CTRM Stock: Two words shout “Avoid” Castor Maritime Stock

Maritime Beaver (NASDAQ:CTRM) gained 61% in February. In 2021 it increased 336%, but last month it was down 7%.

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The owner of 14 ocean freighters captured the imagination of Reddit investors everywhere. The Reddits believe the shipping industry is on the mend, with volumes set to explode when Covid-19 ends.

When this happens, Reddit user u / wyanzka believes, $ 5 is just around the corner for the CTRM share, because the company’s expansion makes it “a force to be reckoned with”.

Really. I am on Star Bulk Carriers (NASDAQ:SBLK) is shaking in his boots.

Two words explain why investors should avoid Castor Maritime.

Suez Canal

If you are interested in the shipping industry, you must have observed what happened recently in the Suez Canal in Egypt. Panamanian-flagged container ship The Ever Given stranded in the waterway, preventing ships from passing one of the busiest in the world maritime routes.

At one point, more than 150 boats were set back while waiting to cross the channel en route to the Indian Ocean or the Mediterranean Sea.

According to Lloyd’s List shipping log, last week $ 27 billion in goods who were believed to have crossed the canal were sitting in a massive traffic jam that made the drive from Los Angeles before Covid to feel like a walk in the park.

Since writing about stocks, something has always hampered the fortunes of shipping companies. And if you want to learn more about the bad fortunes that can happen to those with shipping inventory, read my personal story about how I was hurt by the fraud committed by ACLN Limited.

If traffic jams on the canal and fears of fraud don’t scare you, consider how President Biden “Buy American” proposal will affect shipping companies. On top of that, add the global desire to move to clean energy ships, and no amount of repressed purchases after Covid-19 will allow shipping companies like Castor Maritime to make money.

To be successful in the expedition, you need the size and scale to survive all manner of economic calamities. Ships are not cheap. When interest rates go up there will be a lot of bankruptcies in the industry like there were in 2009 when carriers lost $ 20 billion in the economic downturn caused by the financial crisis.

Where does Castor Maritime stand?

Since the company announced its Third Quarter Results on November 11, he bought ships almost daily. He issued a total of seven press releases since January 1 announcing something to do with ship acquisitions.

When not talking about acquisitions, he is communicating the amount of debt or equity he has raised. Full steam ahead, say the Reddits.

Castor Maritime has been around since September 2017. It plans to develop its fleet by acquiring 12 new and used dry bulk carriers and two tankers.

In the first nine months of 2020, it achieved sales of $ 8.1 million, up 161% from $ 3.1 million a year earlier. Its operating profit for the same period was $ 927,435, 65% higher than a year earlier.

It’s all good.

However, add interest and finance charges, and its operating profit turns into a loss of almost $ 1 million, compared to a profit of $ 560,801 a year earlier.

Castor’s average outstanding debt was $ 19.3 million during the third trimester, up from $ 1.5 million a year earlier. His average interest rate on this debt is 5.4%. It’s not bad as long as you don’t consider that in February, Apple (NASDAQ:AAPL) sold bonds that pay 2.8% for $ 1.75 billion and not mature until 2061.

In January, Castor closed a $ 15.3 million senior credit facility with an interest rate of 3.3% plus LIBOR and maturing in 2025. It will use the funds to purchase more boats.

Like I said, you better be sure that interest rates aren’t going anywhere for at least 24 months or that Maritime Beaver Goose will be fired.

The Bottom Line on CTRM Stock

I think investors buy a lot Reddit stocks under $ 1 just because they can.

Honestly, if you buy ten stocks under $ 1 and I bet on Nike (NYSE:NKE) or some other top company, ten years from now I’m confident I’ll be ahead.

I don’t see what the end game of Castor Maritime is other than buying as many boats as possible as quickly as possible and hoping to God the interest rates don’t go too high so that I can generate enough cash to pay them back. ready. .

It’s not a business that has legs, in my opinion. I wouldn’t buy 10 cent CTRM shares.

As of the publication date, Will Ashworth does not hold (either directly or indirectly) any position in any of the securities mentioned in this article.

Will Ashworth has written on investing full time since 2008. His publications include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger and several others in the United States and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. As of this writing, Will Ashworth does not hold a position in any of the aforementioned securities.

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