The Curious George of Shipping

Curious George has done it again. Just when you think he's backed himself into a corner with no possible means of escape, along comes the familiar man in the yellow hat to pull him from harm's way.

Conjuring the nickname ascribed to him in a Forbes Magazine article last year, DryShips (Nasdaq: DRYS  ) CEO George Economou appears to have been spared some of the worst-case scenarios that loomed over his company's shares. Among the first to bat in reporting earnings for the dry bulk sector, the shipper surpassed expectations for both revenue and profit.

Still, the fact that analysts anticipated something worse than a 97% cut to net earnings per share speaks volumes about the perfect storm that battered the sector ... and the horrific plight of DryShips in particular.

Enough about George
Today's story isn't so much about Curious George, as it is about the mysterious, unnamed man beneath the wide-brimmed yellow hat. The hat, it turns out, is transferrable, and over recent months a cast of characters has donned the disguise and bailed George out of harm's way.

The first character was the reluctant creditors. Faced with a catch-22 of deteriorating credit worthiness and borrowings that were too big to fail, a series of creditors amended debt covenants and renegotiated loan terms, buying the shipper time to get its financials in order.

Next to sport the yellow fashion faux pas were the scores of storm-battered shareholders for whom George had shown little regard in the past, with comments like this one (noted by Motley Fool CAPS member abitare in mid-2008 and quoted in this Fool article). Time and time again, dilutive share offerings have exploded the share count by a factor of five over the past year.

Who wears the hat today?
Lately, the yellow hat has been spotted leaping from head to head on a stiff breeze of stimulus spending and recovery hopes. Moving to stockpile vast quantities of natural resources, China has helped to fuel a minor resurgence in dry bulk demand that permitted DryShips to lock in 87% of shipdays through 2010, which yields $1.6 billion in fixed EBITDA over the next 2.5 years. It's worn by ArcelorMittal (NYSE: MT  ) as the steelmaker restarts some idled capacity in Europe, and miners like BHP Billiton (NYSE: BHP  ) and Cliffs Natural Resources (NYSE: CLF  ) ... in turn supplying pan-Asian steelmakers like POSCO (NYSE: PKX  ) .

Hang up that hat, Fools! After that string of unforgettable misadventures, DryShips is suitable only as a barometer of the times. In my Foolish opinion, Diana Shipping (NYSE: DSX  ) remains a superior choice for dry bulk, and Transocean (NYSE: RIG  ) offers safer exposure to the drillships market.

Further Foolishness:

Start investing today -- just $7 per trade with Scottrade. Or find the broker that's right for you.

The "Dry Bulk Shipping" tag within Motley Fool CAPS lists 16 companies. Join our online community today and share your views on this sector. CAPS is free and fun!

Fool contributor Christopher Barker used to captain yachts somewhat smaller than dry bulk carriers. He can be found blogging actively and acting Foolishly within the CAPS community under the username TMFSinchiruna. He tweets. He owns shares of BHP Billiton and Cliffs Natural Resources. POSCO is a Motley Fool Income Investor recommendation. Try any of our Foolish newsletters today, free for 30 days. The Motley Fool has a seaworthy disclosure policy.


Read/Post Comments (0) | Recommend This Article (13)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 955245, ~/Articles/ArticleHandler.aspx, 12/22/2014 5:14:11 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement