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Why Castor Maritime Stock Just Popped

By Rich Smith - Mar 8, 2021 at 11:55AM

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Dry bulk shipping prices hit a new high. Is it time to buy?

What happened

Dry bulk shipping stock Castor Maritime (CTRM 0.52%) raced out of port Monday morning, notching a 12% gain as of 11:20 a.m. EST. There appear to be two reasons for this -- one good, and one bad.

But I fear it's the bad one that's moving Castor Maritime stock today.

Three quarters view of a dry bulk cargo ship

Image source: Getty Images.

So what

Good news first: The Baltic Exchange Dry Index (BDI), which tracks the rates shippers like Castor Maritime can get for hauling dry bulk goods (e.g. coal, iron pellets, and grain) across the ocean, continues to surge higher. Just one month ago, the BDI was at 1,315. On Friday, website TradingEconomics.com clocked it at 1,829.

That's a gain of 39% in less than 30 days, and is indicative of good pricing power among dry bulk shipping stocks that should translate into gains in revenue and profits in the quarters to come.  

Now what

But here's the thing: If this were just a story about the BDI rising, then you'd expect shares of rival dry bulk shippers to be surging as well -- but it's not at all clear that this is what's happening. Diana Shipping for example, a smaller rival of Castor, is enjoying a 5% rise today, while Star Bulk Carriers, a much bigger rival with more market heft, it up just 0.5%.

Higher rates for dry bulk shippers should benefit all of these companies more or less equally, however. The fact that this isn't reflected in the stock prices today suggests that Castor Maritime stock continues to be moved more by Robinhood traders making momentum-based "Wall Street bets" on the advice of Reddit than by actual investors tracking the fundamentals of the stock.

And if that's the case, as fast as Castor Maritime went up today, it could go right back down tomorrow.

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Stocks Mentioned

Castor Maritime Inc. Stock Quote
Castor Maritime Inc.
CTRM
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