A strong rally in the dry bulk shipping sector over the past several months has led many investors to companies like Genko Shipping & Trading (NYSE:GNK). But before you hop on board, don't ignore two very big warning signs.
Several related-party transactions are funneling shareholder dollars into outside businesses related with key Genco insiders. These related-party transactions with its executives totaled $1.7 million in 2012, including amounts for audit, travel, and office services, along with oil purchases. Last but not least, Genco has failed to produce positive free cash flow in six of the last eight years, indicating just how tough an industry shipping is.
In the video below, Motley Fool analyst Blake Bos explains exactly what a related-party transaction is, what kinds of transactions are taking place at Genco, and whether investors should care about them.
Blake Bos 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.