Castor Maritime (NASDAQ:CTRM) is a small but growing shipping company based in the country of Cyprus. In 2018, Castor owned a single dry bulk shipping vessel. In 2020, CTRM stock spent much of the year as a penny stock — even as it boosted its fleet size.
However, the stock has now posted big gains in 2021. After opening the year at 19 cents, shares rocketed to a close of $1.73 on Feb. 11. Since then, Castor Maritime stock has retreated to below a dollar, but it’s still up nearly 280% year-to-date (YTD).
If that sounds suspicious, it should. A penny stock and a little-known company that suddenly sees shares spike in 2021? That has all the signs of a Reddit stock. In fact, Castor has indeed been popular on the subreddit forum r/WallStreetBets. It’s also being heavily traded on Robinhood.
But there are some other factors at play here, including Castor signing additional deals to expand its fleet. So, maybe there’s more to the CTRM stock gain than just Reddit.
CTRM Stock and the Dry Bulk Shipping Market
What exactly do dry bulk shipping companies like Castor Maritime transport? Dry-bulk goods are mostly raw materials like grain, coal and iron ore. And the dry bulk shipping market is forecast to keeping rising. In fact, China — which has already recovered from the pandemic — continues to drive much of that growing demand. In a report on the industry, Transparency Market Research notes:
“Rapid urbanization, industrialization, and economic growth is likely to propel the dry bulk shipping market across the globe. Growing infrastructure development, which requires significant use of steel products, is a key factor for driving the dry bulk shipping market across the globe. Major investments across the globe by various governments in transportation are anticipated to boost the dry bulk shipping market.”
Moreover, in January, Castor announced it was adding to its bulk carrier fleet, having purchased a 2006 Capesize dry bulk carrier for $17.5 million.
January 2021 reportedly had some of the highest dry bulk rates in a decade. So, if that trend continues, it’s good news for CTRM stock.
What About the Oil Market?
As you probably already know, 2020 was not kind to oil companies. An oil-price war kicked off just as the pandemic was starting to crater demand. At the same time, electric vehicles (EVs) began to surge in popularity. One of the iconic images from early last year was a fleet of crude-oil tankers anchored off the coast of California because no refineries had enough room remaining to store their cargo. Now, oil stocks are still a very risky play, but demand has begun to creep back up.
On Feb. 11, Castor Maritime announced it was purchasing a pair of 2005 Korean-built Aframax LR2 tankers. Ships of this class have a cargo capacity of between 80,000 and 120,000 tons deadweight (DWT). When it comes to transiting the Suez Canal, they are exceeded only by the Suezmax class. Aframax ships also have an ideal size for ports that are unable to handle larger tankers.
Castor Maritime has fully contracted both ships at $15,000 per day. As part of the deal, the company also signed a “50% profit-sharing arrangement.” So, Castor doesn’t pocket the full amount, but the risk of the purchase has been reduced, too.
This purchase marks Castor’s first foray into tankers. In a press release, the company explained the move:
“As we have communicated previously, we are a Company that aims to take advantage of attractive opportunities presented to us, as the shipping cycles evolve. Therefore, we are very excited to be entering the tanker market, at what we believe is an opportune time for this sector.”
If the oil market continues to rebound, the purchase of those two Aframax tankers will prove to be prescient, especially at a price pushed down by the recent glut of oil. When Castor announced the news, it triggered a 45% spike in the CTRM stock price.
Castor Maritime has made big moves this year, continuing an aggressive push to grow the size of its dry bulk goods fleet while also expanding into oil tankers. Yes, its fleet consists of older ships that will cost more to service and maintain, but the company snapped them up at depressed prices.
So, when the global economy recovers post-pandemic, Castor Maritime is in a good position to pick up business and grow revenue.
Some investors are concerned that the recent boost in CTRM stock is courtesy of Reddit. That could mean that any near-term gains are now already priced in. Unfortunately, though, only time will tell.
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On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
Louis Navellier had an unconventional start, as a grad student who accidentally built a market-beating stock system — with returns rivaling even Warren Buffett. In his latest feat, Louis discovered the “Master Key” to profiting from the biggest tech revolution of this (or any) generation.