Is DryShips a good buy? Recovery is coming the way of DryShips Inc. (NASDAQ:DRYS) as rates for Capesize ships continues to show great improvements, and the company holds a large fleet for that category. After five years of drowning, the segment may very well help ease the suffering endured by the industry. But analysts have questioned the trend, while arguing the same depends on uncertain macroeconomic developments.
Under the most favorable economic tailwinds, analysts speculate that Navios Maritime Holdings Inc. (NYSE:NM) will reap greater benefits. Like Dryships, Navios is based in Greece. The differences stem from the service provided by each. The company engages in operating ports and transfer station terminals while handling vessels, barges, and pushes boats, as well as operates upriver transport facilities in waterways. In other words, because both companies are leaders in the capsize segment for dry bulk cargo barge, the comprehensive service provided by Navios gives it an edge over the competition.
The rise on rates for Capesize, the largest dry bulk cargo barges in the market, when compared to other categories is notable. While Panamax rates have risen slowly when compared to Capezise, rates for the three smallest shipping classes, Supramax, have shown the tiniest improvements. In one sense it is reasonable that the hardest hit category shows the greatest improvement. Keep in mind that between 2008 and 2012, day rates for Capesize has declined 98%, from $234,000 to $4,000.
The advantage that Dryships holds over Navios is the investment made previous to the financial meltdown of 2008. Hence, the company holds some of the newest and most advanced capital to complete the job. The downside is that over capacity may force the company to get rid of some of the newly acquired capital. Additionally, prices for commodities are not showing great improvements. So far, the company continues to restructure its balance sheet by selling idle assets.
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Disclosure: Jodor Jalit holds no position in any of the mentioned stocks.