Best In Class: Diana Shipping, Part 2

This is the second installment in today's two-part series on Diana Shipping. Click here to read Part One.

Diana Shipping(DSX Quote) president Anastassis "Stacey" Margaronis conducted a series of sit-downs in New York during last week's shipping-industry conference. Meeting one-on-one with some 25 institutional investors, he gave them all the same lecture, he said, in an effort to explain Diana's bearishness. (It was almost an anti-sales pitch, except it wasn't; with such candor, the company most likely hopes to win over investors.)

The problem, Margaronis said, is that many people have interpreted the collapse late last year, when shipping rates plunged by some 90% from their all-time highs in May 2008, as the bottom of the natural shipping cycle, which ebbs and flows based on supply and demand -- on dynamics, in other words, internal to the dry bulk industry.

It's an old and familiar story: When demand for shipping is high, ship owners strive to take advantage by ordering whole fleets of "newbuildings," as they say in the industry. But after the Champagne bottles are smashed over all those bowsprits, and the new boats slide into service, a glut forms, crashing shipping rates and the value of the freighters themselves. This is the natural shipping cycle, helped along, of course, by the expansion and retraction of the world economy as a whole.

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