3SOF

Quote from: la-onda on December 16, 2007, 07:56:18 PM
DRYS update,

fyi:
1)
Zacks:
Value - DryShips, Inc. (Nasdaq: DRYS)

DryShips has been anything but dry for its shareholders. The stock has rocketed higher this year and with good reason. Despite the huge runup, the shares only trade for about 5x next year's estimates of $17.42 per share. Over the past 90 days, this year's earnings estimates have soared $1.86 to $8.93 per share. Analysts expect earnings to leap 95% next year.

2)
awesome slideshow:
http://www.irwebpage.com/dryships/files/dryspres111307.pdf

3)
Interview CEO:
http://www.forbes.com/video/?video=fvn/business/da_dryship120407

4) chart & slides

laonda, ive scaled back on DRYS considerably since last week..and also have puts.
Am sure you've done your DD, but pls let me know if you feel as positive on DRYS after you've read the entire annual SEC filing.

Stock drops after DRYS announces it wants to get into the oil business.

DryShips Rides Higher In Water
Ruthie Ackerman, 12.18.07, 8:09 PM ET

Investors seemed to be of the mind Tuesday that DryShips was oversold.

Shares in the Greek dry bulk shipping company bounced back 9% a day after a 14% slide precipitated by its announcement that it had agreed to acquire a 30.4% stake in Norwegian offshore drilling contractor Ocean Rig ASA for $405 million. (See: " DryShips Dives Into Offshore Drilling")

With its shares off 45% in the last six weeks, Jeffries & Company analyst Doug Mavrinac said he believes that DryShips (nasdaq: DRYS - news - people ) is extremely oversold, especially given the current strength in dry bulk charter rates and robust forecasts for 2008 and 2009. He said he would have preferred that the company not buy into Ocean Rig and instead use its surplus cash flow to acquire additional vessels, pay down debt, repurchase shares or increase dividend payments. But he pointed out that DryShips has the most operating leverage in the dry bulk sector.

Mavrinac highlighted that DryShips shares are now trading at a modest 3.6 times their estimated 2008 earnings per share.

DryShips shares rose 8.7%, or $6.31, to close at $78.49 Tuesday.

"With dry bulk shipping charter rates likely to increase further next year, we believe our current estimates could actually prove conservative," Mavrinac said.

Mavrinac reiterated his "buy" rating and his price target of $160 per share.

Dahlman Rose analyst Omar Nokta was more negative on DryShips' acquisition of a stake in Ocean Rig. Although the deepwater drilling sector is plainly lucrative, he said he was not sure how DryShips CEO George Economou's plans to grow Ocean Rig will benefit DryShips.

However, Nokta added that he believed DryShips' core business was still strong and estimated that it can generate more than $20 per share in cash flow in 2008. "The problem for us is DryShips shares may trade at a further discount due to investor uncertainty on capital allocation," he said.

Nokta reiterated his "buy" rating, citing strong fundamentals in the dry bulk sector, but said he's lowering his price target to $100 per share from $150, which reflects the discount he thinks the shares will receive.

Cantor Fitzgerald analyst Natasha Boyden emphasized that the transaction was not an indication that the dry bulk industry itself is beginning to soften.

Although Boyden lowered her price target on the stock to $121 from $133, she raised her 2008 earnings per share outlook to $18.52 from $17.65 and reiterated her "buy" rating.

and all the conflicts of interest (operations provided by company owned by his ex wife, purchase of ships / sale of ships to cos owne by him, ex wives etc) doesnt bother you?

im not trying to bash this co. but just am urging you to excercise some caution

Full Speed Ahead at DryShips
Inside Wall Street January 10, 2008, 5:00PM EST text size: TT
Inside Wall Street
Full Speed Ahead at DryShips
DryShips (DRYS), a bulk shipper of dry commodities such as steel and coal, is projected to earn a hefty $20 a share in 2008, up from 2007's estimated $9.18. Yet its shares, languishing at 63—down from 130 in October—trade at a price-earnings ratio of only 3.15. In 2006, when DryShips earned $2.18 a share, its p-e soared to 39. Part of the stock's drop and meager p-e is DryShips' $405 million purchase in December of a 30% stake in Ocean Rig, a Norwegian offshore driller. Critics worry that DryShips may be deviating from its core shipping, which is going strong. But Robert Johnson of Satuit Capital Management, of which DryShips is the largest holding, remains a bull. Ocean Rig will prove to be "a sterling investment in the next two years," he says. The stock is now as compelling as it was last year when it stood at 50—on its way to 130, says Johnson. Given the company's earning power and surge in global demand, mostly in China, he sees the stock at 100 in 18 months. Douglas Mavrinac of investment firm Jefferies Group (JEF) raised his 2008 profit estimate to reflect the stake in Ocean Rigs, to $20.24 a share. He rates the stock a buy, with a 12-month price target of 160. The impact will be greater in 2009 and 2010, he adds, when Ocean's rigs operate under new contracts at higher day rates. The stock is " extremely oversold," says Mavrinac.

