DryShips

I recently bought stock in DryShips (DRYS) as a play in dry bulk shipping, in accordance with my previous post, but for more of a trade than an investment. While I hit with Quintana Maritime (luckily, due to a buyout) and Diana Shipping, I've missed on the trades with Genko (sold too early) and DryShips (bought too late). My cost basis is around $90 on DRYS, so I'm only down a little, but the stock has experienced heavy institutional selling recently and the chart, which looked so good from an IBD perspective, now doesn't look so good. I looked into it today and here's what I found:

DryShips' CEO, George Economou, is not well-liked. He has a history of reaping the benefits while his company goes bankrupt (a company called Alpha Shipping in the late 1990's. Forbes has a good article--"Curious George" by Nathan Vardi, 02.25.08--that discusses Economou's checkered past). But DryShips has a trailing P/E ratio of 6.55 with 64% ROE, 195% Quarterly Revenue Growth, and 441% Quarterly Earnings Growth. The numbers are unbelievable, and yet the stock sells at a discount to all others in the industry. Granted, it does not pay the nice dividend that Diana and others pay (and therefore does not meet Kiyosaki's criteria), but as a growth story it is difficult to argue with the numbers.

But it all comes back to the CEO. Apparently, most institutional investors find this company to be un-investible(?), although hedge fund traders will take the profits and sell it off (could be what's been happening for the last week). Economou has other companies (Cardiff, which is private, and he sits on the board of Oceanfreight, run by his son) so there is the possible conflict of interest. There's also the fear that he does not care one bit about his shareholders and actually thinks that American investors are gullible and downright stupid (see the article by Kathryn M. Welling, 2/28/05, entitled "The Golden Fleece?"). The stock itself is extremely volatile (from the low $80s to about $115 and back down to $87 in less than one month). There are a lot of great investing opportunities in this sector and most investors would simply prefer to pass on this one for something less volatile and more reliable. But the numbers are impressive, the company has taken advantage of the recent run in day rates (Baltic Dry Index has been on fire lately), and it was due for a pullback. Just how much further it pulls back remains to be seen.

One last note: Pete Najarian has been on this stock lately and said today that it might be worth a look. Oh, and Cramer has flip-flopped from negative to positive lately but, like I said, I wouldn't trust him in this sector. I don't think he follows it closely enough.

Dry Bulk Shipping

If there is one industry group that I like more than any other, it would be dry bulk shipping. Frankly, I don't know very much about the shipping industry, but I have read a lot about it and a number of intelligent investors have mentioned it as a great place to invest. The first, an investor I have the utmost respect for, is Robert Kiyosaki. He has mentioned more than a few times in his monthly Yahoo articles that dry bulk shipping is a place he has put a lot of his own money. The most recent was in January (go to http://finance.yahoo.com/expert/article/richricher/62341 to read the article). An excellent discussion of the merits of this industry are in a Street.com article by Simon Constable. Check out this article at http://www.thestreet.com/story/10418095/1/three-reasons-to-bet-on-the-shipping-sector.html?puc=quotelh .

I have been following this sector since the fall. Jim Cramer told his viewers to stay away from the sector after he was unimpressed during an interview with the CEO of Diana Shipping at the end of October. He was right in the short term, as the Baltic Dry Index fell and a lot of these stocks sold off from November through January. But, they have since rebounded and anyone who got in at, or close to the bottom, would have a nice profit on their hands. I, personally, have had a nice run with Diana Shipping, which I bought in the mid-20s. Last week saw a violent pullback in the sector after another huge run.

I don't think you can listen to Cramer on this one. His timing has been way off--I guess he's recommending them again now, but he missed the big move. Not to say that there isn't more upside, and if Kiyosaki is putting millions of dollars into the sector, I would have to at least pay attention to that. I don't know which way the sector will go from here, but with low P/E ratios, high dividends, a weak dollar, and the slow rate of shipbuilding that's going on (again, read that Simon Constable article), I wouldn't bet against it.

Recommendations

While this blog will focus exclusively on investing opportunities, I would like to refer you to two other blogs. For an outstanding discussion of macroeconomic trends and the current economic problems in the United States, go to www.austrianschool.blogspot.com . For those who are more interested in short term trading that disregards stock fundamentals but focuses on technical analysis alone, go to www.uptrade.blogspot.com .

Welcome

Welcome to "The Part Time Investor"! The purpose of this blog is to help the average investor sift through all of the investing information that's out there and find the important stuff. I'm no expert, I'm not a professional, I don't have a Series 7 license, and I don't work as a broker, financial advisor, or money manager. I simply enjoy reading about investing, researching companies, and investing my own money without assistance. I don't believe in Mutual Funds; in fact I think that most of them are rip-offs. But there are a number of professionals out there who I think are worth listening to and reading: William O'Neil, Peter Lynch, Robert Kiyosaki, Jim Cramer, and Ken Heebner to name a few. I don't like to get a lot of my information from television, although I do watch "Fast Money" on CNBC when I have the time. I'm not an option trader, but I do find that listening to what the Najarian brothers have to say about unusual option activity is useful. For the most part, I like to buy stocks for the future, but I only hold onto them if their story remains in tact. I use technical analysis based on O'Neil and the IBD method and I only buy stocks that have outstanding fundamentals and future prospects, in my estimation. But, like I said, I am not an expert and I won't make stock recommendations. I simply want to find the good information and filter out the bad. Thanks for reading my blog and I hope it helps.