We recently compiled a list of the 10 Best Shipping and Container Stocks To Buy. In this article, we are going to take a look at where Matson, Inc. (NYSE:MATX) stands against the other shipping and container stocks.
Before the invention of the intermodal shipping container, goods were shipped in various-sized boxes that workers had to load and unload from ships manually. This method was inefficient, expensive, and time-consuming, making it difficult to transfer cargo across different modes of transport. The introduction of the first standardized intermodal shipping container in the 1950s revolutionized world trade. Approximately 90% of globally traded goods rely on maritime transportation, and the volume of maritime trade is projected to triple by 2050 due to rising demand. With the growth of the world economy over the past decades, the volume of freight transported by ships has also increased. In 2021, about 1.95 billion metric tons of cargo were shipped globally, up from approximately 0.1 billion metric tons in 1980. Consequently, the global container fleet has expanded significantly. Between 1980 and 2022, the deadweight tonnage of container ships grew from about 11 million metric tons to roughly 293 million metric tons.
However, this growth comes with increasing risks to shipping. Due to its global nature, the shipping container industry is vulnerable to several natural phenomena, including tropical storms, inland flooding, sea-level rise, drought, and extreme heat. According to CNBC, citing a study by RTI, climate change impacts on ports—including damage and disruptions—could cost the shipping industry up to $10 billion annually by 2050 and up to $25 billion per year by 2100.
Over the past few months, global trade has faced setbacks due to disruptions in two crucial shipping routes. Attacks on vessels in the Red Sea region hindered traffic through the Suez Canal, the primary maritime link between Asia and Europe, typically handling around 15% of global maritime trade volume. Meanwhile, on the other side of the globe, a severe drought at the Panama Canal led authorities to enforce restrictions, significantly reducing daily ship crossings since October of last year. This slowdown has impacted maritime trade through another vital chokepoint, typically responsible for about 5% of global maritime trade.
According to the International Monetary Fund (IMF) high-frequency transit estimates, trade volume passing through the Suez Canal witnessed a 50% year-over-year drop in the first two months of the year, while trade volume using the Cape of Good Hope detour surged by an estimated 74% above last year’s level. Meanwhile, transit trade volume through the Panama Canal decreased by almost 32% compared to the previous year. Additionally, data indicates a 6.7% year-over-year decline in port calls to the 70 ports tracked in sub-Saharan Africa for January and February 2024. Similar declines were observed in areas such as the European Union, the Middle East, and Central Asia, with decreases of 5.3%. These reductions likely stem from the temporary effects of longer shipping times. Should these interferences persist, they could temporarily disrupt some supply chains and exert upward pressure on inflation in the affected countries.
That said, the global container shipping market, valued at $2.2 trillion, remains up for significant expansion in the coming years. According to a research report, the market is projected to reach $134.03 billion by 2029, demonstrating a compound annual growth rate (CAGR) of 3.11% from 2024 to 2029. In addition, the rise of e-commerce has underscored the importance of end-to-end supply chain visibility, prompting shippers to leverage technology for real-time tracking of cargo and tankers. This e-commerce boom is driving the demand for faster and more cost-efficient shipping solutions, with the global e-commerce logistics market expected to experience a CAGR of over 17.8% from 2022 to 2033.
Our Methodology
For our list of the best shipping and container stocks to buy, we selected the following names based on hedge fund sentiment toward each stock. We assessed the sentiment using Insider Monkey’s database of 919 elite hedge funds tracked as of the end of the first quarter of 2024. The list is arranged in ascending order based on the number of hedge fund holders for each firm. Why are we interested in the stocks that hedge funds pile into? The reason is simple, our research has shown that we can outperform the market by imitating the top stock picks of best hedge funds. Our quarterly newsletter’s strategy picks 14 small and large-caps every quarter and it has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A processional line of imposing cargo ships in a large port, capturing the scope of the company’s ocean transportation business.
Matson, Inc. (NYSE:MATX)
Number of Hedge Fund Holders: 26
Matson, Inc. (NYSE:MATX), headquartered in Honolulu, Hawaii, is an American shipping and navigation services company founded in 1882. Its subsidiary, Matson Navigation Company, provides ocean shipping services across the Pacific, serving destinations such as Hawaii, Alaska, Guam, Micronesia, the South Pacific, China, and Japan. On April 25, Matson declared a second-quarter dividend of $0.32 per common share, payable on June 6, 2024, to shareholders of record as of May 9, 2024.
Norway’s Kongsberg Maritime secured a contract to supply a range of integrated technologies for three new 3600-TEU LNG-powered containerships being built at Philly Shipyard for Matson Navigation at the beginning of May. The scope of supply includes a shaft generator system, a battery energy saving system, and a complete power management system. In 2022, Matson, Inc. (NYSE:MATX) ordered these three LNG-powered Aloha Class containerships from Philly Shipyard for about $1 billion and expects to take delivery of these Jones Act compliant vessels in the fourth quarter of 2026, with subsequent deliveries in 2027. According to the shipping company, the 260-meter Aloha Class vessels will be the largest containerships ever built in the US.
The number of hedge funds holding stakes in Matson, Inc. increased to 26 in Q1 2024, up from 23 in the previous quarter, with a consolidated value of over $107.57 million.
Meridian Growth Fund stated the following regarding Matson, Inc. (NYSE:MATX) in its fourth quarter 2023 investor letter:
“Matson, Inc. (NYSE:MATX) is a US-based ocean and logistics company with a leading position in Pacific shipping that provides a vital lifeline to Hawaii, Alaska, and Guam, as well as premium and expedited service from China to the US. Matson’s unique terminal assets give it a significant speed advantage over competitors, which has been especially valuable amid supply chain disruptions. Matson’s premium service has enabled the company to keep its fleet utilization strong at a significant rate premium which has led to stronger-than-expected earnings. In addition, Matson continues to generate strong free cash flow which has enabled the company to pay down debt, repurchase shares and invest in high-return projects, including fleet additions and upgrades. During the quarter, we trimmed our position as the share price appreciated based on our valuation discipline.”
Overall MATX ranks 2nd on our list of the best shipping and container stocks to buy. You can visit 10 Best Shipping and Container Stocks To Buy to see the other shipping and container stocks that are on hedge funds’ radar. While we acknowledge the potential of MATX as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than MATX but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.