Clarkson, the shipbroker, is enjoying a new windfall

For more than twenty years, Shipbroker Clarkson has been a very profitable investment

Can research and proprietary data spur additional growth?

Over the past few decades, shipping services group Clarkson (LSE: CKN) has become a worldwide shipbroking franchise, with its shares increasing from 90p at the turn of the century to more than 50p today. Since the 1980s, Clarkson, which was established in 1852, has been traded on the London Stock Exchange.

But there was no guaranty of success. Clarkson and its rival Braemar (LSE: BMS) had to navigate a shipping market that had been in a slump for more than ten years in the 1990s. Clarkson reported £27 million in revenue in 1999, which was 30% less than what it had made ten years prior.

Fortunately for patient shareholders, Clarkson's management correctly recognized a turning point, pointing out that although reported shipping rates had reached all-time lows, a recovery in freight rates was starting to be driven by an improvement in the global economy.

The demand for shipping raw materials like copper and iron ore skyrocketed after China joined the World Trade Organization in 2001. With well-established hubs in Shanghai, Singapore, and London, Clarkson was in a prime position to capitalize on this expansion.

In 1999, Braemar's management took a different approach, stating that the company needed to "expand activities into non-cyclical marine services" in order to counteract low freight rates. As a result, Braemar expanded into less lucrative but more reliable ventures like bunkering (purchasing oil storage and matching sales to ship operators). This led to a remarkable increase in revenue: in 2007, the bunker trading segment made 33.4 million, which was slightly less than half of the group's total revenue, but its operating margin was much lower than 0.5 percent. After Braemar eventually admitted that this was a bad strategic move, management sold the bunkering company.

Falling margins resulted from Braemar's unhealthy "diworsification" into steady revenue. As the global financial crisis struck, its earnings before interest and taxes (Ebit) margin dropped below 15 percent, and it would keep falling for ten more years. In contrast, just prior to the 2007 financial crisis, Clarkson, which continued to concentrate on turbulent but lucrative shipbroking operations, increased Ebit margins to nearly 20%.

More recently, as a result of Donald Trump's policies disrupting international trade, Clarkson's revenue decreased by 5% in the fiscal year that ended in December 2025. In 2025, the core shipbroking division attained a 20 percent margin, while the group Ebit margin was 15 percent. It had continued to pay well to concentrate on this erratic but lucrative endeavor. For the past 24 years, Clarkson has increased its dividend annually, and this year is expected to see another increase to 115p. Investors who paid 90p per share in 2000 are now earning more money annually than they did at first.

Clarkson is an unseen catalyst for growth.

Further investigation reveals an even more fascinating tale. The much smaller research division saw an encouraging 14% increase in revenue at a margin of nearly 40%, while the brokerage division's revenue (roughly three-quarters of group revenue) decreased. Because the data it gathers and sells has already been generated by the group's enormous transaction flow, this division is a hidden but scalable growth engine where revenue growth directly contributes to the bottom line.

The Parameta division of interdealer broker TP ICAP, which activist investor Justin Hughes recognized as a hidden gem, bears some similarities. The research departments of Parameta and Clarkson are located downstream of high-volume, over-the-counter broker desks, generating high-margin, recurring revenue from transaction data that isn't accessible to the general public. Their digital subscription services have almost no cost of goods sold (Cogs) when they use this by-product of their parent companies' brokerage operations.

One of the main causes of these divisions has been regulation. The need to exhibit best execution, which makes the service a crucial compliance requirement, has fueled Parameta's expansion. Regulations pertaining to emissions and the environment also increase the value of Clarkson's knowledge and information. Just 7% of the world's shipping fleet currently runs on fossil fuel substitutes, but by 2030, that number is predicted to triple. It is anticipated that regulatory pressure to tighten emissions standards will force older vessels to retire early, increasing the demand for new ships.

