Wednesday, February 25, 2009

NM comes with a discount due transparency issues

In the current investment climate, companies with complex balance sheets are at a disadvantage. Off balance sheet items are an anathema at present. Investors want clarity and unexpected surprises make them uneasy.

Transparency facilitates good stock analysis. Companies with clean balance sheets without off sheet items generally get a premium with investors because they can more easily quantify their risks.

Unfortunately many publicly listed shipping companies are not sufficiently forthcoming on full fleet employment details and many other matters.

NM appears to have significant number of chartered in vessels that can potentially impact solvency. Navios also has a new Greek management who bought out the company in good times, but is untested in the current crisis. Generally Greek managers have less experience and performance has been mixed in freight derivative markets where Navios has a tradition.

These are most likely some of the issues that have led investors lately to sell the company. The future depends on credibility that the management builds with good performance and improvement in general market conditions.

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