In one of the stranger stories in the ETF world, Claymore has re-launched its global shipping ETF. Trading as the Claymore / Delta Global Shipping ETF (NYSE:SEA), this ETF is one of the only options available to retail investors looking for a one-stop shop for shipping stocks.
This ETF disappeared only a few short months ago under strange circumstances. When Guggenheim Partners acquired Claymore, it triggered some provisions within the legal framework of the ETF. Although the shareholders approved the necessary reorganization, the nature of the shareholdings of the ETF was such that the company was not able to get a quorum of investors to approve the new structure. Consequently, the ETF had to be shut down.
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Good ideas do not stay gone for long, though, and Global Shipping ETF is back up and running. It has the same expense ratio as before at 0.65%, which is a bit higher than the average ETF expense ratio of around 0.50% to 0.60%. The ETF is designed to track the Delta Global Shipping Index and will be split roughly between one-third energy shipping (tankers and the like) and two-thirds bulk shipping.
Is this the way to play?
There is no question that this ETF includes a diversified list of well-known shipping names. Companies like Seaspan (NYSE:SSW), Teekay, Ship Finance (NYSE:SFL) and Frontline (NYSE:FRO) are major constituents, along with foreign shippers like Cosco and Mitsui OSK.
This diversification is a big part of why I think this ETF is worth a look by investors interested in the shipping space. There are plenty of important considerations when looking at shipping stocks, like the ratio of spot pricing to term contracts, the type of cargo carried, and the composition of the fleet, and this ETF smooths over a lot of those considerations. Instead of holding three or four individual names, and trying to time the market as to when its best to hold a certain profile of shipping stocks - a dubious challenge for any investor - this ETF will sacrifice some of the gains for correct timing in exchange for eliminating some of the losses of bad timing.
On top of that, I like the fact that this ETF gives investors exposure to foreign-listed names. Many of the world's largest shipping companies are based out of Asia, but relatively few of them are listed on U.S. exchanges. So rather than bother with the expense and hassle of investing directly in stocks listed in Singapore, Hong Kong or Japan, investors can buy them indirectly through this ETF.
An Intriguing Sector
I can see a lot of appeal in the shipping sector. Not only is it a straight-up play on global growth and trade, there are a lot of options within the sector. The likes of Ship Finance and Teekay Tankers can suit the needs of dividend-seeking investors, while DryShips (Nasdaq:DRYS) and Genco (NYSE:GNK) are all about the capital gains.
Interestingly, a lot of shipping names have done poorly in the markets of late, even though the Baltic Index (a widely-followed index of shipping rates) has remained relatively strong. I suspect this decoupling is due to a sharp recent drop in investors' risk appetite and I would expect the stocks to rebound as investors realize the global financial world is not about to end.
For investors who have the time and the risk tolerance to invest in individual shipping names, now could be a great time to buy safer names like Ship Finance or riskier plays like DryShips and Eagle Bulk Shipping (Nasdaq:EGLE). But for investors who want to simplify their investing lives and play a potential rebound in this volatile sector, this Claymore shipping ETF could be the ticket.
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