Why DryShips Ran Aground in 2012

The first half of 2012 is in the rearview mirror, and investors are gearing up for what looks to be an action-packed ending. There are bound to be some big winners -- and more than a few duds -- no matter what happens in the United States and abroad.

Will your favorite stock have its victory lap as we hit the home stretch, or will it get lapped? First-half performances can hold some clues, so let's look to the recent past to find out whether DryShips (Nasdaq: DRYS  ) deserves a place in your portfolio going forward.

First-half recap
DryShips has, at various times been one of 2012's best-performing and worst-performing stocks. It's settled into a reasonable gain on the year to date, as you can see here:

DRYS Total Return Price Chart

DRYS Total Return Price data by YCharts

Here are a few financial snapshots of its recent performance:

Market Cap $1.1 billion
Trailing 12-Month Revenue $1.12 billion
TTM Net Loss ($143 million)
TTM Free Cash Flow ($1.63 billion)
Most Recent Quarterly Revenue $247 million
MRQ Net Loss ($47 million)
MRQ Free Cash Flow ($115 million)
MRQ Revenue / Net Income YOY Change 19.3% / (304.3%)
Motley Fool CAPS Rating (5-star max) ***

Source: Morningstar.

What the numbers don't tell you
DryShips isn't the only major dry-bulk carrier to get raked over the coals in recent years, but it's one of the more prominent examples. Over the past 12 months, DryShips, along with peers Diana Shipping (NYSE: DSX  ) and Navios Maritime Holdings (NYSE: NM  ) , have zigged and zagged their way to some fairly substantial losses. The key reason for this industrywide carnage is the collapse of the Baltic Exchange Dry Bulk Index, which my fellow Fool Sean Williams points out has gone "splat," falling below 1,000 after reaching a pre-recession peak of over 11,000.

European problems in general, and Greek problems particularly, have also contributed to DryShips' misery. The stock tends to react violently to major news out of Greece. I pointed out earlier this year that DryShips and National Bank of Greece (NYSE: NBG  ) had shot up on the false hope that Greece might not be a completely lost cause, and predicted a subsequent collapse of those short-term gains. In the predictable absence of genuinely good Greek news, that prediction's proven correct:

DRYS Total Return Price Chart

DRYS Total Return Price data by YCharts

Earlier this year, it seemed to DryShips' advantage to have operational diversity through a stake in deepwater drilling spinoff Ocean Rig (Nasdaq: ORIG  ) . However, DryShips has been gradually divesting its shares this year. That may be purely out of necessity, as cash-bleeding DryShips has a massive debt overhang that nearly doubled over the course of 2011.

DryShips' current stake in Ocean Rig is worth more than DryShips' current market cap, so investors can now get a free stake in a deepwater driller with the purchase of a floundering and unprofitable dry bulk shipper. That's the only real silver lining to this sad story so far.

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Fool contributor Alex Planes holds no financial position in any company mentioned here. Add him on Google+ or follow him on Twitter @TMFBiggles for more news and insights.

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