Prof. Zucchi,

Are you still a believer in Navios Maritime (NM) and the sector? Is there any evidence supporting the possibility that Navios is a potential takeover target?

-Minyan Bob

MB,

Navios Maritime is up almost 50% since I first wrote about it. Not bad I suppose, until you look at some of its cousins and realize that they're up 60-70 and 80%. Which brings me to the fundies of the entire drybulk space, which are absolutely screaming with both spot and longer term rates making new highs every day. If the current rates stick drybulk shippers can continue to run.

What does bother me about most of these stocks is the rate of ascent they've taken on (for example Excel Maritime (EXM) and Dryships (DRYS)) and the oft-heard argument that these stocks are good buys because they're cheap on traditional valuations. These types of stocks redefine the meaning of cyclical stocks, i.e. highly leveraged names which almost by definition look cheap and cheaper at the top. Remember the homebuilders? Same concept.

Now, I had my ear to the ground in the homies and I knew that what I was seeing could only have been the biggest bubble in the history of modern (and not so modern) finance; and I still was not able to time the end of it! In the shippers space, I rely on data from analysts whom I hold in high regard, but I don't have a first hand feel for what's happening. So I'm not entirely sure of where we are in the cycle. I will note that just about all the stocks I follow have reached or surpassed the Price Targets that those in-the-know were shooting for. NM is the exception, with the $20 PT still some ways away. And I'm not a big fan of the notion of "raising price targets" unless there are truly compelling fundamental reasons.

So, this is a long way of saying that I am not about to fight the move in the shippers, but I'm certainly not looking to start new positions. I've sold half of my NM calls and am holding the other half for free. I'm still long all the stock I initially bought looking to scale out of it when it approaches the PT, or if the fundies start showing cracks.

As for NM being a buyout candidate, I have no insight either way.

-Fil