On the last day of the Year, DryShips Inc. (DRYS) announced the resumption of the previous announced 200 Million (ATM) at the market offering. On December 5th, DryShips announced that they were suspending the offering signaling the way for an upward move in the stock. You can view my article here.
I stated at that time, I believed the company felt that the current stock price was too low. Subsequently the stock price climbed from $3.50 a share to a new yearly high of $5.00 on December 27th. In hindsight, that was the high of the year. So now what?
Good question, before the market panics, it is important to point out that shipping rates have been on the rise. There is no question that the timing of this move is suspect. The CEO has a bad reputation for exactly these types of moves. In my opinion, this is the main reason why the stock is not $7.50. The street has a hard time trusting the financial moves of this company's leader. As a long time holder of this stock, I too have suffered substantial financial loss from these various ATM offerings that have occurred over the last 3 years.
Here is the good news: the stock is up 34% since the announcement of the suspension. What does this mean for the shareholder? At a price of $4.45, which is the current after-hours price on December 31st, a follow on offering would amount to an increased float around 38.5M additional shares into the market. As frustrating as that is to shareholders, it is manageable.
The charts on DryShips and all shippers for that matter remains bullish. The economy is slowly improving. DryShips, with their majority owned Ocean Rig (UDW) is well positioned to capitalize on the continued growth in housing, and the need for dry bulk goods.
DryShips made a huge run over the Christmas holiday, rallying from $3.69 on December 23rd, to $5 on December 27th. The whole sector made solid advances, with Eagle Bulk shipping Inc. (EGLE) rallying 9.8% today to close at $4.58. This calls into question, other shipping companies that will be in need of future funding. Both Genco Shipping and Trading LTD (GNK) and Eagle Bulk Shipping have recently seen their debt sold off to reduce certain bank's exposure to doubtful loans.
It may be a good idea to take some profits in shipping stocks. Pick your entry points and remain flexible to a changing environment.. Many shipping companies are still desperate to raise capital in order to survive. Now more than ever, it is vital to do your own research. In the end, I believe DryShips, Nordic American Tanker (NAT), and Dianna Shipping (DSX) will be a winners.
Under the radar picks for 2014.
Quicksilver Resources Inc. (KWK) is a company I think is about ready to break out. Though not a technology company, I believe it's trading substantially below its intrinsic value. Quicksilver is an independent oil and gas company, engaging in the acquisition, exploration, development, production and sale of natural gas, natural gas liquids and oil in North America. I want to show you a chart of this company, it is important for the individual investor to see what can happen with any company when they fall out of favor with Wall Street. This is a monthly chart covering 10 years.
I like this for a triple in the coming year. I know that sounds bold, but I believe it is conservative. This is a company that has been in business over 45 years, 15 of them as a publicly traded company. The company is funded through 2016, and paying down debt.
The Horn River Basin alone holds a potential 14Tcf of natural gas, according to a third party source. The company is in final negotiations with a partner to share the cost of extraction. They have multiple operations in various parts of the US and Canada. The Fort Worth Basin holds proved reserves of 1.25 Tcfe. You can read my recent report on Quicksilver Resources Inc. here. I will be writing future articles about this exciting company, which is one of my picks to explode in 2014.
As always, I urge you to do your own research, make sound unemotional decisions and always have an exit strategy in place.