Arbitraging Barron's

Time to reprise a very old, mothballed feature of The 'Wart: Arbitraging Barron's, wherein I look past the Barron's pay wall link to some of the more interesting items of the weekend. With godspeed, I'll try to keep it up every weekend

Friendlier Waters Ahead For Cargo Carrier DryShips:

Global trade might slow this year, but it will come back eventually, and DryShips' profits -- and shares -- should move up over the long term, even if 2008 growth turns out to be lower than Wall Street expects. At its recent quote of 64, DryShips stock was trading at a price/earnings ratio of 3.5 times consensus analyst earnings estimates of $18.18 a share this year and about 5 times the $12.22 forecast for 2009. DryShips also trades at a more than 50% discount to its peers, although rivals generally seek long-term contracts, which are less volatile. DryShips sports a healthy balance sheet, with net debt equaling about 40% of total capital.

More to come.

Comments

[bdp1ConsultingLtd]

But the spot market is heavily sentiment driven, it's got a mind of its own-as we saw last Nov and Dec. I hope when it spikes upward, that DRYS will put some of its vessels on longer term charters. Previous issue of Barrons (31-March) had a great article all about the commodities boom and talked about the spec interests keeping the markets 30% than they should be. So why is the freight market any different?

[Mark]

This article fails to mention that dry bulk spot rates are extremely volatile and forecasting where they will go is subject to massive room for estimation error, even for industry veterans. Thus forward PE can be very deceptive and is a silly way to look at the companies. Last year Clarksons research surveyed a large collection of readers to forecast where rates would go in 2007 and EVERYONE was wrong by a large margin. (they spiked massively) They can also spike massively downward in the same fashion... If forward earnings ends up being 80% lower, which historically isn't a crazy notion at all if you look at a rate chart, your PE will be 5x what you thought it was. Thus using forward PE is pretty silly given its forecast error range is so wide as to be near meaningless.

Also, the capacity for shipbuilding yes is indeed "tight", but for bad reasons. It is fully booked to the max and the industry is about to see the largest supply growth ever, for multiple years, going forward. If demand falters in any way and this supply comes on, it will be a slaughter for these companies as they undercut each other gruesomely as they have in the past since ships must essentially be utilized at all times else they are losing money, and its a very fragmented market. Not saying that its all clear cut as to where things will go, but this Barron's article barely touches on the most important issue/risk of massive supply growth which is basically the entire swing factor. They should do their homework a little better.

[dr dre beats headphones]

di cui questo individuo cresciuto, lui o lei è diventata anche questa persona preparati su HIS / la sua terra. Parlare della circostanza inquietante, e mai così è stato Halloween. E 'stato prima il tipo di paesaggio orwelliano si può