Choose Your Poison: Shipping Nanocaps

September Shipping Report: The Nanocaps Edition

I like companies with a focus.

In shipping, this means operating only one type of ship—it is even better if it is of a single class. For example, only small LPG carriers, VLCCs, or Capesize vessels.

But why?

Not all LPG carriers/tankers/dry bulk carriers are the same. For example, VLCC tankers are the best place to be in the tanker segment, so I would pick DHT Holding (NYSE: DHT). Capesize bulkers offer the best risk-reward in the dry bulk niche, so my choice would be Himalaya Shipping (NYSE: HSHP).

However, diversified fleets have one advantage: lower volatility (in the context of shipping), as they are exposed to multiple markets. By picking conglomerates, we smooth the volatility inherent in each shipping segment. To recap, choosing diversified or concentrated names is neither right nor wrong. It depends on investors’ goals, skills, and risk tolerance.

And here comes the shipping nanos, one of the most obscure markets. They range from diversified to focused companies. Think about companies with a market cap below $200 million, questionable management, and a history of screwing shareholders. What's not to like?

This is one of my favorite articles to write, and I guess it will be one of the most curious for the readers. Wonder why?

A meme equals thousands of words.

To reiterate, extravagant compensation, share dilution, and opaque reporting, just to name a few lovable traits of shipping nanos. Simply, there is a poison for everyone.

That said, let’s check how the shipping nanos performed since the beginning of 2025.

The YTD figures are mixed; Imperial Petroleum (NASDAQ: IMPP) and Top Ships (NYSE Arca: TOPS) are in line with benchmarks, as are the Amplify Breakwave Tankers ETF (BWET) and the Sonic Shares Global Shipping ETF (BOAT). The LNG names, Dynagas LNG LP (NYSE: DLNG) and Awilco LNG ASA (OB: ALNG), are the top losers YTD. The middle ground is held by United Maritime Corporation (NASDAQ: USEA) and EuroDry (NASDAQ: EDRY).

The names in the list operate in three segments: tankers, dry bulk, and LNG carriers. Let’s say a few words about each contender.

Performance Shipping operates six Aframax tankers with an average age of 14 years. The company ordered four new LR2 vessels in 2025 with expected deliveries within the next 24 months.

Top Ships is another tanker play. The company operates three MR2 product tankers, 5 Suezmax crude tankers, and 2 VLCCs. The average fleet age is below 6 years, with the oldest units dating back to 2019.

Imperial Petroleum has the largest fleet among the companies analyzed, comprising 19 vessels. The fleet consists of 7 MR product tankers, 2 Suezmax tankers, 2 Kamsarmax bukers, 5 Supramax bulkers, and 3 Handysize bulkers. All vessels are non-Chinese built, with the majority constructed in Korea and Japan.

Pyxis Tankers, similar to Imperial, owns a mixed fleet of tankers and bulkers. The company operates a diversified fleet of 6 vessels. The fleet comprises three MR2 product tankers with an average age of 11.0 years and three dry bulk vessels (one Ultramax and two Kamsarmax) with an average age of 9.7 years.

OceanPal: This is another bulk carrier/tanker name. The company owns 3 x Panamax bulkers, 1 x Capesize bulker, and 1 x MR2 tanker. The average fleet age is 19.2 years.

EuroDry operates 12 dry bulk vessels with a total carrying capacity of 919,000 DWT and an average age of 14.5 years. The fleet is built around two clusters: vintage Japanese-built Panamaxes and modern Chinese-built Ultramax/Kamsarmax vessels.

Globus Maritime owns nine dry bulk vessels (6 x Kamsarmax and 3 x Ultramax), with an average age of 7.3 years and a total carrying capacity of 680,622 DWT.

Awilco LNG operates two LNG carriers, both built in 2013 with a capacity of 156,007 cubic meters each. Awilco vessels have an average age of 12 and come with tri-fuel diesel-electric (TFDE) propulsion.

Dynagas LNG operates six LNG carriers (3 x TFDE vessels and 3 x steamers). The average fleet age is 14.5 years. Five of the ships are ice-class, which are contracted for Arctic operations.

As you can see, there is something for everyone: from tanker-only plays through mixed tankers/bulkers fleets to ice-class LNGs.

