A Buy-Low, Sell-High Investment Methodology: The Case of Bulk Shipping

Abstract

Investment success in a cyclical market, such as the international bulk shipping market, can be dramatically enhanced by a cost-based buy-low, sell-high investment strategy. We developed an estimator of relative price level for a general asset using net present value techniques and publicly available information on costs and revenues. The estimator compares market price with a cost-based nominal price and thus identifies relative highs and lows in a market. As a test, we used the estimator on historical data to simulate how investment decisions could have been made in the bulk shipping market. Investment strategies using the estimator to time acquisitions and sales perform significantly better than a “blind” investment strategy (where ships are acquired and sold at fixed time intervals).

Optimal investment timing in the dry bulk shipping sector

“…The above model is then applied to the Capesize submarket and compared to the actual behavior of shipping investors as revealed by the contracts line in Fig. 1 (see also Marcus et al (1991) Scarci (2007. The optimal trigger strategy is to exercise the first moment X(t) rises to the trigger level X ⁄ .…”

A survey on maritime fleet size and mix problems

“…That is, we will not include literature where the MFSMP has been studied under the perspective of asset play (see, e.g. , Alizadeh and Nomikos (2007), Marcus et al (1991), Bendall and Stent (2005), and Sødal et al (2009)). …”