Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Why Star Bulk Carriers' Stock Sunk Yesterday

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  ) slipped under the waves by 4.1% on April 14 following continued daily weakness in the Baltic Dry Index, or BDI.

So what: The BDI is an index based on various ship sizes and routes from around the world, based on the average market daily spot rates. The index fell another 1.3% yesterday after falling nearly every day for weeks. Within the index, the largest and most profitable type of ship, the Capesize, continued to offer significantly higher performance on a year-over-year basis, but fell 2.5% for the day. Rates for Panamax ships are now a decent clip below the year-ago levels.

The main reason for the weak rates is fear. There have been a number of reports about the slowing growth of China's economy and the growing number of defaults with Chinese banks. Considering that 70% of global iron ore shipments are sent to China, any weakness in demand could hurt Capesize rates. There were also reports of soybean order cancellations, which are delivered by Panamax ships.

Now what: The concern for Star Bulk Carriers is that the company is veering toward a strategy based on the BDI and away from long-term, fixed-rate contracts. Star Bulk Carriers currently has 50% of its operating days open for 2014, and most of 2015 is available as well. As such, swings in rates can make or break its fortunes.

In a recent interview, CEO Spyros Capralos said, "Given our bullish view on the freight market, these strategies are primarily spot oriented." There are naturally going to be some fears that Star Bulk Carriers got this strategy all wrong.

Analysts currently expect Star Bulk Carriers to earn $0.62 per share this year and $1.24 per share next year, compared to the $0.13 per share earned in 2013. Contributing to these expectations of improvement in EPS is the company's plan to deliver 11 new ships starting in 2015, but it is mostly due to the hope that rates will rise. If higher rates don't materialize as Star Bulk Carriers expects, look for analysts to lower their estimates.

Take advantage of this little-known tax "loophole"
Recent tax increases have affected nearly every American taxpayer. But with the right planning, you can take steps to take control of your taxes and potentially even lower your tax bill. In our brand-new special report "The IRS Is Daring You to Make This Investment Now!," you'll learn about the simple strategy to take advantage of a little-known IRS rule. Don't miss out on advice that could help you cut taxes for decades to come. Click here to learn more.

Read/Post Comments (0) | Recommend This Article (1)

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: 2915410, ~/Articles/ArticleHandler.aspx, 9/2/2015 12:39:09 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...

Nickey Friedman

Nickey is a select freelancer for the Fool. She writes about food & beverage, dry bulk shipping, and whatever else floats her boat. After selling four successful restaurants, she turned in her knives for a pen and now puts her passion for food, hospitality, and transportation in writing. You can send email to her at

Today's Market

updated 3 hours ago Sponsored by:
DOW 16,058.35 -469.68 -2.84%
S&P 500 1,913.85 -58.33 -2.96%
NASD 4,636.11 -140.40 -2.94%

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

9/1/2015 3:59 PM
SBLK $2.49 Up +0.04 +1.63%
Star Bulk Carriers CAPS Rating: **