While I was dithering, these shipping shares set sail without me

Tomorrow will mark the 219th anniversary of an event that affected Britain’s relations with the rest of Europe even more profoundly than the Brexit vote. Few schools celebrate the Battle of Trafalgar these days but every ship in the Royal Navy still does on October 21, because it exemplifies a time when Britain really did rule the waves.
More importantly for investors today, more than 80 per cent of all international trade continues to be transported by sea and several businesses in this sector have shares listed in London. Investors’ money can make a difference by helping to capitalise the transition to low-carbon renewable fuels to replace filthy bunker oil. Better still, shipping can deliver buoyant dividend income and capital growth from all over the globe.
Step forward Ocean Wilsons (stock market ticker: OCN), a Brazilian ports, shipyards and towage business whose shares have surged 53 per cent higher over the past year but continue to yield 4.6 per cent dividend income. Listed in London and Bermuda, with a stock market value of £512 million, the shares are priced at less than 11 times corporate earnings.
That price/earnings ratio looks undemanding when independent statisticians at the London Stock Exchange Group calculate that Ocean Wilsons’s gross profit margin is an eye-stretching 93 per cent. That nets down to 18 per cent, with a return on investment of 8.7 per cent. The business can trace its history back to 1837 but last August said it was in talks that could result in it selling substantial assets.
This caused the share price to spike but, fortunately for bargain-hunters, Ocean Wilsons’s biggest single shareholder is the Hansa Investment Company (HANA), which the research company Morningstar calculates is priced at a 42 per cent discount to its net asset value (NAV).
Nearly 30 per cent of this investment trust’s £470 million assets are invested in Ocean Wilsons. And Hansa’s investment represents more than a quarter of Wilsons’s value. Listed in London since 1912, Hansa shares delivered total returns of 48 per cent over the past decade, 32 per cent over five years and 29 per cent over the past year. However, it offers meagre dividend income of 1.4 per cent.
Higher yields are available for investors willing to consider shipping shares listed overseas. Hapag-Lloyd (HLAG), from Germany, and the Danish-based Maersk (MAERSKB) are two of the biggest maritime businesses in the world, with stock market values of €25 billion (£21 billion) and 157 billion Danish krone (£17.6 billion). They yield 6.3 per cent and 4.9 per cent respectively.
Fears that economic slowdown would depress international trade hit both share prices last year when Hapag-Lloyd slipped 5 per cent lower and Maersk sank 14 per cent. Even so, both remain afloat over five years with positive returns of 156 per cent and 29 per cent.
Against all that, withholding taxes on European foreign dividends are difficult to avoid or reclaim. Investment trusts listed in London make it easy to do both, while sharing the cost of professional stock selection in this specialist sector.
Taylor Maritime Investments (TMI) yields 7.9 per cent dividend income while Tufton Oceanic Assets (SHPP) trust yields 7.6 per cent. Taylor, which has total assets of £503 million, and Tufton, with £420 million, delivered returns of 27 per cent and 46 per cent over the past year. Despite that, both continue to be priced below their NAVs, trading at discounts of 33 per cent and 14 per cent respectively.
There is no guarantee that discounts will narrow; they might widen. Neither can dividends be guaranteed, they can be cut or cancelled without notice.
• How I’m swerving the expected increase in capital gains tax
Another worry is that the trend towards globalisation, which boosted international trade in recent decades, might reverse, with headwinds including rising nationalism and protectionism. Last week the American presidential candidate, Donald Trump, repeated threats to impose taxes of 20 per cent on most imports and 60 per cent on those made in China. He said: “To me, the most beautiful word in the dictionary is tariff.”
Few economists agree. Even so, Morningstar calculates that Tufton has increased shareholders’ income by an annual average of 5.7 per cent over the past five years. Taylor Maritime lacks an equivalent record, having been launched in 2021.
High and rising dividends were the main reason I invested in Tufton, paying 86p per share in August 2021, as reported here at that time. They cost £1.02 on Friday and I am happy to hold them in my Isa, where income and gains are tax-free.
Less happily, I may have missed the boat with Ocean Wilsons. After dithering about jumping on board, now the price has spiked. Perhaps this ship has sailed.
I may have got that wrong but, as usual, Shakespeare was right. He observed: “There is a tide in the affairs of men/ Which, taken at the flood, leads on to fortune;/ Omitted, all the voyage of their life/ Is bound in shallows and in miseries./ On such a full sea are we now afloat;/ And we must take the current when it serves,/ Or lose our ventures.”
On a brighter note, let’s wish fair winds and plain sailing for Sir Ben Ainslie and his crew, whose America’s Cup adventure adds to our maritime history. Long ago I was lucky enough to sail with Ben before he got his gong; he is a genuine gentleman
Shipping is an important part of the global economy that is absent from most investment portfolios. But it might be worth considering by investors who are seeking a business that is unlikely to disappear in the future and could prove overlooked and undervalued.
• Compare stocks and shares Isas• Best investment platforms for beginners
A lot of nonsense is talked about English exceptionalism but one thing about this country that really is unusual are its wonderful pubs. Fact-finding missions during the emerging markets world tours of the Nineties and Noughties took me to licensed premises from Buenos Aires to Shanghai and Cape Town to Moscow, along with many more obvious economic hotspots.
But I never saw anything like our local boozers where, on a good day, you can find investment bankers at one end of the bar and bank robbers at the other. Admittedly, that was unusual and they had gathered to remember Bruce Reynolds, the mastermind of the Great Train Robbery, who is buried in the local cemetery; just to the left of Karl Marx.
Sad to say, pubs are under pressures that often prove terminal. Higher taxes with lower demand from younger people helped to close 500 of these drinking dens of social diversity last year.
So it is good to report that some are fighting back with increasingly imaginative ways to bring in the punters. Few try harder than Fuller Smith & Turner (FSTA), where I paid £9.42 in March 2018 for stock that now costs just £7.48. Ouch!
Fortunately, a cash bung of £1.25 per share when it sold its west London brewery and 2.9 per cent dividend income ease the pain. So do 15 per cent discounts off most bills courtesy of its Inndulgence perks card, available to anyone who owns 1,000 shares.
Entertainments beyond food and drink include opera and theatre in Fuller’s pub gardens last summer, links with local sports teams and — to return to where we began — a Trafalgar dinner tomorrow at its flagship pub, the Admiralty, in Trafalgar Square. Cheers!
Full disclosure: Ian Cowie’s shareholdings