Diana Containerships Inc (NASDAQ: DCIX) is having an overwhelmingly strong start to the trading session this morning. However, if you go digging for SEC filings or press releases, you’re not going to find any. Nonetheless, there’s a good reason for the gains. Today, we’ll talk about:
- Why DCIX is headed up;
- what we’re seeing from the stock; and
- what we’ll be watching for ahead.
Here’s Why DCIX Is Up
As mentioned above, Diana Containerships is having an incredibly strong start to the trading session this morning, but the company has not released any news. So, what’s the deal? The gains are not specific to DCIX, in fact, plenty of others in the shipping sector are rising.
Ultimately, it has to do with the trade war and an action that United States President, Donald Trump is taking. Recently, it was announced that the Trump Administration would be putting an end to the more than a century old Postal Treaty with China. This treaty provided subsdidies and kept shipping prices low for our Chinese trading partners. In fact, it provided savings in the amount of $170 million or so in the year 2017.
Now that the treaty is being terminated, the idea is that shipping companies like DCIX and others will have the ability to earn more revenue from Chinese shipments. While this may be what is moving the stock, I going to be a bit of a bubble burster.
The truth is that the DCIX business model isn’t based on shipping prices, it is based on days of use and payments per day. Moreover, the lift of the Postal Treaty doesn’t necessarily benefit the company. The truth of the matter is that much of the $170 million in savings was the result of subsdidies paid by the United States government. So, while some shipping companies will benefit here, this isn’t likely to be one of them.
What We’re Seeing From The Stock
One of the first lessons that we learn when we start to work in the market is that the news leads to moves. In this particular case, the end of the Postal Treaty is leading to investor excitment around shipping stocks. So it comes as no surprise to see that Diana Containerships is climbing in the market today. At the moment (10:16), DCIX is trading at $1.49 per share after a gain of $0.16 per share or 12.03% thus far today.
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What We’ll Be Watching For Ahead
Moving forward, the CNA Finance team will continue to keep a close eye on DCIX. In particular, we’re interested in following thes tory surrounding the shipping sector as a whole and how the termination of the Postal Treaty affects it. Nonetheless, we’ll continue to follow the story closely and bring the news to you as it breaks!
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