One of the biggest meme trades — or at least trades that have “meme-ish” qualities — Castor Maritime (NASDAQ:CTRM) lit up the charts earlier this year. Starting off at $1.86 on the first close of January, CTRM stock finished the Feb. 11 session at $17.30, a nearly 10X move in the space of a month-and-a-half.
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Since then, it has been an entirely different story. With early speculators sensing that sentiment was overstretched, many dumped out of CTRM stock. Naturally, this action triggered more sales as others standing by feared holding the bag much more so than missing out on additional gains. A month after hitting its February closing peak, shares were down 45%.
In hindsight, that was just one last pitstop before additional pain took Castor Maritime down a few notches. A month later, CTRM stock again found itself down big to the tune of nearly 47%. Henceforth, it has been death by a thousand cuts. In fact, from nearly 10X at one point in the year, shares today have only gained 9% since the beginning of January.
Don’t get me wrong — 9% isn’t anything to scoff at because there are companies that would readily trade market performances. However, something tells me that no one is buying CTRM stock for the dividends (mainly because there are none).
Adding to the possible woes is that apparently no confidence exists for Castor Maritime. According to data from Gurufocus.com, the company features no insider ownership and a barely visible institutional ownership.
To be fair, no insider ownership is better than an insider fire sale. However, I’m not really sure if people should get involved with investments that the folks closest to the business won’t touch. As well, you’d like to see some entities of influence place a wager.
Not Quite the End of the Story for CTRM Stock
Ordinarily, when you see an equity unit lose 88% or so over a six-month stretch, there’s a reason for it — and almost always, it’s not a good one. Thus, as simply a matter of common sense, I must emphasize that Castor Maritime is little more than extreme speculation.
If you’re not a gambler that can afford to lose on your wagers, you don’t need to consider this bulk shipping company.
On the other hand, I must also be objective. For those that decide risking their funds on CTRM stock is worth it, the trade isn’t entire devoid of justification. Primarily, the company could be undervalued (perhaps even grossly so) based on the comparison between its market value and asset value.
On a fully delivered basis, “Castor will own a fleet of 26 vessels,” according to a recent corporate statement regarding its $40.75 million debt refinancing deal. Those ships contribute to the $367 million total asset base as of the second quarter of 2021. Backing out the total liabilities count of $57 million, you get total equity of $310 million.
Here’s the kicker — the market capitalization of CTRM stock? At time of writing, it’s just under $189 million. Therefore, you can make the argument that shares should be trading at least to the price which reflects Castor’s net value.
Of course, sometimes companies trade below this metric for lack of confidence that the business will be viable. However, as Reuters reported in late April of this year, demand for commodities has boosted the dry bulk freight market. True, the delta variant of the novel coronavirus has imposed a dark cloud in the near term. Moving forward, though, circumstances could once again shift favorably for the shipping industry.
Check Your Risk Tolerance
So, what should investors do with CTRM stock? Assuming that this is what you are, an investor, it’s hard to justify buying Castor Maritime shares. The market is the ultimate arbiter. Again, if shares tanked nearly 90%, there’s a reason for it.
On the other hand, if you’re a speculator, there might be something here. It’s an extreme longshot but — have mercy on my soul — CTRM could be considered a value play based on the market’s steep discount relative to net worth.
Plus, we’re talking about shipping valuable commodities, not fixing rotary phones. The relevance is there but are your nerves? That’s a question only you can answer.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
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.