George Soros' investment firm recently purchased 590,278 shares of DryShips (NASDAQ:DRYS) and 77,942 shares of Diana Shipping (NYSE:DSX). That comes out to a $1.8 million stake in DryShips and an $841,000 stake in Diana Shipping. Soros' firm currently manages right around $6.8 billion spread across 2,333 holdings, so these additions are a very small portion of the total portfolio. The firm also owns small positions in Navios Maritime Holdings and Navios Partners.
Whether it's Soros himself or his fund managers, it appears his company is making a small bet on the dry bulk shipping sector, with DryShips and Diana Shipping leading the pack. So just what would motivate Soros to invest in this sector?
Some history on Soros' motivations for speculating
Looking at Soros' biography in Money Masters of Our Time by John Train, Soros is known as a speculator by nature, with an ability to trade in and out of positions quickly using margin debt. His strategy revolves around three main points, according to Train:
- Start small, and then if things work out, build the position bigger.
- He doesn't need to know everything about a particular investment, just enough to have an edge on the market.
- He has to correctly judge the risk inherent in a position the moment it's established.
But why is he investing in dry bulk shipping?
It appears from the first point that Soros' firm may be building an initial position, with the potential to add later if the strategy seems to be working. This strategy is most likely centered on a predicted shipping rate rebound in 2014 and 2015,
Nonetheless, speculating on exactly why Soros' firm is investing in DryShips and Diana Shipping isn't the best use of time in this case. For investors, a quick look at Soros' methodology shows he's a macro-trader by nature, with a propensity to enter and exit large positions quickly. Soros' firm is probably investing in multiple companies to try to speculate on a industrywide rebound.
In the following video, Motley Fool analyst Blake Bos takes an in-depth look at Soros' top two dry bulk holdings, DryShips and Diana Shipping, and tells investors whether he thinks it's a good idea to follow suit and invest in these two shippers as well.