Editors' Note: This article covers a micro-cap stock. Please be aware of the risks associated with these stocks.
The Baltic Dry Index has seen a recent surge that has driven dry bulk shipper stocks up. Just a few months ago, the levels of daily rates were unsustainable, and saw cash on hand being whittled away while companies tried to last through the glut. Now the index has surged about 40% and many, although not all, of the companies can see the light at the end of the tunnel.
However, there were many investors who bet against some of these companies and shorted them. Below is my list of the companies, and which ones I believe will soon see a short squeeze that will drive the price even higher (all information came from shortsqueeze.com).
Genco Shipping (GNK): GNK is trading in the $4.40-$4.60 range, has about a 30% short interest, and would likely see the highest pop. This past month their short interest dropped 11%, which saw their stock climb from the $1.90-2.00 range up past the $3.00 range. While there were other market factors at work, the shorts who needed to cover certainly helped keep the momentum going. If 10% of the short interest decided to cover, it would more than double the average trading day's volume.
Eagle Bulk Shipping (EGLE): EGLE is sitting just under the edge of a $100M market cap, trading at the $5.00 to $5.20 range, is sitting just under 20% short interest, and could also see a large boost to the daily volume when the shorts start to cover. If 10% of the short interest decided to cover, it would add over 50% more volume to the daily trading.
Diana Shipping (DSX): With a market cap of just over $1 billion, DSX has a 4% short rate, and would see a small boost to the stock price.
Navios Maritime Partners Limited (NMM): Just like DSX, NMM sits at around 4% short rate, and will likely see some shorts covering, but not enough to have a huge effect.
I don't believe that Safe Bulkers (SB), Navios Maritime Holdings (NM), or Dryships (DRYS) have enough of a short percent to see a huge effect on their stock price. NM saw a short covering last month of 15%, which helped to carry the stock from the $5.50's to the $6.50's.
Based on the short interest alone, I believe GNK and EGLE will likely see a short squeeze in the coming months. The surge in the Baltic Dry Index has brought a lot of investors back into the shipping stocks and volume up 200%+ for many of the shipping stocks. Once the shorts do start covering, expect to see these two stocks surge.