Mammoth US institutional investor Fidelity continues to show it is serious about building a portfolio of public dry bulk shipowners.
The Boston-based outfit has disclosed a $207m position in shipping’s largest US-listed dry bulk shipowner, Star Bulk Carriers of Greece, in public filings reflecting activity through the end of the second quarter.
Fidelity's enlarged stake is good for a 10% slice of the Petros Pappas-led company, making it the second-largest holder after private equity's Oaktree Capital Management, which has 26m shares and a 25.4% stake.
TradeWinds reported on 13 July that Fidelity had built up a 12% stake in New York-listed Genco Shipping & Trading, allowing it to move past another private-equity backer, Centerbridge Partners, as the bulker owner's biggest investor.
But because Star Bulk is so much bigger than Genco — its $2.2bn market capitalisation nearly triple Genco’s $750m — Fidelity’s piece of Star Bulk is its biggest bet yet on the dry bulk sector.
The Boston firm holds just under 5m Genco shares currently valued around $85.5m.
That stake was part of a wider build-up in dry bulk stocks over the course of six months.
Just as Fidelity built its Genco stake as top private equity holders retreated from the share in the first half of 2021, the investment firm seems to have done likewise with Star Bulk.
Fidelity more than doubled its position of 3.5m shares at the close of the first quarter as Oaktree was reducing its holding of roughly 39m shares to 26m.
According to the most recent filings, Fidelity also holds 4.2m shares in Golden Ocean Group worth about $44.5m, 422,000 shares in Eagle Bulk Shipping valued at $19m, 888,000 shares of Safe Bulkers worth $3.3m and 387,000 shares in Diana Shipping valued at $1.9m.
Genco announced a shift towards a low-debt, high-dividend model at the end of the first quarter. The policy is due to take effect in the fourth quarter with payments in the first quarter of 2022.
Star Bulk instituted a high payout dividend model in 2019 that fell into hibernation during the lean times of Covid-19 in 2020 but was revived in May amid a strong market.
Investment bank Jefferies expects Star Bulk to pay out $1.27 per share in the third quarter, $1.97 in the fourth and $4.30 for all of 2022.
Veteran investment banker David Herman, who once specialised in shipping for Credit Suisse and now heads the finance arm of Connecticut tanker brokerage Charles R Weber, has said Fidelity's presence in a stock is an important vote of confidence.
"An investment from Fidelity is like the Good Housekeeping Seal of Approval. It validates a company or an industry," Herman told TradeWinds on the Genco investment.
However, Herman also pointed out that even a $90m investment is less than the cost of two capesize vessels.
"[It] would be tiny in the context of better known, more-liquid stocks like Apple or Tesla," he said.
Even as public shipowners remained challenged at the size of their market capitalisation, Star Bulk is as good as it gets in the dry bulk sector and, therefore, seemingly a natural for the big investor.
Star Bulk trades about 2m shares per day, or roughly $40m in share value at the current pricing.
