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.

Looking to invest in other potential turnaround stocks? The Motley Fool's found a few in a hated sector that's putting bad times behind it. Take a look at "The Stocks Only the Smartest Investors are Buying" in our much-requested free report. This information won't be available forever, and the window of opportunity only stays open for a short time. Click here now to find out what super-investors like Warren Buffett are buying, before it's too late.

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.

The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

Read/Post Comments (0) | Recommend This Article (4)

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.

Compare Brokers

Fool Disclosure

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: 1935073, ~/Articles/ArticleHandler.aspx, 10/23/2016 2:47:12 AM

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...

Today's Market

updated 1 day ago Sponsored by:
DOW 18,145.71 -16.64 -0.09%
S&P 500 2,141.16 -0.18 -0.01%
NASD 5,257.40 15.57 0.30%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/21/2016 3:59 PM
DRYS $0.36 Down -0.03 -7.23%
DryShips CAPS Rating: **
DSX $2.51 Down -0.02 -0.79%
Diana Shipping CAPS Rating: ****
NBG.DL $0.00 Down +0.00 +0.00%
National Bank of G… CAPS Rating: ***
NM $1.18 Down +0.00 +0.00%
Navios Maritime Ho… CAPS Rating: ***
ORIG $0.92 Up +0.03 +2.84%
Ocean Rig UDW CAPS Rating: No stars