http://www.businessweek.com/print/magazine/content/08_03/c4067insidewal536152.htm

At the risk of incrurring your wrath - i still wouldnt touch DRYS.

There may be a pop due to it being oversold..but long term, the prospects r bleak for this company.

If the economy doesn't kill it, most certainly George will.

If you want exposure to shippers go with DSX if you feel BDI rates will climb or QMAR is you feel BDI will fall as QMAR has locked in most of the rates for next 3 yrs.
I feel the shippers r done for now..but I wont be bold enough to say that with any conviction.

All I know if that there's no chance in hell that I will be long DRYS.

Disclosure - I don't have any open possition in DRYS. I closed my puts at a very healthy profit. I'm waiting for another opportunity to go short.

DRYS is investing its money other than itself, meaning it does not have growth coming and/or what they do see coming means their time and money would be better spent elsewhere. Basically it believes in itself less for some reason.

Incredible results out from DRYS:

• DryShips Reports Results for the Fourth Quarter and Twelve Months Ended December 31, 2007 (http://biz.yahoo.com/iw/080214/0362292.html)
Marketwire (Thu 5:39pm)

I guess almost nobody believed the company would meet the very high numbers analysts were forecasting and the company goes and beats them by a wide margin.

It had EPS of $5.37 in the 4th quarter alone. If we exclude the gain in the sale of one vessel, we get $4.5 EPS. Analysts were calling for $4.07 EPS for this quarter.

As for the full year, DRYS earned $13.32 per share. If we exclude the sale of 11 vessels, we get $9.54 EPS. Analysts were expecting $9.55 (but I guess these estimates included the sale of vessels, which were previously announced).

Anyway, these results make the 2008 EPS estimate of $18.18 credible. And this means DRYS closed yesterday at $84.25/$18.18 = 4.6 times forward earnings, while it is expected to grow them 36.5% from the 2007 level.

Also impressive is the average age of the fleet, currently at just 8.8 years.

I would say that even with all the problems related to the CEO's transactions DRYS will be a $150 stock by year's end.

It closed up 8.2% in after hours trading, so this bodes well for the dry bulk industry today.

The people saying that a worldwide economic slowdown would take this sector down were totally wrong, at least the 4th quarter data is demonstrating that. My take is slowdown or no slowdown, the forces of international commerce will keep growing strongly. We have four more huge economic blocks in the World making transactions between them and that won't stop, it will keep growing.

I'm not buying DRYS as I own another Dry Bulk shipping company but I must say I'm impressed by this sector leader.

Good luck if you own DRYS. If you're short ... forget shorting in general, it's a losers game over the long run.

awesome details:

http://www.irwebpage.com/dryships/files/DRYS_4q07_Presentation.pdf

cheers
O.

David,
Be careful of DRYS..results were no doubt good, but i dont trust the CEO one bit.
Nick

Quote from: la-onda on February 15, 2008, 09:16:56 AM
awesome details:

http://www.irwebpage.com/dryships/files/DRYS_4q07_Presentation.pdf

cheers
O.

Indeed la-onda, great slides. I was most impressed by the macro information on the following two slides:

(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=43636;image)

(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=43637;image)

Quote from: nicknite20 on February 15, 2008, 11:49:58 AM
David,
Be careful of DRYS..results were no doubt good, but i dont trust the CEO one bit.
Nick

I agree Nick, I don't trust him either. I guess the company's shareholders have been paying a high price for his reckless words (or else people in Motley Fool are lying) and he probably should resign. The only problem is that he owns/controls almost 80% of the company :o

(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=43638;image)

(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=43639;image)

So nobody can put him out.

DRYS has an interesting story ... it is really weird how a company founded in 2004 became the largest Dry Bulk carrier with 47 vessels. I don't have time to dig more today, but I'll keep doing it.

