Maybe a Pine Tree

Ahknaten -- YHOO DRYS

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Dryships Inc. (DRYS) is a company that I neither hate nor love, but since I dislike giving a 'hold' opinion and I force myself to say 'buy' or 'sell', I'll tell you that I like it. Buy.

Are you curious to know what "real" analysts do? Quite often many are afraid to give 'sell' recommendations. It seems to me, that if the analyst dislikes a stock, they're likely to ignore it rather than saying 'sell'. I'm going to do my best to avoid that mentality.

As you may know, I'm a quant person, so DRYS appeals to me as it has a low PE, price/book, and price/cash flow. But at the same time, I am concerned about the high short interest, high accruals and high F-Score. I find it interesting that in 2006 as the price of oil went up, the stock went down, and then when the price of oil went down, the stock went up. This pattern stopped at the beginning of 2007 as the price of oil went up and DRYS became a hot momentum type stock and DRYS flew from $20 to $120. I need not repeat myself - be careful of HOT MOMENTUM! It plunged from $120 to $50.

Using eVal, and paying attention to my EPS estimates and terminal DCF ratios, I came out with a price target of $125. This is a tricky stock to value, as even the EPS estimates that the analysts give, have a tremendous range. The current price is around $76, so according to that estimate, DRYS is undervalued.

So guess what? I don't love it, I don't hate it, but I actually like DRYS. Buy.

Would you like a few stocks within the same industry?
Long: ACLI, ALEX, DAC. Short: RLOG, SBLK, ULTR

YHOO Update
In my previous blog I complained about the Yahoo deal, and recently YHOO turned it down. Here's my weird prediction: I think YHOO stock will fall in the next year. I think it's overvalued. Sell. Now, once YHOO falls, then I think there is a high probability that MSFT might make another offer on the company, but this time the stock will be trading at a price lower than $19, and the offer will be at least $5 billion less than the other offer they made. Mind you, this prediction is based on the "trend" from the last offer to this offer, but I think it's a neat prediction. Who knows, I might be wrong. If it happens, then it'll be interesting to see what the "unfortunate" YHOO shareholders think then.