JJC:   Tonight, I've got not just one, but two... two catch-up stocks that have been overlooked, while the bigger fish in the sector have soared higher!...

I'm talking about two opportunities in... remember this group... the dry bulk shipping group.

This is where you take grain, or iron ore, or coal... and you just dump it in the ship, which is different than the oil tanker or container ships.

Since the bottom on January 17th, Excel Maritime (EXM) is up 87%... DryShips, Inc. (DRYS) is up 101%... They got hammered today. It's your opportunity...

These are two big dry bulk shippers with growth, but not much in the way of dividends. I'm not recommending them tonight.

Then there are three big dry bulk shippers with hefty dividends... Genco Shipping (GNK), Eagle Bulk Shipping (EGLE) and Diana Shipping (DSX)... On average, they're up 91% since January 17th...

That's two doubles, and three near doubles...

But there's a group within dry bulk that's been left behind... one that I think is ready to play catch-up with its peers... the smaller of the dry bulk carriers... the under-sponsored ones... the ones with market capitalizations under $1 billion...

I'm talking about two that you want to write down, because I think they're about to roar with the rest of them... and they are...

Paragon Shipping Inc. (PRGN) and Star Bulk Carriers Corp. (SBLK)...

Now, these guys... I mean, not too shabby... they've come up 43.8%, since January 17th. I know... these gains are unbelievable, but not compared to the others... These gains are half the size of the other dry bulk shippers. To me, perfect catch-up material...

Why such a huge discrepancy?...

Well, I think, for one... the hot money goes to the better-known... the spot focus growth plays like Excel Maritime (EXM) and DryShips (DRYS). Those are pretty much the proxies... Or they go to the yield plays, Genco Shipping (GNK) and Eagle Bulk Shipping (EGLE)... And, since the larger companies have more ships, their more levered to the bullish cycle in dry bulk shipping, and more levered to the Baltic Dry Index, that everybody follows, who follow these companies closely.

The other issue is that the smaller companies are mostly contracted out for 2008 and 2009. I think that creates the possible perception that there's less upside in the stocks, because there's less earnings upside for the companies.

But, now, look at from the perspective of someone who owns one of the larger dry bulk carriers, and has just made a huge amount of money... or, even better, someone who missed the move... Maybe you missed the move...

You see, these smaller dry bulk plays, like PRGN and SBLK... they haven't moved up nearly as much as some of the larger plays, so people who are looking for more trades among the dry bulk shippers, will be gravitating to these two...

Hey, and they've got great yields...

SBLK yields 9.5%. PRGN yields 9.1%... for now. And, like many of the shippers, those dividends can fluctuate... and I think fluctuate to the upside, because of rates.

PRGN, which has 11 ships in its fleet, has the capacity to grow its fleet by 3 ships in the near future. Hey listen, that matters, it's very hard to make ships right now... And, any announcement that they've got the new ships should be great news for the stock... as more ships generally means more cash flow. And you need the cash flow to support the existing dividend, or future dividend increases...

These boats do not cost nearly as much as the rates (i.e., the dry bulk rates they are paid for transporting their cargo) they're getting, so whatever they're costing is far exceeded by how much they're bringing in. Plus, PRGN has two more ships left to reset charters on this year... meaning two more ships that aren't already chartered out and locked in at a lower price...

PRGN secured an average rate increase of 25% for the four other ships that they've reset charters on this year and, if it gets similar increases from the last two ships... (they will likely) increase the dividend...

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SBLK is the other small, dry bulk play...

The company has already bought two ships this year, adding them to the fleet, and it probably could afford to add one more... SBLK is fully booked in 2008 so, therefore, you're not going to get the higher rates. But it could re-charter ships, not covered, in 2009, to possibly justify paying a higher dividend. Remember, you get higher rates, you get a higher dividend... That's how these ship companies work... they give the money right back to you.

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