisons of portfolio investment candidates

Figure 1

Risk-reward prediction data

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(used with prior permission)

The trade-offs here are between short-term upside price gains (green horizontal scale) considered worth protecting by market makers with short positions in each of the stocks, and past actual price declines experienced during of the holding of these shares (red vertical scale) . Both scales are percent change from zero to 25%.

The intersection of these coordinates with 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 upward price change predictions derived from Market-Maker [MM] hedging actions and actual worst-case price declines from positions that could have been taken as a result of earlier MA predictions like today’s.

Our main interest is the on-site ZIM [3]. A standard “market index” of reward~risk trade-offs is offered by the SPDR S&P500 index ETF at [1].

These predictions are underpinned by the self-protective behaviors of MMs that typically need to put company capital at temporary risk to balance the interests of buyer and seller by helping capital-intensive portfolio managers adjust multi-billion dollar portfolio volumes. The hedging measures taken with real money betting daily define the magnitude 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 must often influence an investor’s choice of where to invest their capital. The table in Figure 2 covers the above considerations and several more.

Compare alternative investments

Figure 2

detailed comparative data

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The column headers in Figure 2 define the items for each rank stock whose symbol appears to the left in the column [A]. The elements are derived or calculated separately for each stock, depending on the specifics of its situation and the current forecast of the MM price range. Data in red numbers is negative, generally undesirable for “long” holding positions. The table cells with yellow fills are data for the main stock of interest and any issues to rank column, [R]. The pink cell fills in the note below – desirable content of long holdings. Market circumstances today create marginal conditions for SPDR S&P500 ETF forecasts, but are not intended as market forecasts.

Readers familiar with our analytical methods may wish to skip to the next section displaying the price range forecast trends for the INSP.

The purpose of Figure 2 is to try universally comparable stock-by-stock measures of a) the SIGNIFICANCE of the price gain, b) the LIKELIHOOD that the gain will be a profitable experience, c) how quickly it can occur, and d) what RISK of falling prices may be encountered during its holding period.

Column price range prediction limits [B] and [C] be defined by MM’s hedging actions to protect the firm’s capital which must be exposed to the risk of price changes from volume trade orders placed by large $”institutional” clients.

[E] measures the potential upside risks for the short MM positions created to fill these orders and rewards the potentials for the buy positions thus created. Past forecasts like this provide a history of relevant risk of lower prices for buyers. On average, the most severe actually encountered are found in [F]during the periods of maintenance in the effort to reach [E] earnings. This is where buyers are most likely to accept losses.

[H] indicates what proportion of the [L] sample of similar past predictions made gains by causing the price to reach its [B] target or be above sound [D] cost of entry at the end of a maximum holding period limit of 3 months. [I] gives the net gains-losses of those [L] experiences and [N] suggests how much [E] can be compared to [I].

Other reward-risk trade-offs involve the use of [H] win odds and loss odds 100 – H as weights for N-conditioned [E] and for [F]for a combined yield score [Q]. The typical job retention period [J] on [Q] provides a symbol of merit [fom] ranking measure [R] useful in portfolio position preferences. Figure 2 is arranged by row on [R] among candidate securities, with the yellow ZIM line identified.

In addition to candidate-specific stocks, these selection considerations are provided for the averages of over 3,000 stocks for which MM’s price range predictions are available today, and 20 of the top-ranked (per of) of these forecasts, as well as forecasts for the S&P500 Index ETF (NYSEARCA:SPY) as an equity market proxy.

Recent Trends in MM Price Range Predictions for ZIM

picture 3

Forecasts induced by MM coverage

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This picture is do not a “technical sheet” of past prices for ZIM. Instead, its vertical lines show the last 6 months of price scale forecasts upcoming market actions in the coming months. The only past information is the big dot of the stock’s closing price on the day of each forecast.

This data divides the opposite predictions of the price range into bullish and bearish outlooks. Their trends over time provide additional insight into upcoming potentials and help keep perspective on what might be coming.

The small image at the bottom of Figure 3 is a frequency distribution of the daily appearance of the Range Index over the past 2 years of daily forecasts. The range index [RI] indicates how much the decline in the forecast range occupies that percentage of the entire range each day, and its frequency suggests what might appear “normal” for that stock, in the eyes of evaluators. An IR of 21, about 1/5and of the range, leaves the other 4/5 (79%) of the upside price swing potential.

Here, the current level is close to its least frequent and least expensive presence, encouraging acceptance that we are looking at a realistic valuation for ZIM. Almost all of the past RIs have been higher than the current RI, indicating that there is more room for an even more positive outlook.

The only reasonable caveat for ZIM is that we only have a little over a year of 252 market days to produce past forecast histories, while our standard is to only accept stocks with market maturities of at least 3 years, or more than 750 market days. . The initial bulleted comments in this article reinforce the essential character from the shipping industry to global business activities in a post-pandemic period with wartime disruptions. ZIM is obviously an effective competitor among alternative investment candidates for positions in a growth-oriented wealth creation portfolio through capital appreciation participations. You may feel differently and there are other choices with more history and smaller win records.

Prospect of past profitability of investment candidates

Figure 4

MM Earnings Forecast

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(used with permission)

This comparison map uses an orientation similar to Figure 1, where the most desirable locations are bottom and right. Instead of being limited to price direction, the questions are more qualitative: “how big” and “how likely” are expectations of price changes now?

Our main interest is the qualitative performance of ZIM, in particular in relation to the choices of alternative investment candidates. Here ZIM is at location [4]the intersection of the horizontal and vertical scales of +24% gain and +100% assurance (ODDS) of a “win”.

Golar LNG Limited (GLNG) to [8] offers a similar size gain based on a limited number of examples, but a full 5-year history. No perfect alternative is available, with Eagle Bulk Shipping (EGLE) offering a slower rate of win due to longer holding periods, but with competitive chances of profitable results.

As an industry standard, SPY is at the location [6] with a gain of +6% and guaranteed profitability of 75%. ZIM tends to dominate all yield gains in this comparison.

Conclusion

Among these alternative investments explicitly compared, ZIM Integrated Shipping Services Ltd. seems like a logical buying preference now for investors looking for short-term capital gain.

Question: Is this form of comparison more or less useful for you in your selections of investment choices than those focused on industry economics or competitive stocks?

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