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.