beegdawg007

Marc Faber: Short Emerging Markets - Barron's

If in fact Faber's view of DRYS is as simple as he says... "tanker rates have plunged, while dry shippers have not", then he will be wrong about DRYS. The shipping rates for dry bulk shippers did drop quite a bit during Jan. But, that was do entirely to short term issues. For example, coal could not ship from Australia do to flooding. Iron ore was not shipping from South America because of some port issues. Etc. However the demand is clearly there. The Baltic Dry Index - a handy index which, on a daily basis, tracks the dry bulk charter rates for shipping for the major shipping routes - has been steadily increasing since late January.

www.dryships.com/index...

These dry bulk shippers break even at rates which are less than half the current charter rates. Analysts est. that DRYS will earn between $18 and $20/share this year. My own analysis is a bit higher. DRYS is currently trading with a forward PE of 4!!!

Now, short sellers have been all over DRYS recently, so perhaps Faber new something other than what he said! The earnings however are really quite easy to calculate. Many have done so. And, the lowest forecast I have seen to date for 2008 is $13/share. I figure EPS to be closer to $22/share. It is also worth noting that DRYS has recently put more of its ships under longer term charters. Now, 40% of the fleet is locked in for a year or more. The largest of the DRYS fleet, the cape size vessels, are now chartering for over $140,000 PER DAY!!

I should conclude by saying that thus far Faber has been right about shorting DRYS. So if his comment in Barron's was for the short term, he was right. However, if he meant to short this for the longer term, he will get burned by that short because there is no quetion that 2008 earnings for DRYS will be stupendous. FYI... DRYS earned over $4.00, during the fourth quarter of 2007.