The market's reaction to earnings on Friday wasn't good, but for now I attribute that to profit taking and the general market weakness.

from seeking alpha:

DRYS EPS estimates for 2009 have been coming down:

(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=44759;image)

Anyway, DRYS closed Friday at just 5 times the 2009 consensus EPS estimate.

I believe I've learned something over the past few months, which is, whenever a stock rises a lot mostly due to an increase in price (freight rates), not quantity (of ships), it is very important to know if the change in price is a permanent or temporary phenomenon. Because if it is temporary the stock will probably come back down to where it came from.

In the shipping industry case, it appears to me that the surge in the Baltic Dry Index, from where it was a few years ago, is a temporary event, because profit margins in the industry are way too fat. With these profit margins, more and more ships will come to oceans, increasing supply and therefore reducing price. Also, it is expected that China's demand for commodities like iron will slowdown.

An analysis based on p/e ratio is misleading in these cases. The p/e will rise to a high level before the rise in price (of the products/services sold) takes effect on EPS and then the p/e will fall to a very low level, when investors perceive the price has peaked and will eventually come back down.

So, timing is key.

Unfortunately, and I thought differently before and paid the price, I think we've already passed the peak in the freight rates and eventually prices will come back down to the previous level.

With these profit margins, more and more ships will come to oceans, increasing supply and therefore reducing price. Also, it is expected that China's demand for commodities like iron will slowdown.
Not necessarily David, the dry bulk shipping company's are working with 1, 2 to 5 year contracts! Also, in TBSI's case freight rates increased for 2008.
And it's also not all about iron, the CEO's and everywhere I  read they keep saying that demand is higher than ever and that they can't keep up with it, that's the reason for the more ships + there's the fact that South America is getting 'discovered'.

From TBSI's CC:
http://seekingalpha.com/article/68455-tbs-international-limited-q4-2007-earnings-call-transcript?source=yahoo&page=5 (http://seekingalpha.com/article/68455-tbs-international-limited-q4-2007-earnings-call-transcript?source=yahoo&page=5)

Well there are different types of steels. First of all our new service from Japan and the Far East, Korea and China going into Brazil is based around specialty steels for the automotive industry in Brazil and we see this growing into, with our present customers, into a five year contract business. So that's very solid. China, in the basic raw steels, we saw a little bit of a tail off towards the end of last year; it's been quiet in the first quarter and the expectations and one of the reasons that the feeling that it's been quiet was based on the fact that the iron ore negotiations weren't concluded. But our expectations are that it will pick up in the second quarter and pretty much follow the same pattern that it did last year. So we're hoping and with expectations that the steel parcel service from China will pick up in the second quarter of this year.

Also, well our business, and we do this year after year, is that we finalize our contracts for the coming year and the end of the quarter 2007 and we have finalized our contracts and our customers have not only have we finalized these contracts at increased rates, but all of our customers have said that they expect more volume to be moved in 2008 so we're very, very excited where the company is positioned for 2008.

I think right now as I said earlier the opportunities for this company our numerous, the markets are very strong. The growth potential is solid and we see this as being again, the best use of the company's cash to grow the company and take advantage of this very, very strong and solid shipping market.
We will not require a secondary offering to complete the new building program, no. It will come from normal term loan and cash flow.


From Greg McCoach:
http://seekingalpha.com/article/72077-bullish-on-all-metals?source=side_bar_long_ideas (http://seekingalpha.com/article/72077-bullish-on-all-metals?source=side_bar_long_ideas)

Commodities worldwide are doing well, not just the metal base metals, but the grains and other commodities are doing well also. The reason for that is we have 3 billion people in the emerging nations of the world who are embracing capitalism at 100 miles an hour. As I travel through the world, it's so apparent to me the growth that is occurring, not just in China and India that we hear about, but in all of Southeast Asia, Indonesia, Argentina, Brazil. An amazing growth in infrastructure building is occurring in these countries. So that takes a lot of base metal—copper, nickel, zinc—to build refrigerators, houses and cars, etc.

So, as opposed to some people who are very negative about base metals, I am actually very bullish on them. A lot of naysayers are talking about if the United States goes into recession, then that's it for the base metals and the commodities. Absolutely not. That's because the world is no longer centered around the United States. This is an unprecedented moment in history—an infrastructure-building boom of this magnitude where you're talking about 3 billion people. The only thing you can compare it to is what happened after World War II in the United States. It was the greatest infrastructure-building boom the world had ever seen. In my opinion that's bullish for all of the commodities for many years to come, not just a couple of years . . . I believe the base metals will be in a bull market for at least 10 to 15 years.

