Like I said in my previous articles, I am not an expert on Dry Bulk Shipping. But I read the experts and the consensus is that this "crash" is temporary. I hate predictions, but these moves are violent and make no sense. DryShips is holding an "investor day" on Monday. Should be interesting to hear what George Economou has to say. A 4 P/E with the kind of growth that DRYS has, especially since the company apparently locked in rates with some contracts at the highs for the BDI. In addition, a large majority of DryShips' fleet is made up of Panamax and not Capesize ships, which took the brunt of the hit recently. And Natasha Boyden, analyst from Cantor Fitzgerald, mentioned that China only has about 3 or 4 weeks of iron ore to burn through before they have to start importing again. I don't trust the Chinese government (I don't know how anyone could), so I don't own and will never own any Chinese stocks for as long as they remain communist, but shipping is a way to play the boom in China, India and elsewhere.
There's been some dumb commentary out there about Dry Bulk shipping. Jeff Macke on "Fast Money" can't get it out of his head that "Dry Bulk Shipping" refers to Walmart's Chinese imports (I don't think he owns any stocks besides Walmart and Microsoft--that's all he talks about.) Najarian disagrees with him and still owns EXM as of yesterday. He agrees that this is a temporary move. Cramer still likes the oil tankers but can't differentiate between that industry and the dry bulk shipping. Technical analysis (apparently) recently shows a "head & shoulders" (bearish) pattern with DRYS. I admit that the institutional selling is a bad sign, but if these stocks trade in lock-step with the BDI, then how can one rely on a technical chart pattern to determine future movements? I don't think the Chinese government will care what the chart patterns look like when they start running out of iron ore.
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Most of the bulk analysts see the China ore buildup as a temporary thing. When are the Olympics? There is also some talk that production will slow down in China until then. After that, usual patterns would be some type of chartering spree like we saw in late May (BHP, et al).
Also interesting to watch that DRYS has now put a bunch of its ships, 14 I think, into longer term charters ranging from 4 to 10 years- starting to see drink the Koolaid of "revenue visibility" which might get the multiples up a bit.
bdp1 Consulting Ltd
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