Editor's Note: This post was written by Fil Zucchi, one of Minyanville's many sharp minds.

Drybulk shippers have been slammed over the last few days courtesy of a plunge in capesize spot rates. However, according to the sharp eyes at Dahlman Rose, the volume of new spot fixtures has been exceedingly low of late. And taking a slightly longer perspective, spot rates are up more than 100% since last year.

A few things to keep in mind:

• Not all shippers are created equal: Dryships NASDAQ:DRYS) plays in almost strictly in the spot market and therefore it stands to reason that it should swing hard with spot rates. After closing the purchase of Quintana Marine, Excel Maritime (NYSE:EXM) now has a decent balance of long term and short term fixtures contracts. And then you have an outfit like Paragon Shipping (NASDAQ:PRGN) with most of its fleet leased out on long term - fixed price contracts.
  
  
• Despite the vast differences in the business models of these three companies, the market has not been very discerning in how it has treated its stocks, which suggests that there may be some arbitrage opportunity, should one wish to play it that way.
  
  
• Despite growing economic risks in China, it's tough to envision a collapse of infrastructure build-outs, or a sudden change in food needs in the BRIC countries and around the world in general. As long as these two activities hold up, it's tough to see a collpase in the shipping business;
  
  
• I can't stress enough that my long side interest in EXM and PRGN is heavily influenced by some sizable, and so far not so succesful, shorts in broad commodity ETF's.
  
  
• And lastly, the volatility in the shippers offers some very attractive options selling opportunities.
  
  (Positions in EXM, PRGN)

If prices were not high enough, the earthquake in the Sichuan region of China has pushed speculation that dry-bulk shipping prices are going to continue to rise. Dryships (NASDAQ:DRYS) may be poised to take advantage of this.

There is additional speculation that the massive consumption of China will increase, as there is now a rebuilding process along with the daily requirements that has the dryshipper's move higher. It is a simple equation. China needs materials and they will either find those in their soil or get it from somewhere else. When it is imported, the most cost efficient way to transport the material is shipping lines. In addition, China has a voracious appetite for coal and iron in order to make steel.

South America is now back on line to begin exporting iron, as is Australia. Both will be exporting coal to China, supplemented by South Africa. Put this all together, and the investors are seeing no end to the shipments to emerging China. So, the high demand for commodities, mainly coal, grain, metals, and fuels are causing the dry shipping rates to soar. That, in turn, creates a nice bottom line.

If you were paying close attention to this column last week, you would have sidestepped some of the pain and misery investors in many of the stocks discussed have suffered lately. Of late, we have seen the general direction of the markets turn positive, even in the face of news to the contrary.

Perhaps it is because investors have an appetite for stocks, since there seems to be few investment alternatives. Real estate is off limits and the yield on bonds and other fixed-income investments is pathetically low.

The theme for the week ahead is SMOOTH SAILING. In this week's column, we delve into some stocks that will be announcing earnings, and that may benefit from the changing tide of investor sentiment. To be sure, there will be several areas of choppiness as we continue to be bombarded by the stormy realities of a turbulent economy.

Monday, May 19

The chart for Campbell Soup (NYSE: CPB) looks M'm M'm good. Sporting a smooth line with nary a ripple over the past 12 months, management has done a great job at keeping both company earnings and share price up, even in the face of significant food inflation. While shares have been condensing during the past few months, recently they have been rising with a series of higher highs and higher lows. Be on the outlook for earnings of 44 cents per share on revenue expectations of $1.89 billion. Now that I think of it. That's a lot of soup wrapped in tin-plated steel -- one of many materials that has seen its price almost double in the past six months.

Peter Way selects his buys by following the trading activity of block traders -- those making large, million dollar bets. Here's the latest from his Block Trader Oil & Gold Monitor.

"The volume stock market liquidity-providers are hedging their necessary position risks in ways that foretell declining oil stock prices. Their records on such outlooks in the past are pretty good, so pay attention.

"The million-dollar market-makers are not always right, and here they tend to be a bit early, but it's obvious they can save you some grief and provide a chance to pick up some meaningful extra profit.

