In our Global Growth service, our shipping stocks have been particularly profitable lately. The shipping stocks are rising far faster than the volume of global trade alone would indicate. One other reason for their recent rise is their increasing exposure to key stock market indices that institutional investors follow religiously. For example, TBS International (TBSI) was recently added to eight different Russell indices. The stock has soared as institutional investors who must track these indices are forced to buy the stock.

Earlier this year, the Russell indexers caused some controversy when they added foreign-chartered companies, namely Bermuda based reinsurance companies, to its domestic stock market indices. The fact that Russell left the U.S. to build its domestic indices was viewed as a very aggressive and surprising development. Officially, Russell says that companies that are determined to be "Benefit-Driven Incorporations" (or BDIs) are eligible for inclusion in the Russell U.S. indices.

I suspect Russell will next add Excel Maritime Carriers (EXM). Already, Russell has added TBS International and reinsurance companies headquartered in Bermuda, so I suspect that it is just a matter of time (specifically June 30, 2008, when Russell posts its annual index rebalancing).

In the interim, you can bet that an institutional money manager who is forced to track a Russell index will more than likely load up on TBS International, since it is the only hot shipping stock in the Russell indices. In other words, since TBS International is the first shipper to be added to the Russell indices, it will likely continue to benefit from wave after wave of institutional buying pressure.

Frankly, I do not like to play guessing games about the behavior of index funds, but if you wonder why our Global Growth Buy List is outperforming almost all the international mutual funds and managed accounts lately, it may be because many institutional managers have one hand tied behind their back and are limited to just a few shipping stocks, like TBS International. But I like all our shipping stocks since global trade is in a long-term bull market that will not end soon.