Five months after UBS Warburg David Lepper told investors to dump Evergreen Marine Corp (長榮海運), he reversed course, saying it's time to buy.
Investors who followed his advice say he missed the boat.
Shares of the nation's biggest shipping company surged 89 percent since he reiterated a "reduce" rating Oct. 3 and last week, when he changed that to "strong buy."
Lepper wasn't alone, said Cheng Yi-sheng, who helps manage NT$1.5 billion ($43 million) at Taiwan Securities Ltd (台証證券). "Almost every analyst and local fund manager missed the rally in transportation shares," he said.
At the time, Lepper's reasoning appeared sound. Less than a month after the Sept. 11 terrorist attacks, he said Evergreen's shares were likely to fall as freight rates drop because of an oversupply of vessels and slowing global economy.
As it turned out, though, shipping companies were among the beneficiaries of the disruption in air travel that followed the attacks -- and were also helped by falling oil prices, down by a fifth since September.
"Signs of a potential global economic recovery, a delay in ship purchases and signs freight rates have started to bottom," convinced Lepper to issue his new ratings for Evergreen, as well as Wan Hai Lines Ltd (萬海航運) and Neptune Orient Lines Ltd, Singapore's biggest traded shipping company.
Wan Hai is up 58 percent since Oct. 15 and Neptune Orient rose 70 percent since Sept. 25. Hanjin Shipping Co, which Lepper rates a "buy," more than doubled since Sept. 17. A Morgan Stanley Capital index of transportation companies in Asia outside Japan rose 18 percent since the attacks.
Some investors still remain skeptical.
"I'm not going to buy," said Steven Hsieh, who manages about US$71 million in stocks at Dresdner Asset Management Taiwan Ltd. "There needs to be clearer evidence of an economic growth pickup."
Yet others say such signs are already apparent.
The US economy is likely to expand during the first three months of this year at a 2.3 percent pace, according to the median of nine forecasts in a Bloomberg News survey. The largest economy buys about a third of Asia's exports.
"The US economy is turning around," said Jonathan Pain, chief investment officer at Rothschild Australia Asset Management Ltd, which manages about US$5.5 billion. "Asian economies will improve as they are heavily leveraged to the US business cycle."
UBS reckons global trade in containers will rise 6.5 percent this year, compared to a 3.5 percent advance last year.
On Friday, Evergreen shares fell 5.2 percent to NT$16.50 while Wan Hai dropped 1.7 percent to NT$17.20. Neptune Orient slid 0.9 percent to S$1.16 and Hanjin shed 5.1 percent to 7,020 won.
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