Four Shipping Stocks for Investors to Avoid

Many observers have come to believe that shipping stocks are uniquely positioned to help investors determine whether or not the global economy is strong or weak. So what does it mean if four shipping stocks have made our list of stocks that investors would do better to do without?

Whether or not the markets eventually lead us into what I've dubbed the World's Most Anticipated Recession, stocks with lower PowerRatings are stocks that investors should avoid. Not only do low PowerRatings stocks, based on our research, tend to underperform compared to the average stock. But stocks with the lowest PowerRating actually produced negative returns on average one year later.

Let's look a little closer at the situation for investors owning low PowerRatings stocks. The average stock, based on our research looking at thousands and thousands of simulated trades since 1995, has been higher one year later as much as 68% of the time. By "average stock" I'm referring to stocks with PowerRatings from 4 to 7.

Stocks with PowerRatings of 2, by comparison, have been higher one year later approximately 41.5% of the time -- well below a 50/50 chance. Stocks with the lowest PowerRating of 1 are even less reliable when it comes to being higher after one year. Our research reveals that 1-rated stocks have been higher one year later less than 35% of the time.

In addition to the relative unreliability of low PowerRatings stocks, those stocks' capacity to underperform is pronounced. While the average stock has been higher, on average, between 12 and 13% after one year, stocks with PowerRatings of 2 have averaged a gain of less than 8% after a year's time. 1-rated stocks, believe it or not, have actually averaged a negative 5.08% after one year.

Now that you know why you want to avoid low PowerRatings stocks, here are a few from the shipping business that are clearly names investors should steer clear of. Ironically, as a group, the Shipping industry remains highly rated with a PowerRating of 8. But when it comes to a showdown between industry groups and stocks, investors are ultimately paid on the performance of stocks. So, until further notice, we defer to the relatively low PowerRatings of the some of the individual (and best known) stocks in shipping.

First up is TBS International (TBSI@TBSI | Quote | Chart | News | PowerRating). This stock has a PowerRating of 1, making it a stock to run-not-walk away from for the vast majority of investors. TBS International has a P/E of 7.60 and is trading at the lower end of its 52-week price range from a high of $71.15 to a low of $8.10. The company provides both integrated logistics and ocean transportation services including liner, parcel, bulk and vessel chartering.

Another 1-rated stock, Diana Shipping Inc. (DSX@DSX | Quote | Chart | News | PowerRating) trades at approximately 11 times earnings and is in the lower half of its 52-week price range from $45.15 to $15.71. Diana Shipping, Inc. is an Athens, Greece-based shipping company that specializes in ocean transport of dry bulk cargoes.

One of the signature stocks in the shipping industry is Dryships (DRYS@DRYS | Quote | Chart | News | PowerRating). In addition to having a PowerRating of 2, Dryships is trading in the lower half of its 52-week price range from $131.34 to $16.85 and has a P/E of 6.10.

Dryships is a Greek shipping company that owns and operates carriers for the transport of drybulk commodities ranging from coal and iron ore to grains and fertilizers. Headquartered in Greece, the company is widely expected to blow away its 2007 earnings in 2008.

Our last shipping stock to avoid is Excel Maritime Carriers (EXM@EXM | Quote | Chart | News | PowerRating), with a PowerRating of 2. Excel Maritime Carriers owns and operates dry bulk carriers, providing seaborne transport of cargoes such as iron ore and grains. The company is based out of Athens, Greece.

Excel Maritime Carriers has a P/E of 9.20 and, like the other shipping stocks in this article, is trading closer to its 52-week low of $14.57 than it is to its 52-week high of $81.99.

PowerRating Charts are now live! Click here to launch them.