Small-Cap Spotlight: Diana Shipping Taking On Water?

On the other hand, if expectations for shipping rates rise quickly, like they did in October, investors could see a nice profit in a small amount of time. Having pulled back sharply from the $45 level, shares of Diana Shipping sport a very attractive risk/reward profile along with a dividend that will become even more important if the Fed continues to move interest rates lower over the next year.

Frank: Catalysts are already factored in

After researching Diana Shipping, it's easy to jump on the bandwagon as global demand for raw materials remains strong and most of the company's contracts will be resetting at much higher day rates. The fundamentals of the dry-bulk industry remain solid, and almost every sell-side analyst who covers the stock has a buy rating.

I can sugarcoat it more and say that Diana has already secured earnings per share of more than $2.50 on the basis of existing contracts and that new contracts will be renewed over the next few months at spot rates that are 170% higher year over year. Throw-in the 8% dividend that Larsen mentions on top of a pullback in the stock price of more than 30%, and we have the perfect investment for aggressive and conservative income oriented investors.

But reading between the lines, I see a much different picture.

Larsen mentions that Diana Shipping trades in line with expectations for the global economy, and I agree. However, my projections on global growth differ from most, including the talking heads on "Kudlow & Company" who suggest that not only is the global economy solid but domestically the U.S. is doing just fine.