The Continent Rebound

Written by GSCR Staff   
Wednesday, 28 August 2013 07:26

In Monday’s Goldman Guide we mentioned possibly looking at European stocks as it seems that the region is finally on course for a rebound.  What may seem crazy is that there is a lot of activity in stocks in the Greek shipping industry.  Does investment or trade in the financial circus that is Greece make sense?

Let’s step back and take a look at this phenomenon from a large scale esoteric viewpoint.  The Greek shipping industry could be viewed as a bellwether for the European comeback.  First, Greece is synonymous with the economic downturn in Europe.  Second, shipping in the region and beyond should pick up as business activity increases.  Money managers and institutional investors are looking for value and future earnings, and this sub sector provides both if one believes that the European recovery has begun.

DryShips, Inc. (NASDAQ – DRYS - $2.44) looks to be the best small cap stock to trade or invest in the Greek shipping industry.  The stock is under massive accumulation trading almost 5 million shares per day up nearly 50% over the last two months.  An EPS turn-around is forecast from 2013 to 2014 going from the red this year to $0.36 per share next year.  Additionally the DMA’s 5, 20, and 50 day signals remain very bullish.

The Company owns a fleet of 42 dry bulk carriers comprising 12 Capesize, 28 Panamax, and 2 Supramax with a combined deadweight tonnage of approximately 4.4 million tons; and 10 tankers comprising 4 Suezmax and 6 Aframax with a combined deadweight tonnage of approximately 1.3 million tons.  Additionally, DryShips has majority ownership in its subsidiary, Ocean Rig, which owns and operates 10 offshore ultra deepwater drilling units comprising 2 ultra deepwater semisubmersible drilling rigs and 8 ultra deepwater drill ships.  A bonus revenue source from oil!

As preposterous as it may have once appeared, Europe may be back on the right track with Greek shipping leading the way.  A play with DryShips may be the course to charter for some profits.  Look for a price target of somewhere around $3.50 in the remainder of the 2013 calendar.

Have a great day.

Disclosure: Holdman Small Cap Research is not affiliated in any way with Goldman Sachs & Co. Goldman Small Cap Research analysts are neither long nor short these shares but may elect to purchase the stock within the next 48 hours.

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