A shell-shocked economy, spiraling debt at financial institutions, or just plain bad management -- on any given day, investors can name a number of reasons to sell a stock. Yet while panic never helps investors, it's still a good idea to play devil's advocate with prospective investments.
In Motley Fool CAPS, more than 135,000 members have weighed in on nearly 5,300 stocks, sharing bullish and bearish opinions alike.
Consider dry bulk shipper DryShips (Nasdaq: DRYS). The stock is down significantly from highs in recent years, but in Motley Fool CAPS, a significant number of the 3,009 members weighing in on the company still offer reasons to be bearish. I've already plucked out some of the common bullish rationale backing DryShips today, so here are three counterpoints, courtesy of CAPS:
1. Shareholders' short stick: DryShips has been struggling to gain control of its finances after the world economy took a dive last year, sending shares of shippers like Eagle Bulk Shipping (Nasdaq: EGLE), Star Bulk Carriers (Nasdaq: SBLK), and Genco Shipping & Trading (NYSE: GNK) plummeting. DryShips has dramatically diluted shares with multiple offerings, cut capital expenditures, and was even dinged with a $43 million penalty for a recent ship cancellation -- leaving investors holding the bag.
2. Charter rates: While some shippers such as Paragon Shipping (Nasdaq: PRGN) managed to increase revenue in the first recent quarter, DryShips' revenue fell 59%. Despite a recent surge in Capesize charter rates, one FBR Capital Markets analyst predicts that Chinese imports won't continue to sustain rates, and expects to see a big drop in the second half of this year. That doesn't bode well for shippers like DryShips.
3. Demand, meet supply: Diana Shipping's (NYSE: DSX) president recently warned that an oversupply in the shipping industry could pose a risk to operators and the banks that finance them. The industry still has a lot of ships awaiting delivery, with companies such as Navios Maritime Holdings (NYSE: NM) adding more to their fleet. Navios already has its new ships' contracts covered, but others, like DryShips, could feel the oversupply pressure.
Of course, DryShips has survived despite past turmoil. But the question of whether the company will benefit shareholders going forward is why CAPS is such a great resource to augment your own analysis.
To see what the very best CAPS members are saying now about DryShips, just click on over to Motley Fool CAPS and have a look.
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