Technical Opinion
Navios Maritime Holdings is a seaborne shipping company engaging in the transportation of drybulk commodities such as grains, coal and iron ore. From a technical perspective the stock is actually classed as a penny stock today, as it is trading below $5, having fallen from as high as $11. The medium term outlook seems to be neutral on the chart and stock price is actually at long term lows. The stock has a high Beta correlation coefficient (1.7), which means that it tends to follow the rest of the stock market but it moves by a greater percentage than the market, in the same direction with the market.
The profitability of the company is hurt by concentrated costs such as the urgent acquisition of new ships, all in a given year, making traders think the stock will suffer as a result, and in fact it does suffer as it can go down a lot. But ultimately, when looking beyond just one year, the stock is simply adjusting while preparing for the next move higher. This is further evident in the fact, that key technical indicators are showing positive divergences, hinting that they are not confirming the the drop down to $2.55 as a permanent development.
Traders have a different approach to trading the same stocks that investors would buy or sell, not only they are more short term oriented, but they tend to ignore the future value of the company. As they are only interested in a quick profit, regardless of real stock stock value. Traders however provide a great deal of liquidity and can drive stocks up and down a great deal. Investors use this liquidity and volatility to look for better entry points to buy a stock as its price drops.
Navios Maritime Holdings stock has been driven down by such trading action, because of short term reduced profitability, which was part of essential restructuring steps taken in the interests of higher, longer term future profitability. The stock therefore is bound to recover, and it is a matter of time before it takes out its previous highs at $11.
Navios Maritime Holdings stock has reached bottom levels, while the technical outlook is looking deceptively neutral on the charts. But the downtrend has actually lost its momentum, as the ADX indicator is showing on the chart, and even some indicators are showing a positive divergence, formed over many weeks.
Fundamental Opinion
Navios Maritime Holdings has an annualized net operating profit margin of just over 28% and a growth rate of 4.5%. The stock is now a penny stock, one which has potential to go as high as $11, in the medium term future, while the theoretical downside risk is only $2.55. The shipping industry is very competitive as it has many companies operating in the field, but this company has proven to be innovative and well managed.
Especially in terms of strategic planning, and being prepared at all times to deliver commodities to new clients around the world, and at the lowest possible cost, and in a reliable way. The stock is actually worth much more than today’s trading price, it is actually worth $19 looking 3 to 5 years down the line. This means that it is suitable for long term investing, offering great risk-reward ratio, and the potential for investors to make four fold gains on their investment capital over few years, or as soon as the stock goes back up to its previous highs.
It also offers the potential for longer term gains, which may go beyond 5 years, as the stock may rise up to its $19 value over time, and in fact as high as $25 over a 7 year period. This is practically a massive return on investment, as even a price of $19 would be a seven fold gain on investment capital, relative to today’s stock price. One more reason why shipping stocks as this one are great investments is because the economies of India and China are in long term steady growth, where demand for commodities is certain, and transportation needs for these massive amounts of commodities are slowly but steadily increasing every year.
This is evident in the fact that all shipping companies always acquire more, larger and better ships all the time, and not one of them wants to stay behind in terms of being competitive. Navios Maritime Holdings has invested heavily in the right types of ships, that best match the needs of the task at hand, and each type of ship is specifically made to transport one kind of commodity as efficiently as possible.
This includes saving money on fuel, time, safety and many more factors. Some contracts even have clauses where the shipping company will not be paid at all if the cargo is not delivered in time. Navios Maritime Holdings is well managed so as to meet these requirements and to be able to deliver commodity cargo around the world as and when the situation arises. This is because demand is not stable, but it fluctuates up and down making difficult for some shipping companies to adjust.
Even China has a steadily increasing but still volatile demand for commodities. But there are even unforeseen events such as the nuclear accident in Japan, which immediately created a massive demand for coal imports. Therefore there is no shortage of business for seaborn shipping companies, and this is the real reason why Navios Maritime Holdings stock is really worth $19. And it will rise to these levels over the coming years.