"From our recent review of energy ETFs, we also note that the pros' perception seems to be that energy stocks have been bid up too far. Ok, so what to do? Sell the oil holdings? Then where to put the proceeds?

MOST NOTEWORTHY: Third Wave, DryShips and Hil-Rom Holdings were among today's noteworthy initiations:

• Third Wave (NASDAQ: TWTI) was initiated with a Buy, target $12 at Deutsche which said the company is compelling small-cap opportunity in molecular diagnostics with an $1B-plus opportunity in the HPV market.
  
• DryShips (NASDAQ: DRYS) was initiated with an Outperform, target $110 at Credit Suisse, which is positive on the company's growth opportunity and is bullish on dry bulk rates into 2009.
  
• Hil-Rom Holdings (NYSE: HRC) was initiated with an Outperform at Oppenheimer which believes 2H08 will be an inflection point for Hill-Rom, with revenue, margin expansion, and earnings growth all beginning to accelerate. The firm believes that the company's performance will improve due to its efforts to complete spending on R&D, reinvigorate its brand, and find low-cost sourcing and manufacturing alternatives.

OTHER INITIATIONS:

• Imperial Tobacco (NYSE: ITY) coverage was resumed with a Buy at Merrill Lynch.
  
• ICU Medical (NASDAQ: ICUI) was initiated with a Buy, target $35 at Jesup & Lamont, which is positive on the company's valuation, strong balance sheet, growth in oncology and expectations for gross margin improvement.

DryShips Inc. (NYSE: DRYS) released a pretty embarrassing press release yesterday, announcing that it was canceling its planned stock split in light of the fact that its stock had tanked:

Although the Company previously announced its intention to effect a 3:1 stock split in the form of a share dividend following today's special meeting, the board of directors has determined that in light of recent developments in the trading price of the Company's common stock, it is in the best interests of the Company and its shareholders to defer the proposed stock split until a more favorable time in order to preserve shareholder value.

Right. I, along with Warren Buffett, have never been a big fan of stock splits, mainly because they don't really have any point or serve any purpose -- unless a stock is so expensive that most people can't afford a single share. But in the case of DryShips, the highest its stock has traded this year is $131.34.

Here's my philosophy when it comes to stock splits: anytime a company's management/board is so pleased with itself that it can't think of anything better to do than slice the pie in different shapes... find a less complacent management team at a different company.

As the globalization era progresses, transportation is at a premium. Young, growing economies in Asia, Latin America, and Eastern Europe are placing enormous demands on their infrastructures, even as they expand them.

Further, the growth in intercontinental trade has meant that shipping vessels also are in short supply, and among shipping companies, Dryships (NASDAQ: DRYS) is worth an evaluation.

Dryships ships commodities, grains, bauxite, fertilizers and steel products in its fleet of 35 vessels.

In general, analysts like Dryships' mix of spot charter market revenue and long-term contracts, in addition to the company's adequate performance regarding cost controls.

In the current international trade environment, that would be enough to recommend the shares, but the major positive is the vessel market. Shipping space is at a premium, and shippers like Dryships have considerable pricing power as a result. Hence, analysts see large EPS gains for the company, among other shippers in the sector. The Reuters F2007/F2008 EPS consensus estimates for DRYS are $4.25/$8.62.

Very interesting piece from the Financial Times today regarding dry shipping rates in the Far East -- the article's premise is based on an interview with Nobu Su, chief executive of family-owned Taiwan Maritime Transport (TMT), one of the largest dry bulk shippers globally. Salient quote from the interview: when asked about day rates, or the rates shippers charge clients to charter out their ships, rising 300% this year, CEO Su called the rates "insane."

Su's main concern was that with inflated day rates, customers using dry shippers, mainly mining companies, would be forced to pass on the costs to their customers -- ultimately, you and me.

"We believe it's unsustainable and shipping people forget about their own business, which is providing shipping services," Su said of the market conditions, where owners of the largest ships, can command about $180,000 a day in charter rates. "TMT has been in the shipping business for 50 years. We continue to do the basic business."

