SBLK

Publicly traded companies mentioned herein: Star Bulk Carriers Corp (SBLK)

Highlights

The presenter is long shares of Star Bulk Carriers Corp (SBLK), one of the largest dry bulk shipping companies in the world (124 vessels) that is differentiated from peers based on its technologically advanced fleet and low daily opex per vessel. There have been several shifts in the dry bulk shipping space that have made the industry more attractive, and SBLK has taken steps to improve its fundamentals, capital allocation strategy, and outlook. He therefore views SBLK as the best-positioned operator in the industry, which will be further strengthened following the completion of its recently announced merger with Eagle Bulk that will improve the cash flow profile, increase its economies of scale, and diversify the fleet. The stock has historically been valued based on the book value of its fleet given the industry cyclicality, but he thinks recent idiosyncratic and industry-wide transformations will drive greater consistency across various market conditions. This seems to be overlooked by investors, partially due to limited analyst coverage, but SBLK could receive credit over the next 2 – 3 years as post-COVID cycle normalization continues, cash flow volatility diminishes, and capital return increases. At that point, the stock can be viewed less as a trade during cyclical lows and more as a strong business that can be valued on FCF, leading to his base case price target of $32 per share from the current ~$20 per share.