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Why Star Bulk Stock Suddenly Dropped Today

By Rich Smith - Mar 23, 2021 at 2:13PM

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Oopsie. The BDI's fantastic rise just hit a pothole.

What happened

Star Bulk Carriers (SBLK 2.07%) stock has had a fantastic year so far in 2021, rising 89% through yesterday's close in less than three months' trading. But they say that all good things come to an end, and today, Star Bulk stock took a sudden turn for the worse, falling 13.4% through 1:20 p.m. EDT

Why?

Blackboard drawing of stock chart arrow going up, being erased, and pointing back down.

Image source: Getty Images.

So what

As you may have heard, the Baltic Dry Index -- the "BDI," which tracks the average cost of shipping bulk cargo from place to place (and thus, predicts the profits of dry bulk shipping stocks) -- has been on something of a tear this year, shooting up 69% since the start of the year to close at 2,319 last night.

Reuters called that price a "one-year peak" and noted that the index had booked six straight winning sessions in scaling it. But this morning, that winning streak abruptly broke, and the BDI is currently down 2.1% from yesterday's record at 2,271.

Now what

Discouraging news? Today, perhaps. But let's not overstate the case here. For the time being, today's decline on the BDI still looks like the merest blip in a longer-term trend of charter prices marching higher -- and the index is still up 66% since the start of the year.

Based on analyst projections of what these higher charter rates will mean for Star Bulk's profits, the stock is still trading for barely 8 times forward earnings. Unless today's BDI stumble turns into a new trend of broadly declining prices, the forecast for Star Bulks stock still appears to be "fair winds and following seas" -- and rising profits.

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Stocks Mentioned

Star Bulk Carriers Corp. Stock Quote
Star Bulk Carriers Corp.
SBLK
$32.55 (2.07%) $0.66

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