Investors have certainly profited from this trend. If you had owned DryShips (NASDAQ: DRYS) this year, you would have 400% more than what you started with at the beginning of 2007. According to Reuters, the company's fleet consists of five Capesize drybulk carriers, 29 Panamax drybulk carriers, and one Handymax drybulk carrier.

About a month ago I wrote a post about DryShips (NASDAQ: DRYS), the drybulk shipping company that's been on fire during the last year. I argued that the stock was undervalued compared to its peer Teekay Shipping (NYSE: TK) and that the stock remained a buy at those levels. Since this post, the stock has had its up and downs but has managed to outperform both Teekay and the S&P 500.

After the bell Wednesday DryShips reported very strong earnings. For the quarter, excluding a one-time sale, the company earned $1.59 per share vs. analyst estimates of $1.34 per share. DryShips also reported notably strong revenues of $112.5 million vs. estimates of $98.7 million.

The company's CEO and chairman also said that "the outlook for 2008 remains positive with fewer vessels being delivered from the shipyards and Chinese demand projected to remain strong." This seems to confirm my original opinions of continued pricing power for the drybulk industry.

If DryShips can continue its beat-and-raise pattern I believe the stock will trade towards $75 per share in the next 2-3 quarters. However, the company's leverage is a double-edged sword and when times turn bad this stock stands to crash which is why it's imperative to keep a stop loss in place as I advocated in my first post.

The stock finished the day up nearly $2 per share then added $3.75 in gains in after hours trading. When times are good times, times are great for these momentum stocks.

The market is hot! Everything seems to be moving. After almost four years of a pretty non-volatile market, the recent volatility in the market has taken the interest of all traders. In a more volatile market one has to remember that a looser stop is absolutely necessary to avoid being shaken out of positions. While the risk is greater, in a volatile market return potential increases as well.

Several of my recent ideas remain around the opening price while others have been doing very well. However, I have to attribute some of these quick gains to general optimism from the market today. Because I have been very bullish on a variety of momentum names, these shoot up quickly on days like Wednesday. But it's a double-sided sword -- when the market gets hit, these things get hit harder. I believe that if proper risk controls are in place, most importantly a stop-loss, then trading these names is a much more lucrative game than gaming normal stocks.

Most of my ideas these days are technically-oriented and there's a pretty simple explanation for this: the market isn't cheap enough to turn up tons of value investments -- my primary fundamental-based investments. While I've managed turn to up a couple value ideas, most notably Earthlink (NASDAQ: ELNK) here, I've also managed to turn up several growth-based fundamental ideas such as American Science & Engineering (NASDAQ: ASEI) (which reported great earnings the other day) here.

Although I'm not the biggest Jim Cramer fan, I do firmly believe in one of his cliches: "Buy on weakness, sell on strength." Essentially, the market is going to have its ups and downs and you, the investor, needs to learn to take advantage of the volatility on stocks you like for the long term.

Days like today are the best for momentum plays because these stocks tend to get sucked down harder than the market. Momentum names that I've highlighted before such as Ciena Corporation (NASDAQ: CIEN) and DryShips Inc. (NASDAQ: DRYS) are both off 2.5-5%. If you're a believer in these stocks, there's no reason not to take advantage of this downturn.

It's hard to have the guts to buy on weakness but I've found it often pays.

While many have heard the saying, "Another day, another dollar," few have heard, "Another day, another 52-week high for DryShips (NASDAQ: DRYS)." That's probably because I just made it up ... but that's not to say it's not very true! It seems like every day this momentum name hits another 52- week high. Today, for example, the stock bounced 7% when an analyst from Cantor Fitzgerald boosted her estimates and bumped up her price target for the company.

Why is the stock so hot? Primarily, because of very strong pricing power for the entire dry-bulk industry. In fact, recently a three-year high in rates was reached.

But this is old news -- investors want to know what to do now. I don't think it's too late to jump aboard the party for several reasons:

Last December, over 100 stocks were featured in our Top Picks for 2007 report. Now, at mid-year, we turn to the 20 advisors whose picks showed the strongest gains to get an update on their previous picks, as well as a new favorite stock for the second half of the year.