QuoteAlso, well our business, and we do this year after year, is that we finalize our contracts for the coming year and the end of the quarter 2007 and we have finalized our contracts and our customers have not only have we finalized these contracts at increased rates, but all of our customers have said that they expect more volume to be moved in 2008 so we're very, very excited where the company is positioned for 2008.

The problem isn't in 2008, but in 2009, as you can see in expectations for DRYS.

QuoteCommodities worldwide are doing well, not just the metal base metals, but the grains and other commodities are doing well also. The reason for that is we have 3 billion people in the emerging nations of the world who are embracing capitalism at 100 miles an hour. As I travel through the world, it's so apparent to me the growth that is occurring, not just in China and India that we hear about, but in all of Southeast Asia, Indonesia, Argentina, Brazil. An amazing growth in infrastructure building is occurring in these countries. So that takes a lot of base metal—copper, nickel, zinc—to build refrigerators, houses and cars, etc.

So, as opposed to some people who are very negative about base metals, I am actually very bullish on them. A lot of naysayers are talking about if the United States goes into recession, then that's it for the base metals and the commodities. Absolutely not. That's because the world is no longer centered around the United States. This is an unprecedented moment in history—an infrastructure-building boom of this magnitude where you're talking about 3 billion people. The only thing you can compare it to is what happened after World War II in the United States. It was the greatest infrastructure-building boom the world had ever seen. In my opinion that's bullish for all of the commodities for many years to come, not just a couple of years . . . I believe the base metals will be in a bull market for at least 10 to 15 years.

I agree with Greg, you know this is my macro case too. The previous long term bull market in commodities lasted about 8 years, between 1972 and 1980 or so. I wonder what were the patterns for shipping rates back then? And shipping stocks, were any of them trading at the time?

I have different feelings for different types of commodities. In some of them supply can "easily" be increased when the price increases (like agricultural commodities), others, like oil and gold, for example, because it is the Earth that makes them and takes millions of years to do it, are in risk of a gigantic bull market, simply because whatever the price is, the Earth can't make the product fast enough to satisfy the demand.

I guess the real issue around shipping companies is profit margins. In some sectors analysts (and consequently investors), work a lot around "average profit margins". They think that eventually, over the long term, profit margins will go back to the long term average for the industry. It has to do with the business economics of that specific industry. I think this is why valuations (in terms of earnings multiples) in shipping stocks are so low.

I've opted to open myself to understanding why things are the way they are, instead of thinking things are wrong. Hopefully this attitude will help me learn some new stuff that can be used in the 30 or 40 years I still have (barring health problems) for investing in the stock market.

Anyway, I sincerely hope you're right about TBSI and other shipping stocks Se7en, good luck :)

Fundamental Case:

I notice the Shipping Industry has been coming back to life recently. EXM has been leading the group, as it is now the largest company in terms of capacity, after acquiring QMAR. I notice the market reacted positively to the fact that EXM concluded the acquisition process successfully.

Now a similar catalyst is happening with DRYS:

(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=45018;image)

Summary: This morning, DRYS announced that it had increased its ownership stake in Ocean Rig (OCR.OL - Not Rated) to 49.9% from 30.4%. As such, DRYS is required by Ocean Rig's corporate bylaws to initiate an offer for Ocean Rig's remaining outstanding shares. Mr. George Economou, chairman and CEO of DRYS, continues to separately hold approx. 4.4% of Ocean Rig's outstanding shares. DRYS acquired the additional 33.3 million shares of Ocean Rig at a price of NOK 45 or approx. $9/share. DRYS has stated that it plans to complete the acquisition of Ocean Rig's remaining shares by early May within the four-week offer deadline set by the Oslo stock exchange.

• How Will Stock Likely Respond? DRYS' announcement comes as little surprise to us. Yet, shares could come under pressure today, as we believe that there are still a meaningful number of investors who view DRYS as the bellwether for the dry-bulk spot market. Nevertheless, our sense is that this announcement is mostly priced into shares, as we believe that it has been increasingly apparent in recent months that the company would continue to move into the off-shore drill rig segment.

