DryShips: Take Half Off The Table

DryShips, Inc. (DRYS) is a company which provides mostly water based transportation for all kinds of cargo. From DryShips website:

DryShips Inc. is an owner of drybulk carriers and tankers that operate worldwide.

Through its majority owned subsidiary, Ocean Rig UDW Inc., DryShips owns and operates 10 offshore ultra deepwater drilling units, comprising of 2 ultra deepwater semisubmersible drilling rigs and 8 ultra deepwater drillships, 3 of which remain to be delivered to Ocean Rig during 2013 and 1 during 2015.

DryShips owns a fleet of 42 drybulk carriers (including newbuildings), comprising 10 Capesize, 28 Panamax, 2 Supramax and 2 newbuilding Very Large Ore Carriers (VLOC) with a combined deadweight tonnage of approximately 4.4 million tons, and 10 tankers, comprising 4 Suezmax and 6 Aframax, with a combined deadweight tonnage of over 1.3 million tons.

It was under three weeks ago when I recommended buying into DryShips, based on ignoring the company's past and looking at the trends of the Baltic Dry Index. DryShips had been up over 100% for the year when I called it a buy 3 weeks ago. Today, it's up nearly 200% on the year 2013 and up over 27% in the last three months alone. Since my last article, it's up nearly 25%.

The Baltic Dry Index is an index that provides, according to the Baltic Exchange, "an assessment of the price of moving the major raw materials by sea. Taking in 23 shipping routes measured on a timecharter basis, the index covers Handysize, Supramax, Panamax, and Capesize dry bulk carriers carrying a range of commodities including coal, iron ore and grain."

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As you can see from the technical picture below, the stock is overbought according to the RSI heading into 2014. In the last two months alone, the stock is up over 40%. If you purchased in early November, now is a great time to take some profit off the table.

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Another reason that I'm advocating taking some profits off the table before letting the rest ride, is a couple of cogent arguments made recently by SA contributor The Specialist. while I don't agree with everything he/she has written, it does offer a bit of perspective for bulls.

And, hey - 40% is 40% - you take it where you can get it.

Some of the bearish argument was based around for seasonal performance in January and February, waning guidance from dry shipping CEOs, and questioning fundamental benefit of the dry shipping indices. The while I don't necessarily think these are rock solid points, there are enough to give us pause and remind us to be sharks and take profits without emotion.

The nice thing about the recent quick spike in the stock price is that investors can take their cost basis off the table and let the rest ride, posting that the dry shipping market as a whole can continue to pull itself out of the recession that is the subject to in 2008.

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Long-term, I remain bullish on DryShips - but I also remain bullish on taking advantage of when an investment bears fruit, whether its in the short or long term. Here, I'm advocating taking at least your cost basis off the table with DryShips before bearing down and seeing if the sector can continue to turn around.

Best of luck to all investors going forward.

Source: DryShips: Take Half Off The Table

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. (More...)

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