Vivian Lewis, editor of Global Investing, chose DryShips Inc. (NASDAQ: DRYS) as her top pick for 2007. The stock rose 126%, as of June 1, 2007. Here is her original recommendation on DRYS and her new favorite stock for the rest of 2007.

Meanwhile, the advisor now says, "DryShips is trading at a P/E of only 15, even now that the stock has gone up 300%. There is a lot of negativity about George Economou, who heads the company and now is the CFO.

"He headed a prior shipping company, which filed for bankruptcy after it could not pay back loans to British banks a decade ago. This was in the DryShips prospectus of course, and was also the subject of a report written by Kate Welling (former Barron's reporter) for a group shorting DRYS, including the Weeden brokerage firm.

"As a result, all this maybe makes DRYS cheaper than in would be otherwise. When I recommended DRYS in Global Investing in December 2005, I wanted it for its yield of 7.8%. That went up to 8.4% a year ago when the shorts were out in force, and the stock fell from $12.75 (our buy level) to $9.50.

"So the recovery is nice, but there is still an 'odor' around, which is why the resignation of the second CFO in a year causes some upset. I'm not giving up on this stock and indeed, perhaps would want to buy on weakness -- although as a holder, I am not sure I want to see weakness."

See all 20 stocks the advisors picked for the second half of 2007.

Last December, over 100 stocks were featured in our Top Picks for 2007 report. Now, at mid-year, we turn to the 20 advisors whose picks showed the strongest gains to get an update on their previous picks, as well as a new favorite stock for the second half of the year.

Vivian Lewis, editor of Global Investing, chose DryShips (NASDAQ: DRYS) as her favorite stock for 2007, which rose 126% as of 6/1/07. Here is her original recommendation on DRYS and her current opinion on the stock.

Now, she explains, "For a new pick for the second half of 2007, how about a copper company from Canada reviving an old mine in Baja California, Mexico?" Baja Mining (TSE: BAJ) is her current strong favorite.

"Baja Mining got a definitive feasibility study of its Boleo Project in Mexico, and it is lovely. Based on a presumed copper price of US$1.50/(metric) tonne, and cobalt at $15/pound and zinc sulphate at $1,200/tonne, the average cost of produced copper, net of byproducts, would be minus 7 cents/lb.

"Proven and probable reserves are sufficient for a 25-year mine life, with 275 million tonnes of measured and indicated resources grading 1.77% copper equivalent, and a further 250 million of inferred resourced grading 1.29% copper equivalent.

"These huge reserves mean that the project will have an after-tax indicated rate of return of 24.7%, or 46% at current market prices for the metals. The net project value at an 8% discount rate is $700 million, or $2.3 billion at current market prices.

Each year Steven Halpern, editor of TheStockAdvisors.com, surveys the leading financial newsletter advisors asking for their favorite stocks for the coming year. This article is part of his 24th annual Top Picks Report.

DryShips Inc. (NASDAQ: DRYS) is the top speculative idea for 2007 from Vivian Lewis, editor of Global Investing. She notes, "The company is an operator of a drybulk cargo fleet, and produced no more negative surprises with its unaudited financial and operating results for the third quarter.

"True, there was a net loss of $9.4 million (a loss of 28 cents per share) from Forward Freight Agreement losses previously announced. They were made by the now-fired CFO early in 2006. He disastrously misjudged the drybulk charter rates trend.

"His replacement, Gregory Zikos, a lawyer, MBA, and investment banker, has just been named CFO and to the DRYS board. Meanwhile, Cantor Fitzgerald reiterated a 'buy' on DRYS, forecasting 2006 earnings at $2.24 and 2007 at $2.15, below earlier estimates but with more confidence. Cantor's target is $16.

"Apart from these losses, the rest of the quarter was within the norms of highly leveraged Greek shipping companies, and net income in the quarter would have been 50 cents per share.

"Meanwhile, Dryships' major shareholders (led by George Economou) reinvested the 20 cent per share dividend payment they were scheduled to receive in October, in the amount of about $3.1 million, in DryShips shares. For speculative investors, we consider the stock a strong buy."

To see Vivian's favorite conservative global idea for 2007, click here.