Navios Maritime Holdings, Inc. (NM)

Industry (192 industry groups) – Buy strong stocks on pullbacks in strong industries

NM is part of the Transportation Ship industry group. This industry group has been in the top 10 rankings for 15 of the past 52 weeks ranking it 8th most powerful industry group. However, 13 of those 15 weeks in the top 10 are dropping off. Those 13 weeks are from May 4, 2007 through Aug 3, 2007. The shippers really broke out early last year and the question is whether or not the weakness since August is permanent or a chance to load up. I believe it is the latter.

The fact that my top stock is in an industry group that is fading using the 52 week is a small warning that the market could be topping out. However, I do a pick of a day regardless of current market dynamics.

Fools – Top 100 fools outperform the rest of the pack

Top 100 fools green/red thumb this stock by a ratio of 9 to 0, which is rather good. In the last 90 days no top 100 fools have green or red thumbed the stock. This is another warning sign. My screening technique shows NM as the top value play at a good buy in point. Yet no top 100 fools have bought in the last 90 days. Is this another warning sign that many of the best stocks are topping out. Remember, the top stocks are what drive a market higher.

Technical – In a bear market buy the best companies most oversold, in a bull market buy strong stocks on pullbacks

NM is 45% off its 52 week high which is significantly more than what I want a stock to pull back in a bear market. My sweet spot is 25% to 35% in a bear market. When a stock pulls back this much it makes me very nervous. I would say that there is extremely strong support in the 8 to 9 dollar range.

The stock currently sits at 11 dollars a share. I would buy in between 9 to 10.50. Yet another warning sign of a market top when my buy in price is lower than the current price. Each day I screen stocks and look for the best value that I haven’t already recommended. There are 4 other stocks on my top 25 list that I have recommended already. There is also another shipper that I like. My screener looks for stocks that have pulled back and when the stocks in the top 25 contain a lot of marginal ones, then you need to be patient on pulling the trigger on any stock. I believe my indicators are right and the market is going to pull back. I would be a buyer of NM at a lower price with real money.

Fundamentals

Pass Line
Trading at 5.57 times next year’s earnings.
Sales and earnings growth estimates still strong from 2008 to 2009
Virtually no short interest when about every stock has a lot of short interest
Transports Iron Ore, Coal and Grain…. Can you say sweet spot of the commodities boom
The Baltic Dry Index is still kicking butt. Its easy to track the status of rates http://www.dryships.com/index.cfm?get=report
Much of its capacity is booked through 2010
4 dollars of cash per share for an 11 dollar stock
Stockholder’s Equity increased approximately 10 dollars a share in 2007
Two years of positive increasing operating cashflow
Owned vessels are all relatively new (past 8 years)

Don’t Pass Line
Earnings estimates have dropped from 2.75 to 1.97 in the last 90 days
Missed last quarters earnings by a penny (0.26 vs. 0.27) after 3 consecutive beats. Is this a bad omen?
If you’re a deflationist, you may not like a company loaded with debt
If you already have a lot of commodity plays, then avoid this. This is playing off the commodity boom just in a different space