In its Shipping Outlook 2017, Drewry Maritime Financial Research benchmarks its shipping investments thesis against “Capital Returns: Investing Through the Capital Cycle: A Money Manager’s Reports 2002-15”, by Edward Chancellor.
In a fascinating account, Edward Chancellor covers the “Capital Cycle”, predicated on investment strategies employed at Marathon Asset Management
In this year’s market outlook we identify key tenets under the “Capital Cycle” investing approach; having used this framework in our assessments of the key sectors of the shipping market in recent years we continue to use it as the basis of our future recommendations.
Rahul Kapoor, Head of Drewry Financial Research Services Ltd said, "Most investors base their decisions focussing on demand forecasting rather than supply. This happens despite knowing that demand is essentially a black box and does not pay enough attention to supply side. It is the changes in the supply side dynamics that drive industry profitability."
"This key principle is often overlooked and stock prices fail to anticipate shifts in the supply side. Dry bulk shipping and container shipping is undergoing a massive supply side normalisation after years of supply growth, we expect return expectations to rise owing to the shifts."
He added: "We believe the stress levels for the shipping sector will ease significantly in 2017, primarily driven by supply normalisation, with real profitability and returns emerging over the next 12-18 months."