Diana Shipping, Inc. (NYSE:DSX)

CAPS Rating: 4 out of 5

The Company is engaged in the ocean transportation of dry bulk cargoes worldwide through the ownership and operation of bulk carrier vessels.


Player Avatar BuffettJunior1 (97.69) Submitted: 7/22/2011 5:30:27 PM : Underperform Start Price: $9.83 DSX Score: +84.84

All of these shipping companies are value traps. They look cheap based on traditional valuation methods (P/E ratios, P/B, etc...). However, when you look at their cash flow we see something completely different. Companies like this are and always will be very capital intensive. In fact, the capital expenditures (required maintenance of ships) are so high that most of the time these companies can’t earn enough cash to cover them. Now, I don't know about you, but this doesn't sound like a company I'd feel safe investing in. This company is slowly taking on more debt, that's the only way it’s able to cover its increasing costs. In the long run a business like this will surely fail and its stock price will continue its steady decline.

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Member Avatar aapries (43.90) Submitted: 11/23/2011 1:38:57 PM
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You have no idea what you're talking about. Have you ever even calculated DSX's free cash flow? It's has been and remains, positive. I agree that many of the shippers are going down because of over leveraging and the supply gut; however, DSX will not be one of them and will actually benefit when this industry consolidation actually takes place.

Do actual research before you thumb down everything in sight in a bear market.

Member Avatar BuffettJunior1 (97.69) Submitted: 11/23/2011 6:43:56 PM
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The company's free cash flow has been negative in 8 out of the last 10 years. You call that good?

History has shown that capital intensive companies, while very important to the economy, are terrible investments. If you add up all of the profits over the past 50 years of all the different airlines, shipping-companies, car manufacturers, and other capital intensive companies, you will arrive at a negative number.

It should be common sense to people that a business that can maintain a high return on capital will always outperform. I don't know of a single capital intensive company that has a high return on capital. Not a single one! Most of these companies require a huge amount of assets and they end up making a tiny amount in terms of profits (that's if they're lucky), most of the time they lose money. I’m not talking about anything new here. Most of this information is out there where anyone can access it.

The reason people fall for these kinds of investments is because the stock price has dropped. People have this preconceived notion that just because a stock used to trade at 50 per share, and today it trades at 5 per share, this means that it’s undervalued. It’s for this reason that the majority of investors never make a lot of money in the stock market. They look at things that truly tell you nothing about an investment.

Member Avatar kilduffe (< 20) Submitted: 2/14/2012 8:33:20 PM
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Review DSX balance sheet and see cash is greater than long term debt this company will be around after the consolidation

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