DryShips explodes as Baltic Dry Index presses pause
Global trade around the world has increased markedly in 2016. Now, with the U.S. dollar falling and commodity prices rising, the future strength of global trade is coming into question. The quickest way to gauge the health and speed of raw materials circulating the globe is to review the Baltic Dry Index (BDI).
To clarify, the Baltic Dry Index is a shipping and trade index created by the London-based Baltic Exchange that measures changes in the cost to transport various raw materials, according to Investopedia.
The BDI includes three component ships: Capesizes, Panamaxes and Supramaxes. DryShips (NASDAQ: DRYS), which captured today’s Stock Challenge Breakout award in February’s Stock Challenge owns a fleet of 13 Panamax drybulk carriers with a combined deadweight tonnage of approximately 1.0 million tons. More on them shortly…
Baltic Dry Index | Performance post-Trump
The BDI exploded to a high of 1257 in the days following Trump’s surprise victory in November. Since then, the shipping and trade index has retreated.
Baltic Dry Index – 1 Year Chart
For long-time readers, you know the Baltic Dry Index is a huge focus of ours at Pinnacle. Check out this excerpt from September 8th, 2016:
“The Baltic Dry Index and TSX Venture continue to march higher and if you’re long junior mining stocks, tracking the BDI should be a priority. We were early to this party and warned as early as March of 2016 that the bull market on the TSX Venture was being led by the Baltic Dry Index.”
Click here to read this article and learn more about how the Baltic Dry Index predicts commodity demand cycles.
DryShips benefits from increased Global Commodity Trade
Its hard to argue there is a better positioned company than DryShips, particularly in Europe, to benefit from an increase in commodity trading activity.
DryShips describes itself as a diversified owner of ocean-going cargo vessels that operate worldwide. The Company owns a fleet of 13 Panamax drybulk carriers with a combined deadweight tonnage of approximately 1.0 million tons, 1 Very Large Gas Carrier new building and 6 offshore supply vessels, comprising 2 platform supply and 4 oil spill recovery vessels.
On January 31st, DryShips padded its treasury in a big way after announcing the successful completion of a $200 million common stock offering.
Mr. George Economou, Chairman and CEO commented:
“We are very excited to have successfully raised $198 million of equity and with total available liquidity
in excess of $300 million, we have strengthened our position to continue the process of re-building the Company’s fleet and earnings capacity and pursuing investments in various shipping segments.”
Click here to read the entire press release.
Shareholders and market participants are bracing for the company’s fourth quarter results, set to be released tomorrow, February 7th, after the market close.
Investors wasted little time speculating as more than 48 million shares exchanged hands and DryShips closed up 34.21% to $5.61 per share Monday.
Jamen Ford takes off on DryShips selection
Long-time member ‘Jamen Ford‘ selected DryShips for February’s Stock Challenge and saw his combined average return explode 18.62%. Despite the move Monday, the member of nearly 2 years was unable to crack the Top 50.
With just a handful of days gone in February the returns look more like the middle of the month. Past Stock Challenge Champ ‘joeyg48’ is leading the pack with a 69.70% return. The next closest is ‘paukoz’ with a 49.47% return.
The TSX Venture is breaking out and is now nearly in a bull market from the December 22nd low we identified in An Amazing Track Record.
The world’s junior resource exchange traded more than 100 million total shares and closed up 0.87% to 826.37.
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