Box Ships Inc (OTCMKTS:TEUFF) Could Reverse In Line With A Wider Industry Sentiment Shift

Box Ships Inc (OTCMKTS:TEUFF) ran up early to mid last week, but has since settled to give back the gains. The wider industry is drawing some speculative attention, however, and there looks to be some potential for some further upside heading into the final third of the month and – beyond – into December.Here's what we're looking at.First, who is Box Ships?The company is a shipping company based out of Greece. Through the lease of its fleet, the company engages in the seaborne transportation of containers worldwide. As far as an introduction goes, that's pretty brief, but there's not too much more we can say. The company was formed in 2010 and since formation has had a pretty rough ride. It's now valued at just shy of $400K market cap. Analyst chatter suggests a bankruptcy might be on the cards, and there's very little being released by the company to counter this suggestion as things stand.We think market sentiment couldn’t be more wrong, however. The shipping space has had an incredibly difficult few years. With the Chinese economic slowdown impacting goods shipped, the continued threat in the US of monetary policy tightening, and all this compounded by the rocky twenty-four months in Europe, shippers across the board have struggled.The Baltic Dry Index, which is generally regarded as the most accurate indicator of the health of the dry shipping industry (it's a composite of the Baltic Capesize, Panamax, Handysize and Supramax indices) declined from 2,230 late 2013, to just 291 at the beginning of this year. That's an 87% industry wide contraction. During the last ten months, however, the index has risen to its highest levels since the end of 2014. Moreover, a large portion of these gains (from 954 to 1257) have come since the election result hit press in the US.Why?Markets are expecting a large stimulus program in the US as driven by President-elect Trump's efforts to reinvigorate the nation's manufacturing sector. This stimulus program, if it materializes, will almost certainly focus on US infrastructure, and in turn, will require significant transfer of goods and raw materials into the US. Beyond that, as is Trump's plan, the re-invigoration of the manufacturing sector should, in turn, initiate a large increase in US goods exported (read: goods shipped from the US to Asia, Europe etc.)As the Baltic Dry picks up, it's a leading indicator of the potential for gains in companies like Box Ships.Management tried to tell us all this a few months ago, but markets are yet to listen. Here's an excerpt from the company's latest lesson to shareholders, which hit press on July 11, 2016:

"I have watched as maritime shipping has been mired in a long downturn. The entire container shipping sector has suffered and, along with the dry bulk and LNG sectors, we are at cyclical lows. I have seen these times before. I have been in marine shipping, as a shipping company founder, executive and technical superintendent supervising vessels for other shipping companies, for more than 35 years. These highs and lows are a part of life and we understand the classically cyclical nature of the business. Times like these are not only financially difficult, they are humbling as well."

Since publishing these words, and in the lead up to their publication, CEO Michael Bodouroglou has initiated a flurry of cost cutting initiatives (primarily, the off loading of a portion of the company's fleet), reduced debt burden (as per the most recent filing) and set up the potential for a reverse split should it be necessary to improve capital structure.Bottom line here is that we've got a company beaten down by wider industry forces, but one that is positioned to reverse if said industry picks up – and the leading index in the space, and by proxy, the most accurate bell weather, suggests exactly that is happening right now.Yes, there's a high risk of dilution, as the company seeks to finance itself to expand into the demand growth (although the recent asset offload has injected a certain degree of cash into its balance sheet) but the potential for upside on a revival of the industry outweighs the potential for value loss on this dilution, assuming management maintains a degree of control over its raise initiatives.We will be updating our subscribers as soon as we know more. For the latest updates on TEUFF, sign up below!Disclosure: We have no position in TEUFF and have not been compensated for this article.