No matter what you think about Castor Maritime (NASDAQ:CTRM) stock, whether a platform of pure, unadulterated speculation or an investment with a genuine fundamental catalyst, you can’t deny its remarkable performance this year.
At one point, CTRM stock was up nine-fold. Personally, I think it’s intellectually dishonest not to assume this dynamic doesn’t play at least a small part in its enthusiasm.
Whether or not you should participate in the exuberant proceedings is another question altogether. Yes, CTRM stock must have represented a life-changing trade for the intrepid few who took a bold shot with it.
Look, it’s not every day that you’re going to get 9X returns over a period that lasts less than a month-and-a-half. But such extreme speculation necessarily attracts correction.
And boy, did CTRM stock suffer a reality check. From its peak closing price of $1.73 on Feb. 11, shares dropped down to 50 cents to close out the month of April. I’m going to do the quick math so I can inflate my word count for this article: this translates to a 71% loss.
When people talk about the risks of bag holding, they’re talking about CTRM stock. Still, at half a buck, it raises the question about whether there’s one more rally left in it.
I don’t think you can ignore this prospect. One thing that longtime investors teach rookies is to not fight the tape. In other words, the market can stay irrational longer than you can stay solvent. If Wall Street wants to reward meme stocks, who are you to stop it?
Further, data from the Financial Industry Regulatory Authority indicates that trading on margin has again reached fresh highs for March 2021. While this is past-looking information, it’s still a powerful reminder that speculation fever has yet to die down.
Why CTRM Stock May Have Lost Its Charm
While the notion of generating 9X returns — or anything even approaching that — appeals to anyone, the market may also be getting more skeptical about these meme trades. Specifically, the broader economic environment doesn’t quite support the case for CTRM stock like it used to.
Back when shares initially went on their upward rampage, you can say that investors had hope for a comprehensive recovery. One of the biggest changes between 2020 and 2021 is of course the Biden administration. Along with Democrats controlling Congress, this suggested that extensive fiscal support was on the way.
In that regard, I don’t think the headlines disappointed shareholders of CTRM stock. But what did cool off the speculation was that the hard numbers failed to support the narrative. Aas more data came into the picture, the bullish thesis for Castor Maritime became less exciting.
For instance, I’ve noted before that the personal saving rate is at multi-decade highs. If people desire to purchase more goods, they have a strange way of showing it. Folks saving money is deflationary, which isn’t necessarily great for dry bulk shippers.
Also, a more recent data point is money velocity, the rate at which a unit of currency circulates throughout the economy. For the first quarter of 2021, it registered as 1.123 times, which is devastatingly low when you compare this to recorded history.
I’m talking about American consumer sentiment, but it’s not because of some obnoxious nationalistic sentiment. Rather, we’re a nation of consumers, having exported much of our manufacturing base. Therefore, if we don’t consume, then exporting nations like China have less reason to do so.
If China and other nations are exporting fewer products, that’s going to impact the global shipping industry. Unless Castor is prepared for a war of attrition, CTRM stock seems exceptionally risky.
Limited Resources to Go Around
Finally, here’s another risk for Castor Maritime that might not get much airtime: cryptocurrencies.
I can’t help notice that after a seemingly devastating correction in the sector, many of these digital assets are on the rise again. While this doesn’t directly have anything to do with CTRM stock, the crypto market’s rise necessarily takes attention away from speculative stocks.
Plus, you have to figure that CTRM appeals largely to a younger audience. While YouTube gives the impression that everyone under 20 is a multi-millionaire, that’s just not reality. As you would expect, the younger demo simply doesn’t have deep funds to spread into every popular trade.
Therefore, if cryptos continue swinging higher, that will bring more eyeballs to the current flavor of the day. And these eyeballs don’t have the collective cash to heavily bet on cryptos and CTRM. So the smart approach right now is to probably stay away.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.