Check up on Europe’s Small Cap Proxy
|Written by GSCR Staff|
|Friday, 17 January 2014 10:40|
Back in late August we highlighted Dryships Inc. (NASDAQ – DRYS - $3.99), the bulk shipper, as a micro play on an improving European and global economy.
Those who bought are probably feeling happy but a little queasy as the stock is up over 60% since then but on a proverbial roller coaster ride. The question now is what does 2014 look like for this highly traded bellwether?
Stepping back to our 3-tiered approach at the micro level on the stock itself offers a bright picture. The DMA is solidly very bullish and the options contracts indicate the smart money is betting on the stock. Several traders took profit right at the start of 2014 as the stock went from $4.70 on New Year’s Eve to $3.62 this past Monday. Another accumulation phase seems to be in the works as the stock has climbed nearly 10% since then trading about 20 million shares per session over the last three days. Finally, the nearly 43% rise to over the $2 billion mark forecast in revenue for 2014 takes the P/E out of the red and nice low 14. Check all three for our micro outlook.
While the micro outlook for DRYS looks good one cannot ignore the larger macro picture, as keeping this stock is a play on Europe at the small cap level. The World Bank raised its forecast for worldwide growth to expand 3.2% this year versus the earlier forecast of 3.0% and a 2.4% 2013 prediction. Earlier this week the European Central Bank raised its forecast for the Euro Zone GDP growth to 1.1% for 2014. This may seem low, but is hyper growth compared to the last 5 years. All these positive forecasts are good indicators for DRYS.
We think investors and traders continue to flock to DRYS in 2014, but it will be a bumpy ride again. Look for a $5.00 price level to hit sometime in 2Q14.
Have a great weekend!
Disclosure: 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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