Sector Snap: Drybulk rises amid jittery market

Analyst Jonathan B. Chappell said in a client note that he believes investors had sloughed off the shares in fear of the "complete collapse of the shipping markets"--both in freight rates and because of the tight global credit market.

"We do not believe this Armageddon scenario is likely to occur," he wrote.

Chappell suggests that many stocks appear "cheap" as they have been beaten down amid broader market turmoil and falling steel prices. Drybulk stocks tend to trade in tandem with steel and coal prices, as those are two of the major commodities carried by the vessels.

He noted Diana Shipping Inc. is the best value among drybulk stocks, with low debt and strong revenue potential because of planned ship constructions.

"We are confident that Diana has the financing in place to meet its current commitments, and we believe that its low leverage could provide an opportunity to further expand its fleet in a weakening asset price environment as banks may feel more comfortable with Diana's current financial position than those at many of its peers," he said.

In afternoon trading, Diana shares rose $1.02, or 6.6 percent, to $16.39. DryShips Inc. added 77 cents, or 3.4 percent, to $23.25. Eagle Bulk Shipping Inc. gained $1.31, or 14.7 percent, to $10.25.