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Short Squeeze Incoming: Castor Maritime (CTRM)

02/26/2021 | 05:09am EDT

Any savvy investor knows that to make exponential gains, those truly life-changing gains, you need to look at micro-cap or small-cap stocks in industries that are either about to explode or have been laying dormant and are severely undervalued. Some of you may immediately think of sectors like genomics, semiconductors, 3D printing, or electric vehicles that would fit this mold. Sure, but in this frothy market environment that we are currently in, these sectors have already popped and are on every investor's watchlist. We're talking about true growth backed by real numbers and pre-COVID-19 profitability.

But this isn't about the next potential penny biotech stock that has a chance of receiving FDA approval, or some lidar or SaaS company that could one day hit it big, this is an industry that predates most forms of technology and is essential to global trade. When you hear of the dry bulk goods shipping industry you may scoff. It's boring and pardon the pun but it's dry. We get it. But the shipping industry is highly concentrated near the top and is an underrated sector to target as it reopens out of the COVID-19 pandemic. This is the bull case for Castor Maritime Inc. (NASDAQ:CTRM) as a stock that should be on any value investor's watchlist as the shipping demand returns.

What does Castor Maritime (CTRM) do?

Hey, all due diligence should start with what the company is about. How will you know it is a good investment if you have no idea about the future potential of your investment? Castor Maritime is a bulk dry goods shipping and logistics company founded in 2016 and is based out of Cypress. Castor primarily ships bulk commodities such as grains, coal, and other minerals, and ships to ports all over the world. It began trading on the NASDAQ exchange in 2019 and has seen its market cap grow to over $560 million.

We love to see management that is dedicated to the company and the founder of Castor Maritime Petros Panagiotidis is still the CEO and CFO today. The other members of the Board of Directors have extensive work experience in Greek business and the marine shipping industry so the executive team provides a strong foundation for the future direction of Castor Maritime.

If you ask Panagiotidis, the shipping industry also runs in his blood. His father, Gabriel Panagiotidis is a Greek shipping magnate that is listed amongst the world's billionaires. His sister, Ismini Panagiotidis is the owner of a global shipping fleet management company and also offers vessel repairs and maintenance. There has even been some talk of the brother and sister merging the two companies to further their reach into the industry. Needless to say, Petros has plenty of support, plenty of money to back him up, and knowledge and experience within the family that should serve him well over the long-term.

Why are we excited?

Where do we start? Castor Maritime was already profitable from 2017-2019 which is rare for such a new company. We repeat it was already profitable. We cannot stress how important that is, especially when moving forward into the future. Revenues and net income fell in 2020 as the COVID-19 pandemic wreaked havoc on the global trade and shipping industry. That isn't a surprise and in fact, we should have expected it. Revenues still increased year-over-year from 2019 to 2020 and with its fiscal Q4 earnings report still to come, Castor Maritime has already grown its revenues by 35% during the first three quarters.

Assets! Castor Maritime has had a busy first two months of 2021 as it has acquired several new vessels on the second-hand market to bulk up its fleet. Castor ended 2020 with six vessels and has since doubled their fleet to twelve ships with an aggregate capacity of 1.1 million dwt (pennyweight). Castor's total fleet now includes one Capesize, three Kamsarmax, six Panamax dry bulk vessels, and two Aframax tankers. Panagiotidis has been aggressive with his expansion and is wielding the capital that he has access to through his father, in anticipation of the reopening of the global shipping industry.

Here is a quote from Panagiotidis himself: "We are very happy to announce the acquisition of our third Kamsarmax dry bulk vessel and remain committed to our plan of steadily deploying capital and growing our fleet. Upon completion of all our recently announced acquisitions, our fleet will consist of twelve vessels, doubling in size since the beginning of 2021. We are working diligently in identifying and taking advantage of attractive opportunities presented to us across vessel sizes and segments."

Despite all of this, Castor Maritime has been able to remain relatively debt-free and has not relied on creditors to purchase its new vessels. This will be favorable for Castor moving forward as a low debt to asset ratio means a shorter path to profitability. Castor also has an impressive 33% gross margin and a 23.7% operating margin which are both surprisingly high for the industry. Comparing it to an industry rival Navios Maritime Holdings (NYSE:NM) which has a gross margin of 25% and an operating margin of 15.98%. Castor is set for long-term profitability with high short-term upside.

One more point is that Castor Maritime has gained a lot of support from institutional investors. Several investment management funds have added Castor including Hudson Bay Capital Management, Intracoastal Capital, and Empery Asset Management all with well over 13 million shares each. While institutional investors are certainly not an indicator of future success, all three of these have added these positions in 2021 since Castor expanded their fleet. Thalassa Investment Co. is another large investor and is an investment fund run by Panagiotidis himself! Now that is faith in your own company!

What about the Shipping Industry?