With its World Fleet Register, Clarkson is in a unique position to advise and finance these multibillion-pound fleet renewals as the industry leader in valuations, sales, and purchases. Built over many years, this database of the world's merchant fleet includes information on vessel ownership, age, specifications, order books, and trading activity. The Shipping Intelligence Network, which provides country profiles and coverage of the complexities affecting shipping markets, including an evaluation framework of the recent closure of the Strait of Hormuz, is the group's other flagship data service. In the first half of 2026, growth accelerated to 24 percent year over year, with the margin improving to over 40 percent. Over 90 percent of the research division's revenue is recurring annually.

Only engineering firm Goodwin has outperformed Clarkson as the FTSE 250's top-performing stock since 2000. Nevertheless, institutional shareholders have voiced some opposition to chief executive Andi Case's eight-figure compensation package, which exceeded £11 million in 2024. Part of the reason for Case's high salary is that, in addition to managing the company, he also works as a revenue-generating shipbroker, earning substantial amounts of performance-related compensation from commissions on brokerage deals. In the shipbroking industry, this is fairly typical; however, James Gundy, the former CEO of Braemar, recently left the company to concentrate on his (presumably more lucrative) role as a shipbroker.

However, it would be better for institutions to concentrate on high rewards for failure, such as in the UK banking industry, where there is a long history of high compensation for managers who fail to generate value or even destroy it. A growing wave of favorable macroeconomic factors has lifted everyone's boat and contributed to the banking industry's recent success. On the other hand, investors in shipbroking should be pleased to reward quality management, as evidenced by Clarkson's 5,100 percent share price increase since January 2000 compared to Braemar's flat share price over the same time period. Outcomes have varied greatly as a result of superior strategic decisions.

The defenses of Clarkson are strong.

However, Braemar poses one risk to Clarkson's investment case. It announced ambitious plans in May of last year to increase revenues from 136 million in the year ending in February 2026 to 200 million by 2030, including a pledge to hire ten new brokers annually. Clarkson has so far equitably divided profits between shareholders and brokers. But since this is a people business, where the assets leave every nite, raising the price of talent runs the risk of giving "star players" with the connections and ability to negotiate a better deal a larger portion of the rewards.

Nevertheless, Clarkson's yearly revenue of more than 600 million is nearly five times that of Braemar. The market leader benefits from the larger group's inherent advantages, which include better liquidity and the capacity to distribute fixed technology costs across a wider revenue base. Approximately 10% of all shipping fixtures worldwide are handled by Clarkson, which has led to a strong network effect: shipowners prefer locations with the greatest number of charterers, and charterers prefer locations with the largest tonnage selection. This stance is strengthened by every successful transaction.

Braemar has combined its revenue target with a target underlying operating profit margin of 15%, indicating that it has learned from its mistakes. Therefore, a fierce competition for top talent is unlikely to be sparked by its expansion.

Clarkson's most recent half-year to June was significantly better than the previous year's revenue drop. Elevated freight rates and increased demand for chartering services created a favorable environment because it typically receives a commission on commercial activities. Strong demand for derivatives instruments to help manage risk, along with a thriving market for shipping vessel valuations, also proved beneficial.

In the first half, revenues increased by 39% to over 414 million, with an Ebit margin of 14% (not including acquisition-related expenses). In August, the business stated that it anticipates a "materially ahead of market expectations" full-year result. For both 2026 and 2027, broker Zeus has increased its earnings per share prediction by 14% to 279p and 310p. As a result, the group's forecast is 17 times this year and 16 times next year. With 155 million dollars in cash at the end of June, Clarkson has a solid balance sheet as well.

In contrast, Braemar has a net debt position of slightly less than £3 million at the end of February and trades on just nine times forecasts for the current fiscal year and seven times forecasts for the next. For the past 20 years, Braemar's share price has hovered around 225p. If management can meet expectations for revenue and margin, the valuation appears appealing. However, investors' skepticism is understandable given that revenue last year was below the level attained in 2016 following many years of poor performance.

As a result, Braemar is in a turnaround position, hoping to emulate its bigger competitor's success. In the meantime, Clarkson has developed into a crucial shipping infrastructure, where the group's recurring revenue from franchises and data subscriptions reduces the "key-man risk" of brokers departing. Even though Clarkson's offices are situated in St Katharine Docks, just outside of London's ancient Roman walls, the seasoned broker has strong defenses to safeguard its place in the market.