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According to an article by the Economist, Greece, a country of some 11 million people, controls nearly 20% of the world's merchant fleet by tonnage.  The Greeks specialize in oil tankers and carriers that transport bulk commodities.

According to Martin Stopford, an economist with Clarksons, the world's largest shipbroker, the secret of the Greek success is not, as you might expect, that Greeks are good at running ships. They leave the grind of finding cargoes to specialists: they excel, instead, at managing risk. The Greek shipping fortunes are based on buying ships cheaply and selling them dear. They have an impressive record of spotting the tops and bottoms of the market.

Therefore, it would be natural to invest in where the Greeks have comparative advantage: the shipping or cargo industry in Greece.  Below are some of the Greek Stocks listed in the United States:

Tsakos Energy Navigation (NYSE: TNP) - Tsakos Energy Navigation Limited is a provider of international seaborne crude oil and petroleum product transportation services. The Company owns a fleet of modern tankers providing worldwide marine transportation services for national, major and other independent oil companies and refiners under long, medium and short-term charters. Its fleet consists of 27 tankers, including three chartered-in vessels, of which two are very large crude carrier (VLCC) tankers, four are Suezmax tankers, 10 are Aframax tankers, seven are Panamax tankers and four are Handysize product carriers. The fleet totals 2.9 million dwt (dead-weight tons) and is less than 10% single-hulled as measured by dwt. In addition to the vessels operating in its fleet, the Company has contracted for the building of additional 13 vessels and has signed a letter of intent for two further vessels.

Stelmar Shipping Ltd (NYSE: SJH) - Stelmar Shipping Ltd. is an international tanker company that is developing its fleet with a primary focus on Handymax tankers, which transport refined petroleum products, and Panamax tankers, which transport crude oil. As of December 2003, Stelmar owned and operated its fleet of 31 tankers, including two leased Aframax tankers with a total cargo-carrying capacity of 1,791,490 deadweight tons (dwt), which include 18 Handymax tankers, nine Panamax tankers and four Aframax tankers. As part of the Company's fleet growth and renewal program, during the year ended December 31, 2003, Stelmar received delivery of the first newbuilding in a series of 11 new vessels to be delivered in 2004. Two 2004-built, double-hull Panamax vessels, the Cabo Sounion and the Reymar, and three 2004-built, double-hull Handymax vessels, the Alcmar, the Alcesmar and the Andromar, were received from January 2004, through March 2004.

Original Article from the Economist:

On the crest of a wave?

Jul 22nd 2004 | ATHENS AND LONDON
From The Economist print edition

Things have been so good in the bulk-shipping market that it is hard to believe they can stay that way

BY THE pool, overlooking the wine-dark waters of the Aegean, the champagne flowed as the cream of the world's shipping industry gathered to watch the fireworks at one of many lavish parties thrown during Posidonia, a recent trade show. Thanks to the greatest boom the industry has seen since the closure of the Suez Canal in 1967, the mood was buoyant. But strong winds blew ash from the fireworks on to the guests, driving the many women in low-cut dresses to shelter under the jackets of obliging males.

No sooner was the party over than it seemed that the industry itself might have to run for cover, as the price bubble that had seen bulk-shipping rates more than double since September 2003 suddenly lost air. Fears of a slowdown in China's economy, and a temporary ban on its imports of soya from Brazil, halved the Baltic dry-cargo index, which covers bulk-cargo rates on the world's 23 busiest sea routes. Rates have since recovered somewhat (see chart), but worries abound that a more fundamental correction in rates may be coming soon.

Now is clearly a moment to keep a close eye on the behaviour of the Greeks, who—despite departures from the business of the heirs of Aristotle Onassis and, late last year, those of Stavros Niarchos—remain the savviest in the industry. Greece, a country of some 11m people, controls by far the biggest share—nearly 20%—of the world's merchant fleet by tonnage, even if many Greek ships fly flags of convenience. The Greeks specialise in oil tankers and carriers that transport bulk commodities.

According to Martin Stopford, an economist with Clarksons, the world's largest shipbroker, the secret of the Greek success is not, as you might expect, that Greeks are good at running ships. They leave the grind of finding cargoes to specialists: they excel, instead, at managing risk. The Greek shipping fortunes are based on buying ships cheaply and selling them dear. They have an impressive record of spotting the tops and bottoms of the market.

