BDI - the difference of a month (or so)

For dry bulk shipping, Q3 is typically the strongest quarter, or a very strong quarter in the cycle. In 2023, Q3 has been a profitable, but not particularly, strong. Fast forward to the last week in October, and things started to shift.

November 2023, an even strong shift - doubling during the month.

Advice to self and others - if one can’t decide on individual shipping names, just grab some shares of an ETF that attempts to map BDI e.g. Breakwaves’ BDRY. I don’t think any of the individual dry bulk shippers managed what BDRY November 2023


Realized some gains on the BDRY bet. It helps mitigate the impact of closing out another dry bulk shipping trade i.e. Star Bulk Carriers (SBLK) [in good company, even Oaktree Capital messed up SBLK :wink: ]

What happened to SBLK? Is there any hope?


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@JimA759s - I underestimated SBLK management’s capabilities. The company agreed to buy back shares from its previously largest shareholder, Oaktree Capital. The deal was announced in two steps - a 10M share buy-back in Sept 2023, then a second 10M shares in Oct 2023. Cash on the books when the first announcement was made suggested the first buy-back was quite doable.

The second buy-back? SBLK just sold off a bunch of vessels with low debt, plus re-arranged their existing financing a little, sold some shares, and that should took care of the second buy-back. I really did not expect them to complete the second buy-back so quickly. I figured the second buy-back would take at least Q4 2023 to sort out, and was prepared to wait till Q1 2024 to revisit.

Then this month long event I am calling “BDI bounce” happened. If you look at a SBLK chart, the share price did not react a lot the the first few weeks. Then around Nov 21st, shares start moving upward.

SBLK is a well managed company. I don’t think their management team, or Oaktree Capital, or I, could have predicted that Nov 2023 was going to be a good month for BDI.

It is somewhat copacetic- folks associated with the maritime sector use Forward Freight Agreements (FFAs) for hedging. I believe BDRY is mostly multiple purchases of FFAs that get recycled. While I had not gone into the transaction thinking of it as hedge, my BDRY purchase in June 2023 worked fantastic as a hedge. I closed out of my SBLK position because I saw risk on the horizon, and got bailed out by the BDRY stake.