What happened

Shares of DryShips (NASDAQ:DRYS) have taken off in 2018, rising more than 46% by the end of the first half, according to data provided by S&P Global Market Intelligence. Driving the diversified shipping company's surge was its return to profitability as well as the announcement of several strategic initiatives.

So what

DryShips bounced back after a disastrous 2017, during which the company lost nearly all its value due to a series of dilutive stock offerings that gave it the cash to expand its fleet. Those additions have now become one of the drivers of its rebound in 2018 as they helped the company return to profitability in the first quarter.

Tanker ships out on the water with an orange sunset in the background.

Image source: Getty Images.

In addition, the company reversed its dilutive ways by authorizing a $50 million stock repurchase program. Through the first quarter, DryShips bought back nearly 3 million shares, reducing the count by almost 3%.

The company also announced plans to spin off 49% of its gas carrier business to investors, which would free it up to pursue its own strategic focus and priorities. DryShips also reshuffled its portfolio a bit. The company bought two newer vessels -- one dry bulk carrier and an oil tanker -- while selling two older dry bulk ships. In doing so, the shipper continued the modernization of its fleet. 

Now what

After dramatically rebuilding its fleet last year, DryShips spent much of this year making minor improvements. On top of that, it has tried to reverse some of the devastating impact of all the dilution by repurchasing shares.

While these moves have driven the stock higher, and could continue doing so, shares remain quite risky because the company operates in the volatile shipping sector, which is tough for even the most astute capital allocators to create value for shareholders. That's why I think investors should steer clear of this stock and consider one of these top options instead.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.