Diana Shipping Coasts Along

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I've already revealed that I have a crush on Diana, and suggested that Charles Darwin himself would have been smitten with her adaptive prowess.

I'm speaking, of course, about Diana Shipping (NYSE: DSX  ) .

Diana, a dry bulk shipper, made a profit after a challenging second quarter, matching analyst expectations with earnings of $30.4 million. A 31% decline in the average charter rate to $33,073 per day, plus a marginal increase in idle operating days, yielded a copycat 31% drop in revenue. Diana's fleet utilization rate of 99.1% highlights the importance of long-term charters during a major market disruption, although smaller operator Eagle Bulk Shipping (Nasdaq: EGLE  ) outpaced Diana by keeping ships moving on 99.7% of available days.

Great navigators must be able to predict the weather with accuracy, however, and Diana is not shy about sharing her forecast. Alongside fellow bellwethers Nucor (NYSE: NUE  ) and Joy Global (Nasdaq: JOYG  ) , Diana's management stands out from the pack with a penchant for straight talk. Offering a timely reminder for investors consumed by understandable recovery hopes, CEO Simeon Palios warns that "the difficult phase of the cycle is far from over."

Accordingly, Diana remains in lockdown mode, making no additions to a conservative order book of just two new vessels under construction. Competitor Navios Maritime Holdings (NYSE: NM  ) , by contrast, stepped up its growth spurt recently by ordering four additional vessels atop the seven already pending. With an estimated mind-boggling 50 million deadweight tons of dry bulk capacity scheduled to enter service in 2009, I share Diana President Anastassis Margaronis' concern (expressed last quarter) that oversupply of new vessels will present tremendous challenges to the industry.

Despite the temptation to dive into dry bulk as China continues to hoard raw materials and American industrial giants perceive a bottom, I have not altered my fundamental view that physical survival remains the overarching priority for dry bulkers until we see how this global fleet expansion will be absorbed. I view debt-laden operators like Excel Maritime Carriers (NYSE: EXM  ) and DryShips (Nasdaq: DRYS  ) with particular concern.

With more cash on hand than long-term debt, and the most conservative strategic stance I've observed in the industry, Diana is prepped for survival. She may not be flashy or prone to comforting rhetoric, but she's beautiful in this Fool's eyes.

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The "Dry Bulk Shipping" tag at Motley Fool CAPS includes 17 companies. Join our online community today and share your views on the offerings in this sector. CAPS is free and fun!

Fool contributor Christopher Barker captains yachts somewhat smaller than dry bulk carriers. He can be found blogging actively and acting Foolishly in the CAPS community under the user name TMFSinchiruna. He tweets. He owns shares of Diana Shipping. The Motley Fool has a seaworthy disclosure policy.

Read/Post Comments (2) | 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.

  • Report this Comment On August 07, 2009, at 8:30 PM, stockjock43 wrote:

    I agree and finally got a 13 entry point... it may go down to 11's but that is fine with me...I will buy 100 more shares above my last order and continue to do so if she drops.... This is one shipping stock where I know I wont double my money in 2 weeks on a squeeze like DRYS or even EXM ..EGLE

    But I sleep like a Baby and know in 5 years uts a 30 dollar stock + -

  • Report this Comment On August 10, 2009, at 10:55 AM, AZ123 wrote:

    Any updates on SRYS spinning off RIG later this year?

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DSX $2.51 Down -0.02 -0.79%
Diana Shipping CAPS Rating: ****
DRYS $0.36 Down -0.03 -7.23%
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EGLE $4.48 Down -0.20 -4.27%
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