CTRM stock: Castor Martime | 500% + premium To Net Asset Value | Epic momentum rally

 Feb. 12, 2021

Introduction

I purchased back 1000 share of CTRM stock at price of $1.47. I like to continue to work on research on this momentum stock, what I should learn from my own experience. I also like to work on more equity research. 

Analysis - Seeking Alpha

Here is the article. 

Here is the summary 

1. Small Cyprus-based shipping company has emerged as one of the leading momentum names with the stock up more than 500% year-to-date on massive volume.
2. Market capitalization has ballooned to $1.2 billion or more than 6x the company's estimated net asset value while proven market leaders are changing hands at a discount.
3. Discussing latest fleet additions and the likely exercise of almost 350 million warrants for net proceeds of $85 million.
4. Expect the concept of valuation to prevail over time, but with the stock likely on top of virtually every momentum trader's watchlist these days, timing a short sale could be difficult.
5. Patiently wait for shares to exhibit relative weakness amid a decline in trading volume before considering a trade and limit potential losses by placing a stop-buy limit.

My study notes: 

1. short sellers - Google it
2. propel the stock - mid-teens to $500 
3. Neo-brokers like Robinhood - ?
4. new generations of investors - am I one of them? 
5. care about existing concepts of corporate valuation - Need to calculate my risk - CTRM corporate valuation? 
6. outsized returns - more or less coordinated effort - I do think that it is true to get 100% for my investment in less than two months. 

Facts to review: 

1. CTRM - up 500% in 2021 from Jan. 1 to Feb. 12, 2021

Undoubtedly, today's momentum-driven market presents a challenge to short sellers as evidenced by the epic GameStop (GME) squeeze which propelled the stock from the mid-teens at the beginning of the year to almost $500 at its peak in late January.

So-called Neo-Brokers like Robinhood have attracted an entirely new generation of investors who don't seem to care about existing concepts of corporate valuation.

With the ability to trade stocks at no charge, most of them have joined the already powerful momentum crowd chasing particular stocks or industries in a more or less coordinated effort for quick, outsized returns.

Over the past couple of weeks, Castor Maritime, a junior Cyprus-based shipping company, has emerged as one of the leading momentum names with the stock up by more than 500% year-to-date on massive volume:

Consequently, my recent short call turned out to be a total disaster with the shares up by more than 400% since the time the article was published.

Massive Dilution

Since mid-2020, the company has raised up to $160 million in net proceeds by issuing almost 350 million new common shares and an identical number of warrant sweeteners at prices substantially below prevailing share prices.

Net Asset Value

At the end of the third quarter the company reported cash and cash equivalents of $37.6 million and long-term debt of $18.7 million. In addition, the company's Series A Preferred Shares have an aggregate liquidation value of $14.4 million.

Since then, the company has raised $40.4 million in net proceeds from recent equity offerings and an assumed $85 million from warrant exercises as well as $15.3 million in additional debt financing.

On the flip side, Castor Maritime has used $75 million for the purchase of five additional vessels.

Net asset value per share ("NAV") calculates to only $0.27 per common share which results in the stock currently trading at an eye-catching 540% premium to NAV.

While the recent recovery in charter rates has lifted drybulk companies' stocks across the board, even the largest and financially strongest players like Star Bulk Carriers (SBLK) or Golden Ocean (GOGL) still trade at a discount to net asset value.

Castor Maritime isn't printing cash from its charter contracts either. At current rates, I would estimate the company to operate just slightly above cash break-even levels.

Actionable Items:

It is important to understand the risk in stock investment. I did purchase 1000 shares of MRO in 2020 at price of $4.3 and sold with $300 dollars within a month, but on Feb. 12, 2021 MRO price is close to $10.00 dollars. 

It is hard for me to learn from my own experience. What is value of the stock? Market price does not tell the truth. 

I like to be a value investor, and consider purchase of INTC stock and hold them in the long term. But I also like to figure out those popular momentum stocks like CTRM, and learn from those stocks equity research community. A lot of people do share some meaningful content, so that I can have chance to learn a few things.