Why Star Bulk Carriers Stock Took to the High Seas Last Week

Star Bulk Carriers reached new 52-week highs after several catalysts were hit.

Mar 11, 2014 at 7:45AM

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Star Bulk Carriers (NASDAQ:SBLK) set sail last week, rising as much as 23.5% following release of its fiscal-fourth-quarter earnings, its conference call, and the renewed overall strength in the dry shipping market.

So what: For the quarter, Star Bulk Carriers reported adjusted net income of $2.1 million, significantly higher than the $0.3 million it earned in the year-ago period. Adjusted earnings per share came in at $0.07, $0.03 above the $0.04 estimate.

CEO Spyros Capralos called 2013 a year of "radical transformation" for Star Bulk Carriers. Capralos points out that the company ordered 11 new ships during the year just before market prices for new ships jumped by 15% or more. In addition, Star Bulk Carriers scored four used ships at prices below today's market values. It was a good move.

Meanwhile, the Baltic Dry Index, which measures overall global shipping rates, took off like a rocket to rise 22.7% last week. This was the biggest one-week rise of the year so far.

Within the index, the Capesize ships, which are the largest and often most profitable ships, saw rates explode the most; they rose 43% for the week. This bodes especially well for Star Bulk Carriers' five Capesize vessels as well the company's strategy to order and acquire larger ships.

Now what: Star Bulk Carriers was profitable for the full year after losses in 2011 and 2012. Capralos stated, "We believe that our company is now well positioned to take advantage of the improving dry bulk market, as we have repositioned our fleet toward the larger vessel sizes." If so, the company should see much greater earnings in 2014 and beyond.

Capralos added, "We remain optimistic regarding the fundamental dynamics of the dry bulk industry, as we expect the interplay of contained vessel supply and resilient dry bulk commodity demand growth, to enhance the earnings power of our larger, diverse and competitive asset base."

During the conference call, Capralos referred to 2013 as "essentially the bottom of the shipping cycle." He said that Star Bulk Carriers adopted a "flexible commercial strategy so as to maintain long-term spot market exposure taking full advantage of a market recovery." He believes a "broad market recovery" is currently under way.

Capralos dropped a hint about future dividends or buybacks coming. He stated, "As our fleet expands and the drybulk market recovery is established, we will evaluate favorably the potential return of capital to our shareholders in a manner consistent with our overall business strategy, cash flows and liquidity position." The market of course would be pleased to get cash back, but perhaps more importantly it shows confidence in the future.

Like many other dry shippers, Star Bulk Carriers expects continued demand for iron ore in China to likewise increase demand for shipping and thus raise rates. CFO Simos Spyrou points out that there is a flood of new cheap iron ore coming on line from foreign countries. He believes this will lead to the depression of iron ore prices to levels that small Chinese producers can't compete with. The result will be even more importing of iron ore into China and therefore higher shipping rates, according to Star Bulk Carriers.

Fools that are interested in dry bulk shipping stocks should take a look at Star Bulk Carriers. Analysts expect it to earn $1.23 per share in 2015, or double the returns expected for 2014. With a 2015 P/E of a little over 12, and with those analyst estimates continuing to rise, Star Bulk Carriers represents a compelling combination of growth and value.

This could be a big boom for the dry shipping industry
Record oil and natural gas production is revolutionizing the United States' energy position. Finding the right plays while historic amounts of capital expenditures are flooding the industry will pad your investment nest egg. For this reason, the Motley Fool is offering a comprehensive look at three energy companies set to soar during this transformation in the energy industry. To find out which three companies are spreading their wings, check out the special free report, "3 Stocks for the American Energy Bonanza." Don't miss out on this timely opportunity; click here to access your report -- it's absolutely free. 

Nickey Friedman has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.

Compare Brokers