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Leveraging Datasets to Enhance Financial Decision Making

7 min read

Deciphering Buy/Sell Signals in the Automation Age with VesselsValue

As the leading provider of vessel valuations and market perspective, VesselsValue delivers high quality data updated daily, as well as objective historical and forecasted values, market trends and flexible APIs to connect VesselsValue data with other critical systems and models. Its extensive data coverage and objective, in-depth analysis helps maritime professionals, investors, and enthusiasts alike stay informed and identify opportunities in the ever-evolving shipping industry.

In 2023, VesselsValue was acquired by Veson Nautical, a global market leader in developing, implementing and supporting the solutions that propel maritime commerce. VesselsValue now sits alongside three other brands in Veson’s suite of maritime solutions, including the flagship Veson IMOS Platform, dry bulk commodity trade flow solution Oceanbolt and vessel and voyage document management solution Q88. Having these strategic solutions all under one roof creates possibilities to integrate systems and workflows, helping maritime organisations deepen visibility and enhance decision-making like never before.

I recently spoke at Marine Money, where I demonstrated the wide range of valuable datasets VesselsValue offers and how you can use them to help inform financial decisions. Let’s take a look.

Automated Vessel Valuation

VesselsValue Market Value estimates are generated by a statistical model, calibrated daily to market data, specific to vessel particulars, and supported by measurable accuracy. Most importantly, they are independent, objective and confidential.

The VesselsValue model relies on complete and accurate data of vessel particulars, Sale & Purchase (S&P) transactions, freight earnings, steel prices, and other drivers of asset value, which are curated by specialist teams across Veson Nautical. We understand that the vessel data and valuation outputs from our models become the inputs to your models, which is why we take great care with the data we are collecting to avoid a ‘garbage in, garbage out’ scenario. Aside from standard asset valuations, we produce many datasets that clients use to inform their decisions. One example is Fixed Age Market Value.

Fixed Age Market Value

As assets age, the overall market value follows a generally decreasing trend. To understand the Fixed Age Market Value of an asset, start with the market value of a depreciating asset, such as this example asset – an Aframax built in 1998 (black line).

Next, we strip out the depreciation component from the model. This means that the hypothetical market value of the asset is being assessed as if the asset remained fixed, at the same state that it was in when it was zero years old (blue line).

Without the asset’s age factored in, the changes displayed on the graph are being driven purely by market conditions. This pure market indicator can help clients answer the question of ‘where are we in the market cycle right now?’ to help inform their investment/divestment decisions. There are many methods for leveraging this insight, such as computing statistics of historical value distributions, fitting trend models to these data and projecting forwards, or even fitting stochastic processes to simulate future scenarios. We will be evaluating the simplest of these methods, which is analysing statistics of these historical value distributions.

Evaluating Historical Value Distributions

In this Fixed Age Market Value chart spanning 25 years, we can see the current value of the zero age asset (red line) as well as the minimum and maximum (gray dashed line) and the median (black dashed line) of the historical valuations. From this additional information, you can see that the current fixed age value is high compared to historical fixed age values.

From here, we can convert the time series graph into a histogram that displays how long the fixed age value of this vessel spent at each valuation level, in relation to its current level  (red line). Additionally, we can calculate the percentile of the current fixed age value within this distribution. In this example, the result is 92%, meaning the market value of an equivalent asset was historically lower 92% of the time, and historically higher only 8% of the time. This simple analysis of historical valuations, with no additional context or narrative, can act as a baseline for building a buy/sell case.

Here you can see ‘heatmaps’ showing these percentiles for different vessel types, vessel ages, and dates, all derived from VesselsValue’s Fixed Age Market Value data. Views like this can provide highly valuable insights into whether assets are trending towards ‘buy’ or ‘sell’, based on the percentile of each asset’s current fixed age value within its historical distribution.

Adjusting For Inflation

VesselsValue valuations are in nominal USD, meaning they are not adjusted for inflation. So, it begs the question of whether inflation should be factored in? The answer can be yes and no. Yes, if we are trying to analyse multidecade time series on a ceteris paribus basis, meaning real dollars. On the other hand, there is an argument for no, as vessel price inflation is hard to discern empirically and is likely lower than consumption-based inflation rates.

The above charts demonstrate the difference between fixed age market values in nominal dollars and inflated to 2023 USD using the US Consumer Price Index (CPI). In real terms, the current zero age value is no longer close to historic highs, lying much closer to the median of the distribution after adjusting for inflation. This shows that different premises applied to the same data result in a different story. In other words, our data itself is not your competitive advantage, but rather a tool to help you realise that competitive advantage.

Adding Context & Nuance

In addition to the context-free baseline of historical fixed age values, VesselsValue provides other datasets that can add context and nuance. Some examples are understanding general freight earnings with Discounted Cash Flow Values (DCF Value), specific employment of vessels with Market Value with Charter, macroeconomic forecasts with Forecast Market Value, and ESG ratings such as EEXI and CII. Additionally, supplementing VesselsValue data with expert analysis can help deepen insights for your specific business goals and strategy – the VesseslValue analyst team stands ready to assist.

Whether you are a shipowner, broker, investor, or simply have a keen interest in the maritime world, VesselsValue can help you navigate the complexities of the shipping industry with greater clarity. With access to real-time data on vessel valuations, market trends and shipping analytics, you can remain well-informed and identify profitable opportunities as they arise. Learn more about advancing your competitive advantage with VesselsValue by exploring our solutions and requesting a demo.

VesselsValue data as of January 2023.

Disclaimer: The purpose of this blog is to provide general information and not to provide advice or guidance in relation to particular circumstances. Readers should not make decisions in reliance on any statement or opinion contained in this blog.

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