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Tuesday, January 26, 2021

Navios Maritime Holdings Inc. (NYSE:NM) Catches the Fever

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Navios Maritime Holdings Inc. (NYSE:NM) is a dryshipping name that’s started to rip higher with the rest of the group as several things come together to spur major interest. First, the election of Donald Trump, with the GOP preserving dominance in both the Senate and House in the US federal government has unleashed an enormous amount of speculation that the largest economy in the world is about to see a massive fiscal stimulus package centered around infrastructure upgrade.

That’s the prime mover catalyst. More proximally, the Baltic Dry Index of shipping rates has soared in the past several days, rising by as much as 20%. Finally, the Hellenic Shipping News website put out a piece of analysis on Thursday noting that, “Capesize one-year time charter rates will double over the next five years from the lows of 2016. The reasons for a sharp contraction in the supply and demand gap are improving demand outlook coupled with a slowdown in vessel supply due to high scrapping and continued low deliveries along with scarce new-orders.” That has presented the sector with a major local catalyst. And it has been embraced, explosively.

Navios Maritime Holdings Inc. (NYSE:NM) promulgates itself as a company that operates as a seaborne shipping and logistics company. The company focuses on the transportation and transshipment of dry bulk commodities, including iron ore, coal, and grains. It operates in two segments, Dry Bulk Vessel Operations and Logistics Business.

The Dry Bulk Vessel Operations segment engages in the transportation and handling of bulk cargoes through the ownership, operation, and trading of vessels, freight, and forward freight agreements. This segment charters its vessels to trading houses, producers, and government-owned entities.

The Logistics Business segment operates ports and transfer station terminals; handles vessels, barges, and push boats; and operates upriver transport facilities in the Hidrovia region. This segment provides its integrated transportation, storage, and related services through its port facilities, fleet of dry and liquid cargo barges, and product tankers to mineral and grain commodity providers, as well as users of refined petroleum products.

The company’s fleet consists of 61 vessels totaling 6.3 million deadweight tons. It operates in North America, Europe, Asia, South America, and internationally. Navios Maritime Holdings Inc. is based in Monaco.

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In short, Navios Maritime Holdings Inc. is a global, vertically integrated seaborne shipping and logistics company focused on the transport and transshipment of drybulk commodities including iron ore, coal and grain.

That is a major role to play in an accelerating economic context. With red tape suddenly swept aside, like it or not, the new administration in the US is likely to be able to act like a stick of dynamite in the existing order of constraints on growth. It’s an open right of way to act. And the first part of that is clearly going to be a jolt of money for infrastructure build out in the US. That means energy and materials. It also means inflation.

Hence, we are seeing prices everything rise dramatically in the past two days, with copper exploding higher along with longer-term interest rates. The Baltic Dry Index (BDI) has moved in step. Shipping stocks are finally responding. And if you pair this story with the constriction of supply of ships noted in the Hellenic Shipping News story, the combination is explosive for NM, along with many of its peers.

Recent action has seen 22% during the past week in terms of shareholder gains in the listing. The situation may be worth watching. NM has a history of dramatic rallies. What’s more, the stock has benefitted from a jump in recent trading volume to the tune of 43% above the average volume levels in play in this stock over the longer term.

Earning a current market cap value of $132.3M, NM has a significant war chest ($145.83M) of cash on the books, which is balanced by an appreciable load ($1.65B) of total accumulated debt. That’s an awful balance sheet. The only savior here can be growth. But the type of growth we may be about to see was not expected, so we would imagine there are lots of shorts hanging out in this stock. That could make for some very interesting times ahead for this one. We will update the story soon. For continuing coverage on shares of $NM stock, as well as our other hot stock picks, sign up for our free newsletter today and get our next hot stock pick!

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