What happened Shares of Athens, Greece-based Diana Shipping (NYSE: DSX) were swimming full speed ahead Tuesday morning, up by 13.4% as of 11:49 a.m. EST after brokerage firm BTIG announced it was initiating coverage of the dry bulk shipping company with a buy rating and a $5 price target. So what Diana Shipping stock closed trading Monday at $2.60 a share, meaning BTIG is predicting close to a 100% gain for this stock over the next 12 months -- reason enough for investors to get excited, one would think. But consider, too, BTIG's logic in making this buy recommendation. Diana just completed a stock tender in which it successfully bought back about 7% of its shares outstanding for a low $2.50 a share, reports StreetInsider.com. This will have the effect of concentrating future profits among fewer shares of stock. Image source: Getty Images. Now what And BTIG seems pretty sure there will be profits to concentrate. While Diana has been burdened by a weak freight market and an aging fleet in recent years, BTIG anticipates the freight market will improve over the next couple of years as the global economy emerges from its recession. In such recoveries, says BTIG, companies operating older fleets tend to outperform because their asset costs are low but the rates they can charge for use of those assets increase -- resulting in improved profit margins. BTIG further predicts that Diana will use this market recovery to pay down debt and strengthen its balance sheet. Later in the cycle, when operators of newer fleets tend to outperform, the analyst expects to see Diana upgrade to newer ships. The question investors need to ask themselves now is: Will Diana make enough profit early in the cycle, and pay down enough of its $430 million debt load, that when it begins buying ships later, it doesn't just overload itself with debt all over again? 10 stocks we like better than Diana ShippingWhen investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.* David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Diana Shipping wasn't one of them! That's right -- they think these 10 stocks are even better buys. See the 10 stocks *Stock Advisor returns as of November 20, 2020 Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.Source