The dry bulk goods shipping industry is the largest shipping industry in the world by the total volume of goods transported. You would think that given its importance to the global trade industry, that it would have a fairly strong case to be a consistent performer. Well, the last decade has actually been a downturn for dry goods shipping but industry experts are already giving bullish sentiment for 2021 and more. The Biden administration should reopen global trade routes, specifically those that route through China which is the center of global manufacturing and trade. With China's economy reopening after COVID-19 faster than others, the demand in dry bulk goods shipping has once again returned to near pre-pandemic levels, which should bode well as other major economies open up throughout the year.

Looking at stateside developments, the Biden administration has put a focus on domestic manufacturing and infrastructure improvement. With an emphasis on reopening global trade and a higher demand for raw materials to use in the United States, the maritime shipping industry may be headed for a boom. Specifically, materials like steel and cement which are major exports of China would be in demand, and there is no better way to ship these across the ocean than by shipping vessels.

Is there a bearish case?

There is a bearish case for any stock or company you can find. Castor Maritime is a small company, let's not mix our words. It is poised for rapid growth as the global maritime shipping industry reawakens from the pandemic. But there are some big fish in the industry, as the aforementioned Navios operates 55 vessels and Seanergy (NASDAQ:SHIP) has 11 of their own and a recent acquisition on February 18, 2020. Competition in the Greek shipping industry is fierce and Castor has its work cut out for them. Indeed there are some naysayers out there as well since Castor has an incredibly high short float with over 35 million shares shorted as of the end of January, which accounts for 1,486.25% of total shares. The reopening of the shipping industry also will rely on COVID-19 more or less going away this year, but if there is another wave, it could cause further damage. With bulk dry shipping rates skyrocketing and the amount of vessel acquisition, Castor Maritime could see this stock soaring to its 2019 high of $7-$8.

Final Verdict:

Castor Maritime has done everything in its power during the COVID-19 pandemic to grow its shipping fleet and expand operations. And you know what? It's working. Especially after Biden just approved the supply of rare earth metals used to make important products positively affecting the dry bulk market. The earnings report is expected March 8, 2020, we are expecting a huge positive jump which could cause a short squeeze since the overall short is about 1400%. Revenues are up year-over-year and have been growing at an average rate of 41% per year over the last five years. Earnings per share grew 210% year-over-year and are trending upwards with the growth in vessel count and high margins they boast. Castor is on pace to smash their fiscal year Q4 earnings report and have a strong balance sheet even after purchasing six new vessels this year. Combined with the fact that the global bulk dry goods shipping industry is expected to have its best year in nearly a decade, and it is easy to see why investors are excited about Castor's future. The stock has already surged by over 500% in 2021 and has a lot of room to grow still. Castor also regained NASDAQ compliance which means that institutional investors will continue to add the stock to its funds and portfolios, driving up demand as the supply of shares dwindles. Finally, check out that short percentage. If there are any more bullish catalysts (like a good earnings call) or lower COVID numbers or reopening of economies or Panagiotidis continuing to be aggressive in buying vessels, the stock could surge, causing a short squeeze. It's only a matter of time. Shorters should be careful, this company has high potential with other marine shipping companies such as $EGLE, $SBLK, $NMM, $SB.


The opinions expressed herein are the opinions of Supernova Investments LLC from Florida. Publication of these opinions is not an investment recommendation, nor is it a solicitation of any kind of business or transaction.

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Company Name: Supernova Investments LLC

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Stocks mentioned in the article
ChangeLast1st jan.
CASTOR MARITIME INC. -2.99% 1.3 Delayed Quote.-8.45%
NAVIOS MARITIME HOLDINGS INC. -3.29% 2.06 End-of-day quote.-44.17%
05/09Castor Maritime to Seek Acquisitions
05/09Earnings Flash (CTRM) CASTOR MARITIME Reports Q1 EPS $0.21
05/09Earnings Flash (CTRM) CASTOR MARITIME Posts Q1 Revenue $54.6M
05/09Castor Maritime Inc. reports $20.0 Million Net income for the Three Months Ended March ..
05/09Castor Maritime Inc. Reports Earnings Results for the First Quarter Ended March 31, 202..
04/18Castor Maritime Enters Into Charter Agreements
04/18CASTOR MARITIME : Announces New Charter Agreements - Form 6-K
04/18Castor Maritime Inc. Announces New Charter Agreements
04/17Castor Maritime Inc. Announces New Charter Agreements
04/01Castor Maritime Inc. Announces Availability of its 2021 Annual Report on Form 20-F
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Financials ()
Net income
Net Debt
P/E ratio
Capitalization 123 M 123 M -
EV / Sales -1
EV / Sales 0
Nbr of Employees 1
Free-Float 99,9%
Duration : Period :
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Petros Panagiotidis Chairman, President, CEO, CFO & Treasurer
Dionysios Makris Secretary & Independent Non-Executive Director
Georgios Daskalakis Independent Non-Executive Director
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