Foolishness to the Greeks

That is in sharp contrast to certain other perennial investors in shipping: on the waterfront of Piraeus, where owners and their agents mingle, they say that, while God gave the Saudi Arabians oil, he fortunately gave the Greeks the Norwegians. Needless to say, Norwegians disagree. After all, the world's largest tanker owner is a Norwegian company. Nor is it just Norwegians who are the fall guys. The price of second-hand bulk carriers started to fall this spring as freight rates declined, catching out some firms. On July 21st, Jinhui, a Chinese shipping company listed in, er, Oslo, issued a profit warning for precisely that reason.

Greeks buy and sell ships far more often than others in the industry. Naftiliaki, a trade magazine, says that of 535 ship trades from January until mid-May 2004, 264 involved Greeks. Most of the 733 Greek shipowning firms are small, with only a few ships. But the industry is consolidating fast—which may limit the ability of firms to time the market so well in future (at investment vehicles such as hedge funds, bigger generally means worse). The 46 largest Greek shipping firms now control 70% of the fleet. Although the fleet has grown, the number of firms is down by 25% since 1998.

The past few years have also seen the emergence of the publicly-traded Greek shipping company, an idea that would have been anathema to the likes of Onassis and Niarchos, who had little time for the transparency or accountability involved in being public. It is still a comparatively limited phenomenon, but it involves some big companies. For instance, Tsakos Energy Navigation (TEN), a subsidiary of the second-largest Greek shipowning firm, is listed on the New York Stock Exchange.

Soon there may be many more, combining the trends of listing and consolidation, and increasing internationalisation—signs, perhaps, that the Greeks think the market is near a top. Another Greek shipping line already listed in New York is Stelmar, founded by Stelios Haji-Ioannou (of easyJet airline fame), and floated in 2001. This week it reported second-quarter profits that had swelled to $15.8m from $4.5m in the same period in 2003.

Mr Haji-Ioannou, who with his family owns 27% of Stelmar, is attacking its board for not letting shareholders consider a couple of takeover approaches. One is from OMI, an American shipping firm listed in New York; the other is from the GEM group, owned by the Greek Restis family and rumoured to be seeking a listing in New York. Argonaftis, the first shipping firm to float on the Athens stock exchange, announced in February that it would also get a New York listing.

The urge to go public has been accompanied by a move into market niches; TEN, for instance, signed a $170m contract to buy a liquefied natural gas carrier (LNG) in early June—a sector that the Greeks have historically steered clear of, but which is now starting to boom. Because the LNG trade is expected to grow significantly in the next decade, many more ships are being built. This is a niche once dominated by energy groups themselves and shipping companies from big oil-importing countries such as Japan: now everybody is piling in, perhaps over-enthusiastically.

As well as becoming more diversified, risks are also being managed by making the Greek fleet younger (and thus in better condition)—the average age of a Greek ship is now 16.8 years, down from a bit over 20 years in 2000. But the Greeks, who traditionally trade only second-hand ships, have now placed orders for new vessels, taking them into new risk territory.

One side-effect of the increase in transparency has been to attract more outside investors into the industry. Traditionally, shipping finance came from plain vanilla bank loans, secured against ships. Bankers such as Royal Bank of Scotland are still prominent on the Piraeus waterfront, but new sources of finance are emerging. Financial instruments, such as asset-backed securities, are increasingly popular, especially in Germany, where investors (chasing a local tax break) have a lamentable habit of entering a market just as it becomes a bubble. According to Lloyd's Shipping Economist, such new sources now account for 60% of global ship-financing.

The most dramatic growth has been in shipping futures, which allow shipping companies to lay off risks. The most popular futures are forward freight agreements (FFAs) to deliver goods on a particular route at some point in the future. They have grown, in the past year, to be roughly the size of the physical market, according to Bill Lines of the Baltic Exchange, a shipping bazaar in London that sells FFAs. Many in the industry have been suspicious of such futures, because they have been averse to hedging their bets—risk-taking is, after all, part of the game—and averse to complicated financial instruments that they do not really understand.

But, says Mr Lines, the desire of outsiders to get into a booming ship industry has fed the growth of futures. In September 2003, the Baltic Exchange launched a “paper ships” index, which trades on the future cost of ships themselves, rather than future freight rates and, this autumn, they plan to launch a “demolition assessment” index, which will trade on the future scrap value of ships. The International Maritime Exchange, in Oslo, a competitor, estimates that the futures market will grow by another 80% by the end of 2004.

More use of hedging should, in theory, reduce the volatility of shipping rates, and thus mean smaller swings between market peaks and troughs. That would limit the ability of Greek investors to make a killing by timing their purchases and sales. On the other hand, they will see opportunity aplenty in the rush of new, inexperienced money into the industry—especially if they suspect that prices could once again crash. Beware Greeks bearing ships?

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