Stock Pick: DryShips Inc. (DRYS)

This is a very risky cyclical play.  DRYS has been beaten down due to its enormous debt liabilities.  However, the fundamentals of commodities are improving and will keep improving.  It is very probable for DRYS to recover as credit market unfreezes and commodities recovers.  The up-side far out weights the downside.  In addition, as oil wells dry up, the deep sea rigs would turn out to be great investments.

2 thoughts on “Stock Pick: DryShips Inc. (DRYS)”

  1. Tom Ski says:

    Dryships is in the shipping business not the commodity business. They will have competition from other shipping companies for cargos. The world order book for new builds is overflowing and this iron will have to be accounted for before indexes move appreciably up.

  2. admin says:

    Dryships’ pricing level for its unchartered ships are tied to the Baltic Dry Index (BDI), which has almost 100% correlation to commodity (grain, iron ore, coal, etc) prices. As regard to the competition, there are a lot of new builds as you said. However, there are also a lot of canceled orders and ship scrapping as companies are having difficulties financing those ships. The ship-building industry is in shambles because of it. If there are tons of ships being built, wouldn’t you expect shipyards to flourish instead of suffering?

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