DRYS

[David Randolph]

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.

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

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.

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

[David Randolph]

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:



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. If that happens DRYS can move sharply higher.

Technical Case:



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.

[poli]

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

[David Randolph]

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.

[David Randolph]

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

• 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.

[David Randolph]

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

Stopped out even before the news. Whatever.

[Terliso]

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

[la-onda]

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.

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