Dry Bulk Shippers Continue their Descent - Adding Excel Maritime (EXM)

As I wrote (Dry Bulk Shipping - Play with Fire and You Can get Burnt) there is quite a bit of risk in chasing a hot sector. With that said, for a relatively minor drop in spot shipping prices these stocks have been pole axed. The contrarian in me is starting to get interested, although the fact these stocks are over run with Johnny come lately momentum kids is the main problem. They will panic and selling begets selling, just like buying begets buying on the other side.

Some examples
Excel Maritime (EXM) has lost 27% of its value in just a few sessions, down from $80 to $57's
Dryships (DRYS) has lost 21% of its value in just a few sessions, down from $130 to $103's
Diana Shipping (DSX) has been a bit more stable over the past week but down 12.5% from its high Friday.

If there were not so many momentum lemmings I'd be more constructive and catching a falling knife is not optimum trading strategy but I decided to open a beginning position in Excel Maritime (EXM) in the $57s. As I've stated I am not willing to chase momentum stocks at 52 week highs because when the music stops, finding a chair is tough but when they pull back so strongly in such a short amount of time and the underlying fundamentals have not changed (much), it is more interesting.

This stock has been hit the hardest and has some support in the $55 to $60 range from late September/early October. Unfortunately it has broken its 50 day moving average of $60, so hence why it's hard to go whole hog. A break of this level would take the stock to $45 where I'd be interesting in buying in some scale. While there should be a flotilla of dry bulk shippers hitting the world in 2010-2012, the market should be relatively benign for next few years - that said, current rates are extreme for shipping and a pullback would be in order. When it costs more to ship iron from Brazil to China, than the iron ore itself costs, we are at a major pressure point where end customers say enough is enough.

Excel Maritime has estimates of $4.03 for 2007 and $6.87 for 2008. With that said, estimates for 2008 are subject to large revisions since spot pricing is a good part of Excel's business. So I am going to go with a more conservative $5.50-$5.75 estimate for 2008 which still puts the stock at about 10x 2008 estimates at today's price.

I started with 185 shares in the $57s or $10.5K, a 0.9% position for the fund
EDIT: Marketocracy.com is running very slow today, so getting updates and filled orders is extremely delayed. Since I could not tell if I was filled on EXM I actually put in two orders in error, so I bought 185 AND 175 shares so my position is actually 360 shares, $21K or 1.8% of the fund.

Long Excel Maritime in fund; no personal position