Seeking Alpha

Dry bulkers slide, Deutsche says capesize rally may have peaked

  • After rallying hard on the back of surging capesize rates, red-hot dry bulkers take a breather.
  • Perhaps weighing on sentiment is Deutsche's Justin Yagerman, who says shipping rates may be at a "near-to-medium term peak [as] the recent Cape-led rate rally may only be temporary."
  • Yagerman does expect the market to continue "to recover over the next several years."
  • Diana Shipping (DSX -3.3%) catches a downgrade to Hold (price target is $12).
  • ETF - SEA -0.4%
  • GNK -3.8% EGLE -1.3% DRYS -1% SB -3.8% SBLK -3.6% BALT -1.5%
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Comments (10)
  • Philip Marlowe
    , contributor
    Comments (1311) | Send Message
     
    Meanwhile, the markets immediately prove Mr. Yagerman wrong as both the cape and panamax rates rise today.
    13 Sep 2013, 01:56 PM Reply Like
  • new slang
    , contributor
    Comments (171) | Send Message
     
    Rally is still way ahead of itself...
    13 Sep 2013, 02:21 PM Reply Like
  • Philip Marlowe
    , contributor
    Comments (1311) | Send Message
     
    I am not sure what that means. But I should note that the Baltic indexes are not financial. In other words, they are not reflection of investors making financial bets on what the market should be. Instead, they reflect what companies are paying right now to charter ships to move stuff. Thus, when the baltic dry index is going up as it is right now, it means people are actually paying more money to charter ships.

     

    Thus, I do not think it makes sense to say that the rally in the baltic indexes is "ahead of itself."
    13 Sep 2013, 03:16 PM Reply Like
  • Michael Bryant
    , contributor
    Comments (5907) | Send Message
     
    A rise in China sentiment is driving these shippers. Sentiment should stay for a while.
    13 Sep 2013, 03:02 PM Reply Like
  • Michael Bryant
    , contributor
    Comments (5907) | Send Message
     
    (DRYS) is probably the best way to profit. High risk and high reward.
    13 Sep 2013, 03:05 PM Reply Like
  • jjmc2001
    , contributor
    Comments (1334) | Send Message
     
    Interesting comment Michael. I guess it all depends on your time horizon. DRYS was "the stock du jour" of the day traders in this sector when times were good. If I had to hold a position more than a few days this would certainly not be the stock I would buy in this sector. How about DSX with a better balance sheet and a better likelihood of long-term profitability?
    13 Sep 2013, 03:56 PM Reply Like
  • J Mintzmyer
    , contributor
    Comments (5842) | Send Message
     
    You're much better of with $DSX imo. If the rates improve, even slightly you will be up 2x. If the rates continue to flatline, $DSX will settle to $8-$10 and the fleet with double in the interim. If the rates sink even further (unlikely), $DSX will settle around $7, and the fleet could near triple as we have another bk surge and yards get even more desperate.

     

    If the rates improve enormously over the next few years (very unlikely) DSX is $40+.

     

    $DRYS on the other hand is on a trajectory to enormous dilution and/or insolvency unless the rates pick up soon. Sure the upside is 4-5x, but R/R... I don't agree. I guess it depends what scenario %s you plug in.
    13 Sep 2013, 04:16 PM Reply Like
  • BradyStreet414
    , contributor
    Comments (11) | Send Message
     
    The BDI has risen +95% in the last three months, and upwards of +62% in the last 30 days. It has been a slow & steady rate climb. Something is underway....
    13 Sep 2013, 03:34 PM Reply Like
  • FreeStateYank
    , contributor
    Comments (801) | Send Message
     
    I like SB in this sector. New ships, debt within reason. CEO owns a significant amount of shares.
    13 Sep 2013, 07:38 PM Reply Like
  • petaylor
    , contributor
    Comments (19) | Send Message
     
    Anyone here looked at Freeseas, (Symbol: FREE)...?
    13 Sep 2013, 11:16 PM Reply Like
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