• How Will Acquisition Be Financed? DRYS plans to utilize a mixture of available cash-on-hand and debt financing to acquire Ocean Rig. We also note that recent follow-on share issuances are also likely tied to this transaction. However, we have yet to confirm whether DRYS has issued any of the additional 6.6 million shares, which were registered in March, 2008, as part of this transaction.

• Potential Next Steps For DRYS? We believe that DRYS will increasingly move away from its predominately spot chartering strategy. We would expect the company to lock up a sizeable portion of its dry-bulk fleet on long-term time-charter coverage by the end of 2008. Our sense is that a potential shift in chartering strategy would primarily be a function of the company seeking to secure future cash flow generation in light of today's announcement. However, some investors may interpret any sea change in DRYS' chartering strategy as the company calling a peak for dry-bulk rates. We would also remind investors that DRYS' option on two drill rig units at Samsung are likely scheduled to expire on or around April 24, 2008.

• Estimates Remain Under Review. Our estimates remain under review pending the conference call. Management will host a conference call on Thursday, April 24th at 10am EST. The dial-in # is (866) 819- 7111.

This acquisition is about to close and DRYS will make a conference call on the subject tomorrow. I guess it will be all positives regarding the acquisition and investors will probably be pleased to know DRYS is entering the oil drilling business, since $WTIC is so high right now. I guess this acquisition can bring an air of sustainability to DRYS's current very fat EPS numbers ($18.39 expected for 200 (http://finance.yahoo.com/q/ae?s=drys)8). If that happens DRYS can move sharply higher.

Technical Case:

(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=45021;image)

DRYS made a higher low in March and now it is approaching the key $88.49 resistance level. I expect tomorrow's conference call to provide the motivation for a powerful bullish breakout.

Trading Plan:

Buy DRYS at today's open. SELL with a small loss if the stock is set to close below the 50 days SMA, currently at $70.61.

David,     Why EXM and DRYS instead of TBSI?  Precentage wise DRYS is up about the same amount as TBSI since you sold TBSI in early March,  (which I stated at the time was not what I was going to do. ) I am still in TBSI but at a cost basis of the low 30's.

Poli

Quote from: poli on April 23, 2008, 09:13:46 AM
David,     Why EXM and DRYS instead of TBSI?  Precentage wise DRYS is up about the same amount as TBSI since you sold TBSI in early March,  (which I stated at the time was not what I was going to do. ) I am still in TBSI but at a cost basis of the low 30's.

Poli

Congratulations on TBSI Poli. Yes, it was a mistake selling it.

Why DRYS now instead of TBSI? DRYS has a near term catalyst that I know of and TBSI doesn't.

Today's trading plan for DRYS is simple. There's the following event:

Quote• Estimates Remain Under Review. Our estimates remain under review pending the conference call. Management will host a conference call on Thursday, April 24th at 10am EST. The dial-in # is (866) 819- 7111.

Which was my basic reason for buying DRYS. I bet the conference call will be all positives about the Ocean Rig acquisition and that should be the catalyst for the stock to make a bullish breakout above the $88.49 resistance level. If this is the case I'll keep on holding DRYS, as the bullish breakout will probably attract more people to the stock in the upcoming days.

However, it can be the case that the market reacts negatively to the news. If this is the case, whatever the reason, my reason for buying gets invalid, so I'll bail out with a small loss.

Given this, I put on the following trading plan for DRYS:

1. If DRYS is down 5% on the session, that is, if it prints $80.57, SELL;
2. If, even though the stock is never down 5% on the session, it still closes negative, SELL;
3. If points 1) and 2) don't happen, that is, if DRYS doesn't print $80.57 and closes positive, HOLD the stock.

Quote1. If DRYS is down 5% on the session, that is, if it prints $80.57, SELL;

Stopped out even before the news. Whatever.

David, from technical point of view I think DRYS is a buy from here. ;)

DRYS: CSFB Starts @ Outperform; Sets Tgt @ $110; Analyst Notes
Friday , May 02, 2008 09:30ET

Issuer: DryShips, Incorporated (NasdaqNM: DRYS)
Analyst Firm:  Credit Suisse First Boston Corp.
Ratings Action: INITIATE
Current Rating: Outperform
Target Price Action: INITIATE
Target Price: $110.00

Analyst Comments: The firm is positive on DRYS's growth opportunity and is bullish on dry bulk rates into 2009.

(//)