The Underground Trader: Beware those Bearing Gifts?
September 7, 2010The Underground Trader
We wish to introduce a new periodic feature to TSP Flash Alerts: The Underground Trader. These posts are authored by a long-time friend and colleague who specializes in trading futures and options. The Underground Trader is a very close watcher of the indices and is a market junkie who cruises message boards, trading groups, news feeds and opinion sites for any edge he can get. Do not bet the ranch on any of his comments but they are usually interesting and definitely food for thought.
From The Underground Trader:
- BEWARE THOSE BEARING GIFTS? Some of the worst trades I ever made were trying to "catch a bottom" in the stock of Greek dry bulk shipper Dryships (DRYS) in 2008. DRYS was a darling of the financial press in 2007, with many cheerleading articles like one appearing in IBD titled "Smiling Dry-Bulk Shippers See Boom Times Lasting for Years". At about that point the stock was trading around $130, then made a move to $50, back to $115 and eventually fell off a cliff to $2.00 ( yes, that is two). It is a little bit difficult to make an apples-to-apples chart comparison on DRYS since it has been called a "compulsive capital raiser and serial equity diluter". But suffice to say the stock has been wildly volatile and a 'widow-maker' for many investors. It is estimated that 90% of the dry bulk shipping business evaporated during the depths of the global recession. DRYS has been back in the news recently with takeover speculation, filing for more equity dilution, another round of financing, and expansion of its business into deepwater drilling. One site has called it one of the "20 most undervalued stocks being chased by 'Smart Money'. It has traded recently in a 52-week range of $3.23 to $7.29 and is showing increased volatility again on the rumors that it might be the target of a takeover by Rio Tinto (RTP). A favorite of daytraders, it is one stock I vow to never touch again, no matter what the latest news might bring.
Dryships - Last 5 Years
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Dryships - Intraday
Dryships - Last 12 Months
Disclosure - Mr. Moenning owns positions in securities mentioned: none
Note: Observations by the Underground Trader should not be construed as trade recommendations, but rather are reports on marketplace activity and his view on the subject.