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Unusual Rally in DryShips (DRYS)

July 27th, 2009 Michael McDonough

I noticed an unusual rally in DryShips (DRYS) today, which closed up an astonishing 13.6%.  At first I attributed this advance to positive sentiment stemming from better than anticipated new home sales, coupled with speculation over the company’s earnings data and a higher BDI, but after looking at the performance of the rest of the sector, which was good, but not stellar, I began to wonder.

After a couple minutes of investigation I came across an article on Reuters titled  PREVIEW-Drybulk earnings to be mostly in line with expectations, in which Oppenheimer’s shipping analyst Scott Burk stated he believes DryShips (DRYS) and Excel Maritime (EXM) have the highest potential to exceed earnings estimates given the companies’ exposures to spot shipping rates. DRYS is now up 17.0% on a weekly basis. He also indicated that Diana Shipping would be the least likely to beat expectations.

Of course reaction to this piece probably led to its fair share of short covering and speculation toward Friday’s earnings release, but I at least feel confident that I found the catalyst for today’s move.  Given the motivation behind today’s rally it is unclear whether we can expect to see continued buying in DRYS tomorrow in advance of this week’s earning release.

Dry Bulk Shipping
Index 1D% 1W% 1M% 1Y% Weighting
DBSI 7.5% 10.6% 19.9% -55.6%
DSX 2.6% 2.8% 8.5% -47.1% 20%
DRYS 13.6% 17.0% 19.2% -90.3% 32%
EGLE 5.3% 16.4% 29.8% -78.1% 5%
EXM 5.2% 6.1% 39.2% -72.5% 8%
GNK 2.6% 7.6% 16.4% -57.8% 14%
NM 7.1% 4.3% 12.5% -47.2% 8%
PRGN 4.7% 3.2% 18.7% -70.6% 2%
SB 3.6% 7.9% 20.3% -55.3% 8%
SBLK 10.5% 9.9% 4.6% -59.4% 4%
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