I have changed my tune on the mid term outlook in the industry (more bullish) as outlined in [May 22: DryShips - Earnings Growth Continues & Potential Deepsea Oil Drilling Play]
Now I, in general just prefer to own the physical items these shippers are moving around the world, but there are some interesting developments happening in the sector. First, it takes time - and money to build new ships. One longer term issue I had with this sector [Oct 23: A Near Term Top in Dry Bulk Shippers] is the potential of a flood of new ships coming out in 24-36 months. While some are pointing to the 'credit crisis' as a reason it might be harder to fund new ships, I think this is more of a US/UK issue - there is enough petrodollars out there to finance whatever is needed in this world. But these recent stories about the ever higher steel costs might be a true impediment [May 17: WSJ - Fast Rising Steel Prices Set Back Big Projects]. Now on the flip side to that, this is a tricky "reason" to buy companies in this sector because while it might be considered a "pro" for the sector, the same reason would be a "con" for the global economic growth engine, which is what is the underlying story behind these type of stocks.
I'll continue to pick my spots, but due to caution on the market as a whole, I won't be buying much - but as I did Friday buying a bevy of stocks down 15-25% or so (in about a week's time) we'll make some selected purchases along the way. Of course, there is no guarantee the market will fall further. Just my hunch; otherwise I'd be adding more of this name at this support level. Since the rise in price has been meteoric we have very little in the way of support once we break below $80 - hence in a true market selloff we could be easily looking at $65. This would be a nice area to add more.
Long DryShips in fund; no personal position but could change
1 comments:
yea i had "twittered" earlier this morning that i was watching DRYS hoping it would hit the plain jane 50 day simple moving average around $80. (btw sidenote that twitter application is on the upper right corner of my site now mark so you can see what i was talking about, even though i know you don't have as much of a use for it)
anyways, DRYS run-up has been huge and had a nice pullback. the name has always been volatile so its expected. and, as you've shown: if you're patient, you get your opportunities. the baltic dry index has been at ridiculous highs and looked as if it wanted to head even higher. and, seeing as DRYS has a lot of their contracts (practically all) on the spot market and the spot prices were so high, their next earnings report should be great. obviously some of this is already priced in due to the run it had from 65 to 115. but, even last quarter they reported pretty solid numbers and the spot price wasn't ridiculously high then. i'm expecting a massive earnings report next go-round.
only thing that worries me on the pullback has been the volume. stronger volume on this pullback than normal, showing some distribution... just plays into the usual volatility with this name. what's good about this pullback though is the 50day ema here and then the little peak in march is around $85 as well and so that past resistance is now future support.
i bet your personal position will change pretty soon here haha, i'm right on the cusp myself.
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