The sprawling valley of disconnect between sound investment vehicles and high-risk speculation has never appeared so wide.
Particularly in times like these, cultivating effective risk assessment becomes all the more critical for individual investors. As Goldman Sachs made crystal clear in its testimony to Congress regarding sales of debt securities that were allegedly designed for failure, it's "buyer beware" out there.
Although I missed out on tremendous returns by avoiding Teck Resources
Within the rough-and-tumble realm of dry bulk shipping, no stock better illustrates the potential pitfalls of speculative fervor than DryShips
The curious shipper reported another disappointing quarterly performance that missed analysts' expectations on both the top and bottom lines, DryShips continues to bounce along the bottom of the sector that has endured an array of daunting challenges: from a structural oversupply of vessels to persistent uncertainty over the safety of debt and the availability of credit among maritime financiers. DryShips reported only $5.7 million in income for the first quarter, with revenue lost from the relocation of a drillship to the Black Sea for use by Petrobras
Much of the company's fate now hinges upon the performance of existing and pending drillship assets as opposed to its operations in the dry bulk segment. Both the oil spill resulting from the sinking of a Transocean
Under trying circumstances like these, Fools are advised to maintain a giant label of "speculative-grade" emblazoned across the hull of this high-risk stock. I continue to recommend that investors eager to enter the dry bulk sector focus their gaze upon lower-risk operators like Diana Shipping
I've added DryShips to my Motley Fool CAPS portfolio, purely as a high-risk bet that recent weakness will yield another speculative rally in the near term. When the risks are simply too great to warrant the deployment of real capital, I find that Motley Fool CAPS offers a zero-risk, even therapeutic outlet for the speculator that arguably lives within us all.
I have issued my short-term outperform pick for DryShips over at CAPS, and I fully expect to end the pick over the coming months with another modest gain. Whether you consider the stock investment grade or risky speculation, in CAPS we only wager ideas. Join the free community today and voice your opinion about DryShips' suitability for investment capital.
Fool contributor Christopher Barker can be found blogging actively and acting Foolishly within the CAPS community under the username TMFSinchiruna. He tweets. He owns no shares in the companies mentioned. Petroleo Brasileiro is a Motley Fool Income Investor recommendation. Try any of our Foolish newsletters today, free for 30 days. The Motley Fool has an extremely buoyant disclosure policy.