Now, let’s look at the figures. The following table presents a summary of each company:

As you can see, the adjective “nano” perfectly describes those enterprises. For the price of a new LNG carrier with MEGI propulsion (approximately $250 million), you can build your maritime empire by acquiring 8 out of 10 listed nanocaps and still have $50 million as pocket money.

Unsurprisingly, financials vary significantly. We have highly geared enterprises, moderately leveraged names, and a zero-debt company. Similarly interesting is the situation with profitability and efficiency. The LNG names, DLNG and ALNG, deliver solid FCF yields, while others, such as EDRY and OP, are burning cash.

Yet, what is common is the massive discount to Tangible Book Value (PTBV). All names in the list trade at 60% to 90% discount to TBV. Of course, this is a norm for shipping nanos, as their idiosyncratic risk is inherently higher compared to mid- and large-cap shipping names. That said, occasionally the nanos can revalue up to 50% to 60% Price to TBV. Consider that if you enter at 20% PTBV and exit at 50% PTBV, this results in a 150% upside potential.

For yield-oriented investors, two of the companies offer preferred shares/units:

• Dynagas LNG Partners LP 9.00% Series A Cumulative Redeemable Preferred Shares (NYSE: DLNG/PA)

• Imperial Petroleum 8.75% Series A Cumulative Redeemable Perpetual Preferred Shares (NASDAQ: IMPPP)

The two issues are marked with green on the table above.

Dynagas had two series of preferred units, but in July, the company redeemed the Series B units. At today’s share price, Series A provides an 8.55% current yield. Given the company's extensive backlog, robust debt coverage, and double-digit FCF yield, DLNG Series A is an alternative to consider.

However, there is a specific risk to be aware of. This is the relationship between Dynagas and Russian-related corporate entities. The companies in question are Yamal LNG and SEFE Group. In short, beware the sanctions risk.

Imperial also offers one issue of preferred shares, Series A. At the present price, the current yield is 8.65%. The company has no debt, so it will likely repurchase its preferred shares sooner rather than later.

Risks

Normally, I do not close the market reviews with a risk discussion. Yet this is the Nanocap edition, and without addressing the risks, my job is incomplete.

One of my favorite rules is inversion. Essentially, start with what not to do, and then figuring out what to do becomes easier. In other words, ask the following question:

Why should you NOT invest in company XYZ?

This question is 100% applicable to shipping nanos, because most of the time, and for most investors, they are more dangerous than a beneficial addition to the portfolio. Although for industrious investors, shipping nanos are a wonderful addition under a few considerations:

• Shipping nanos are basically call options; they offer huge risk-reward, yet the principal is far from guaranteed. Assume you can lose 100%.

• Bet a small fraction of the book, preferably low single digits, and build position gradually on a few tranches.

• Time the entry. Follow closely the company you like to pick the timing. It will never be perfect, but the goal is to be less wrong. A sound signal is buybacks and management shares purchases.

• Time your exit, too. Shipping stocks, in general, are not buy-and-hold plays. This is even more valid for nanocaps. Once the price reaches the target, take the money from the table. Remember, another share dilution round always creeps around the corner.

Shipping nanos share many similarities with junior miners: dubious management, generous compensations, and capital destruction. Therefore, for the majority of investors, it is preferable to play the shipping theme through the shipping majors or ETFs, such as BWET and BOAT.

On the other hand, shipping nanos are proper alpha boosters for shipping portfolios, offering a high risk-reward. Or, in some cases, as with Dynagas LNG and Imperial Petroleum, as a part of an income-centered portfolio.

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PS: For more actionable and asymmetric ideas on shipping and beyond, consider TheOldEconomy premium plans: Researcher and Strategist.

Thank you for being part of TheOldEconomy. Here’s to your continued growth and success, one wise decision at a time.

Invest wisely,
Mihail Stoyanov
Founder, TheOldEconomy

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Everything described on this site, TheOldEconomy.substack.com, has been created for educational purposes only. It does not constitute advice, recommendation, or counsel for investing in securities.

The opinions expressed in such publications are those of the author and are subject to change without notice. You are advised to do your own research and discuss your investments with financial advisers to understand whether any investment suits your needs and goals.