DryShips (DRYS)

A play on the basic materials, commodities and emerging markets booms.

DRYS is one of the most undervalued, trading at just 4x 2008 earnings. Fundamentals suggest a higher multiple should be deserved.

When the economy does slowly return, the demand will far outweigh supply and the lack of trade over several months to years will force a free for all to push commodities into port. The Baltic Index will in turn run at a fast pace to keep up, and this company Dryships will be very much the number one to benefit. It's business structure relies on the Spot market and is currently trading at .4 P/E Ratio, with the market Cap greater than its number two and number three competitors, its yeild will be tremendous. You must just wait out the economy turn around as we all are anyway. The $8.50 share price is the best hidden gem on the exchange, hope you don't miss it.

Too little dry bulk ships to meet increasing demand. New ships are expected to come online in late 2009, giving the industry pricing power in 2008.

DRYS is quite a ride. Fluctuations in the cost of shipping (gas prices, etc) make the industry a scary one -- but one that provides a key service. DRYS fast-expansion and growing fleets, however look to be a good sign for the stock. I fully expect it to climb back up into the mid 90's before falling back.

Expected earnings was to be a positive catalyst, and although the results really were not much of a driver of the stock, it's still up about 7 points from where we recommended doing a buy / write on the shares. We're still looking at this company and really think that as those written calls expire this month, we'd truly rather be long this company as we go into the fall and winter months. Maybe we're falling in love with the fundamentals of this company; they are extremely compelling - though we warned our readers against this very same notion. One proviso: The size of the float on the shares is so small that they are vulnerable to all sorts of intra-day volatility.