Dryships Falling

Some stocks fall in bear markets, but others completely collapse.  Once the darling of day traders and those trying to cash in on the commodities bull, Dryships Inc. has fallen from a high of $131.34 to a low of $15.80. With an 88% decline, its chart looks more like a financial company than an up-and-coming international shipping corporation.

The remarkable thing about the decline is the fact that at its low on October 10th, the entire company was valued at less than the net profit made by the company in the last four reported quarters. It isn’t often that Wall Street is so suspicious of a company’s prospects that it’s P/E ratio dips below 1. At this same low point, the company was selling at roughly one third of its “book value”. In other words, if you could have actually bought all the shares up at the low (essentially impossible), and then broken the company apart and sold everything off, you could expect to triple your money for your efforts.

I guess it’s true that international trade could completely collapse – which is what the market seems to expect. It’s a funny thing though, no matter what the circumstances are politically or economically, raw materials have a way of moving from the countries that have them to the countries that want them.

You don’t ship coal to Birmingham, but with the Chinese building coal plants at the rate of about 2 per week, and rapidly devouring the world’s iron ore to further their policies of urbanization, industrialization, and militarization, it’s hard to imagine that shipping companies will be the ones to suffer the most in the coming years.