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Eric Schleien

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  • Big Oil Once Again Abused by Congress [View article]
    Re: Ethanol

    Ethanol is inappropriate and irresponsible to use. The return on energy invested is downright awful and it's horrible for the enviroment as fossil fuels still pollute the air. It's also not appropriate to have a countries energy supply compete with their food supplies. We simply do not have enough farmland to support our population.

    RE: Canuck Investor

    Many oil companies are struggling to maintain their reserves. Nationalized oil companies such as the one in Saudi Arabia have done an awful job letting excess water into the oil fields and letting much natural gas escape which is wasted energy. It's the same reason Pfizer won't put lots of money into super high risk drugs -- that's left to the small pharma firms. The E&P firms as a whole are in a more risky and volatile business as their success relies on finding new reserves and for the very micro-cap firms finding oil in the ground at all. If there was a monetary incentive the oil companies would do it. The facts are yields have gone down on oil fields and it takes more and more money and is harder and harder to pump oil out of the ground. The "gusher" is hard to find these days as we now need to force out heavy crude compared to the easy to find light sweet crude.

    RE: Nationalizing Reserves

    Mexico and Venezuela were cited. Also note Saudi Arabia.
    Apr 21, 2008. 03:17 PM | Likes Like |Link to Comment
  • Dry Bulk Shipper Anomaly in Spot Pricing Creates Buy Opportunity [View article]
    World's Scariest Stock: DryShips
    By Rich "Cap'n Blood" Smith October 29, 2007 Comments (20)

    60 Recommendations

    Ahoy, investors! Methinks me sees a ghost ship cresting the horizon. Sails tattered, the Jolly Roger hoisted -- why, it's not just a ghost ship, it's a ghost ship manned by pirates, arggh! And its brig is crammed with the lost souls of investors, imprisoned behind the iron bars of logic.

    The Flying Dutchman, you say? Nay, landlubber. This is something faaaaar scarier. This is Athenian cargo carrier DryShips (Nasdaq: DRYS).

    Gasp! What's that sound?
    Originally chartered to ferry loads of coal, steel, and other commodities across the waves, DryShips bears a different cargo today. You can hear the wails of lamentation emanating from its hull, the moans of investors who've publicly panned DryShips' stock on Motley Fool CAPS -- and suffered the consequences:

    TMFOtter: "In the 1990's, the last time capital was cheap, [DryShips CEO George Economou] took an identical company public and evaporated every last penny of shareholder capital."

    Steve819 [Quoting Barron's editor Kathryn M. Welling]: "When someone asked why he was [taking his company public, Economou] actually said, basically, 'Because Americans are the dumbest investors around, and there's lots of liquidity in this market.'"

    Allstar13913: "The CEO is crooked, and directly owns a competing company." (privately owned Cardiff Marine, Inc.)

    TMFEldrehad: "'We do not intend to sell shares,' [Economou] said. This means the company can put a big part of equity back into buying vessels. Economou added: 'We can deliver more money for every dollar invested in the company.'... [S]elling shares in a secondary offering will result in more equity with which to buy ships, but that's not what he's saying -- he's saying not selling shares translates into more equity. I need some Dramamine, because my head feels like it's spinning from trying to understand this."

    These CAPS players have three things in common. First, they're all extremely leery of DryShips' management. Second, they're all good enough investors that their concerns should be your concerns, too. Each and every one ranks in the top 1% of investors tracked by CAPS. Third and finally -- they've all lost big time in their bets against DryShips, in some cases, seeing the stock rise more than 1,000% since placing their bearish bets.

    Has an epidemic of insanity swept the coast of CAPS-land? Or is there truly something wrong with DryShips? As one of the many investors who've seen their CAPS ranking decimated by betting against the company, I've asked myself this question more than once. But the more I look, the more I see red flags waving alongside the skull-and-crossbones at DryShips. Consider a few numbers:


    Profit Margin (trailing 12-month)

    CAPS rating (out of 5)





    Diana Shipping (NYSE: DSX)




    Excel Maritime Carriers (NYSE: EXM)




    Eagle Bulk Shipping (Nasdaq: EGLE)




    Quintana Maritime (Nasdaq: QMAR)



    Data from Yahoo! and CAPS.

    In what sane universe do capital-intensive companies like these deserve multiples to book value approaching those of asset-lite profit leaders like Google and Microsoft?

    And while I'll grant you that the dry bulk shipping industry is booming, I fail to see why a single player within this industry -- DryShips -- should enjoy a valuation more than 50% higher than its nearest rival, and more than twice that of some of the ships giving more distant chase.

    Sure, it gets the best margins of the bunch, but that just raises more flags. Reviewing DryShips' results, we see that much of its profit over the past year was derived from gains on the sale of assets. Meanwhile, the firm's cash flow statements don't show this supposedly wildly profitable firm generating any cash profits since its IPO. On the contrary, over the last year, the firm has burned through nearly $500 million in free cash flow, as its long-term debt ballooned from $418 million to $728 million. Somewhere, this corporate ship has sprung a leak.

    If DryShips can't generate free cash flow on sky-high margins, I shudder to think what will happen when those profit margins splash back down to sea level. And you should to -- because this is the scariest stock in the world.

    Feb 29, 2008. 11:22 PM | Likes Like |Link to Comment