I hate big boats, so I try to avoid them. The feeling of the floor shifting beneath my feet makes me sick. I have never been on a cruise and intend to keep it that way.

While traveling a few months ago, I had no choice but to suck it up and take a three-hour ferry voyage between the north and south islands of New Zealand. It was the only way for my wife and me to get to Picton, the small fishing village that was our next destination.

As soon as I stepped onto the boat, I sought out a room with no windows. I thought maybe if I couldn't see outside, my inner ear—or whatever part of my body malfunctions at sea—wouldn't realize we had left land, and I could avoid that awful nauseated feeling.

I tucked into a small booth, popped in my earbuds, and turned up the volume. About half an hour later, when the podcast I was listening to ended, I realized with great delight that I had forgotten I was even on a boat. The voyage was so smooth that I didn't feel the slightest bit queasy. I was overjoyed—my plan had worked!

I removed my earbuds, pulled out my iPad, and started to read, content in knowing I had found a solution for my lifelong seasickness problem. In the back of my mind, I was already planning the Caribbean cruise for our next Christmas vacation.

Then the intercom blared: "We apologize for the delay; we'll be departing shortly."

Crap.

When the ferry finally did pull away from port, it quickly not only became clear that my clever plan hadn't worked, but that locking yourself in a room with no windows makes seasickness worse, not better. Who knew?

I ran up to the sundeck to find my wife, who also suffers from seasickness, but had smartly opted for the fresh-air approach. Thankfully, she had some anti-nausea pills, which I had previously refused to take. The distinct feeling that I was about to lose my breakfast overpowered my apprehension of taking medication, so I downed the pills. They saved the day.

As much as I have suffered aboard ships in my lifetime, though, that's nothing compared to the agony people investing in ships—specifically, dry-bulk shippers—have endured in the last five years.

Dry-Bulk Shippers—a Dismal Performance

2008 to early 2009 was a bad time for stocks in general—but shipping stocks really took it on the chin. One large, publicly traded shipper lost 98.7% of its value from peak to trough, and the others didn't do much better.

Since then, most stocks in the S&P 500 have recovered in unison, thanks to the Fed's unprecedented money-printing. But dry-bulk shippers didn't recover at all; in fact, they sank to new lows into 2013. They've been terrible laggards in the economic recovery.

Dry-bulk shippers, if you're not familiar, are the companies that own the ships that move goods across oceans. They carry iron ore, coal, wheat, and many other commodities from one country to another. It's a cyclical business, heavily dependent on the health of the economy.

The problem was that shipping charter rates fell off a cliff in late 2008 and never recovered, so shippers couldn't make any money. Like any price, charter rates are a function of supply and demand—demand being the amount of stuff that needs to be moved across the ocean, and supply being the amount of ships available to do the job.

As you would expect, demand plummeted during the financial crisis, but also recovered pretty quickly. Supply problems, on the other hand, persisted.

The crux of the issue is that ships are huge and take two years minimum to build. There is no Amazon Prime for ships: if you order one now, you'll be lucky to get it before the next summer Olympics.

For that reason, a lot can change from the time a ship is ordered to when it's ready for use. Shippers learned that lesson the hard way when they ordered a record number of ships in 2007 and 2008, in response to rising charter rates.

Then the bust happened.

Two years later, when demand was recovering, those previously ordered ships were finally starting to come online… at exactly the wrong time. The glut of ships kept shipping rates depressed, and many shippers struggled to survive.

Charter Rates Are Finally Turning Up Now

The new uptrend is also a result of supply and demand. After five disastrous years, the oversupply of ships is finally dissipating. And because ships take so long to build, the glut isn't coming back anytime soon. New ship deliveries are dropping sharply and will continue to fall through 2015.

With charter rates finally turning back up after five long years of decline, the dry-bulk shipping industry is ripe for investment. Here are five tips on how to choose the best dry shipper.

1. Fixed vs. variable rates

Some shippers contract their ships over long time frames, charging a fixed rate per day and locking in that rate for two to five years at a time. Others contract each ship on a per-trip basis, constantly adjusting prices to reflect the spot rate. Most shipping companies use a combination of both.

If you're a conservative investor like me, your kneejerk reaction is probably to go with the fixed-rate shippers. Their revenues are more predictable, and thus they're more financially stable.

But under today's market conditions, that would be a mistake. Because shipping rates are rising and should continue to rise, you want to own a shipper that contracts most of its ships at spot. Those companies will benefit first, and their stock prices will rise the most.

In short, shippers that contract on spot have much more upside than their fixed-rate counterparts.

2. Don't invest in a shipper that might go bankrupt

OK, this isn't exactly a profound tip. I might as well tell you not to use antifreeze as mouthwash. But it's a very important point when investing in shippers, because many of them are tiptoeing a little too close to the edge of bankruptcy for our liking.

Why are so many shippers in critical financial condition? Keep in mind that their primary assets are gigantic, expensive boats. To acquire those boats, shipping companies often take on a lot of debt, leaving them more vulnerable to economic downswings than your average industry.

Add to that the fact that the shipping industry has been a disaster for the last five years, and it's no wonder a sizable chunk of the industry is near financial distress.

Before picking a shipper, make sure it can handle its interest payments and other fixed operating costs. Otherwise, it might not be around long enough to reap the benefits of rising charter rates.

3. Don't diversify

You won't hear this advice very often, but it's key in this space.

Here's why: as I mentioned above, thanks to years of dismal business conditions, most shippers are not the picture of financial health. In fact, six of the ten shipping candidates our analysts examined in this month's Casey Report actually have negative Altman Z-scores (a common metric that estimates the probability of a company going bankrupt).

If you diversify among several companies, you'll surely end up with a few of those debt-laden deadbeats in your basket, dragging down your overall returns. It's much better to pick the best of the best, rather than allow mediocre companies to invade your portfolio in the name of diversity.

4. Use stop-losses… because shippers are volatile

Of course, eschewing diversity and focusing your dollars on just one company adds a bit of risk. Dry-bulk shippers are volatile and can react strongly to macroeconomic news. For example, if Chinese factory workers stage a major strike, you'll know it by looking at dry-bulk shippers' stock prices that day.

So you want to use stop losses to make sure that if things go bad, you only lose a little bit. The nice thing about the dry-bulk industry is that it's been beaten down so badly that share prices are still quite low, so the downside is limited. We've seen opportunities to buy a stock with 50% upside, where we can place a stop loss just 20% below its current price, making for an attractive 2.5:1 reward/risk ratio.

5. Use seasonality to your advantage

Charter rates are seasonal. Typically, they decline in the first quarter of the year, which we're smack-dab in the middle of right now.

There are a few reasons for that. One is that weather in Brazil and Australia—two important commodity producers—is generally bad this time of year, which slows down production. Another is that the Chinese New Year, China's most important holiday, falls in late January or February. Much like the week between Christmas and New Year's in the US, Chinese people take it easy during their most important holiday, so commodity demand softens.

Given that we're pretty much right in the middle of the seasonal weak period, now's the perfect window to invest in shippers, before demand picks up again.

As a shameless plug, if you'd like some assistance navigating the choppy waters of dry-bulk shippers, take The Casey Report for a risk-free test drive. In the current edition that was published just last week, our analysts identify the very best dry-bulk shipping stock. It's still very close to our buy range today.