Something strange is happening with dry bulk shipping stocks on Tuesday. At 11:45 a.m. EDT, shares of Star Bulk Carriers (NASDAQ: SBLK) are down 8.8% and Safe Bulkers (NYSE: SB) is off 10.6%, but penny stock and other dry bulk shipper Maritime Beaver (NASDAQ: CTRM) is sailing in the opposite direction, up 8.7%.
So what’s up with this?
The first two are easier to explain than the last. As you may have heard, the Baltic Exchange Dry Index (BDI), which tracks the tariffs that dry bulk haulage companies may charge for transporting dry bulk goods (e.g. coal, pellets) of iron and grains) across the ocean, peaked at 3,266 on May 5 – up 138% from the start of this year. Then the BDI fell, but almost recovered to its highs six days later, hitting 3,254 – but it has generally declined since.
The BDI closed at 2881 yesterday – still up 110% from the start of the year, but well below its high – and that may make some dry bulk investors nervous. A higher BDI, after all, means dry bulk carriers can charge more for their shipping services, collect more revenue, and make more profit once their fixed costs are covered. But if the BDI continues to decline, then all of these positive dynamics will start to recede.
If the BDI falls sufficient, Star Bulk and Safe Bulkers could start losing money again, as they both did at the start of last year.
This explains why the shares of Star Bulk and Safe Bulkers are declining today – but what about Castor Maritime? Why is it this particular dry bulk shipping stock in progress up?
One reason could be that, as a penny stock and a “meme stock”, too, the Castor Maritime stock does not always follow the natural laws of stock market physics. Its stock price movements can be guided as much by the optimism of dynamic investors as by macroeconomic trends. In this regard, Castor Maritime is poised to perform a 10-to-1 reverse stock split, which could both push up its (apparent) share price out of the penny stock to approach $ 4l. ‘action and save the stock from the threat of delisting from the Nasdaq Stock Market.
Robinhood traders and WallStreetBetters may be betting on this event today, and are hoping that a seemingly more valuable, and write-off-proof, Maritime Beaver stock will gain new momentum and continue to rise, little doesn’t matter what the BDI does. But if you ask me, it’s a lost bet. If Castor Maritime couldn’t turn a profit when times were good for dry bulk shippers, I shudder at what will happen if times turn bad.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.