This Red Hot Sector Might Surprise You

What comes to mind when you think of hot stocks and sectors? There’s a good chance that tech stocks lead the list, and for good reason. The Nasdaq 100 gained 55% last year, more than doubling the S&P 500’s 26% return. The Nasdaq Composite has already gained 13.97% this year.

The problem with tech stocks, especially the mega-cap variety, is that in many cases, the train has already left the station. But if we look closely, maybe there is a non-tech sector flying under the radar that we can still buy at a reasonable price.

Global maritime shipping isn’t an area we delve into often, but the road less traveled — or in this case, the ocean less navigated — could make all the difference.

Why is the shipping sector heating up? Check out this excerpt from a statement by Danish shipping giant Maersk, released late Monday. Maersk explains why the company is upgrading its guidance:

On the back of strong container market demand and the disruption caused by the ongoing crisis in the Red Sea...Maersk now also sees signs of further port congestions…

This development is gradually building up and is expected to contribute to a stronger financial performance in the second half of 2024.

Important things to consider:

1. While the gains over the past month have been outstanding, this is not the norm for the shipping sector.
2. Some of these names are small-caps. Investors can break their orders into smaller transactions to avoid excessive volatility.
3. Many of the names in this sector are limited partnerships. Limited partnerships — and distributions generated by limited partnerships — are taxed differently from stocks and regular dividends. Ask your tax advisor for more information.

First up is ZIM Integrated Shipping Services  (ZIM) . This $2.5 billion cargo shipper has gained 66.54% in the past month, and has doubled in less than two months. The company missed earnings estimates, but exceeded revenue projections when it reported on May 21. 

Next up is Frontline PLC  (FRO) , a Cyprus-based, $6.2 billion oil tanker shipping company. Frontline has gained 38.64% year to date, with 13% of that gain coming in the past month.

Finally, we have Knot Investment Partners  (KNOP) . This U.K.-based shipper is tiny, with a market capitalization of just $238 million. KNOP jumped 10.95% on Monday, and has gained 29.21% over the past month.

KNOP hit a new 52-week high on Monday, as it traded on its highest volume of the year.

We often hear of the benefits of diversification. Since many portfolios have grown tech-heavy due to stock appreciation, it might not be a bad idea to diversify into an area unrelated to tech. 

At the time of publication, Ponsi was long KNOP.