Buy Navios Maritime Partners (NMM)
With the global economy in solid recovery mode—for example, the U.S. economy will grow at a 2.4% rate in the first quarter of 2010 and at a 2.3% rate in the second quarter (not great but a long way from recession) according to the OECD (Organization for Economic Cooperation and Development)—I think it’s time to reach a little further for yield.
Navios Maritime Partners (NMM) is a cyclical stock subject to huge ups and downs with the ebb and flow in global demand for commodities such as iron ore, coal, and grain. But it looks like we’re now in the flow part of the cycle: Revenue at Navios climbed to $93 million in 2009 from $75 million in 2008, and earnings per unit look to have, at worst, stabilized with Wall Street analysts forecasting a mere 1.3% decline for 2010 to $1.64 a unit. That’s enough to cover the $1.62 current distribution that gives the units a 9.1% yield.
And with the company’s recently completed (February 3, 2010) follow on offer, which raised $62 million, Navios has capital to use in expanding its asset and revenue base. (Long-term debt has held steady at $195 million from December 2008 to December 2009 while cash climbed to $78 million in December 2009 from $28 million in December 2008.) The general partner in the limited partnership, Navios Holdings (NM) certainly seems in expansion mode: Using a special purpose vehicle Navios Holdings acquired 13 tankers for almost half a billion on April 8. With this post I’m adding Navios Maritime Partners to my Dividend Income Portfolio.
Full disclosure: I don’t own shares of any company mentioned in this post.
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Another great call Jim! (GDX)
“Gold Climbs to 12-Week High on Hedge Demand as Dollar Weakens ”
http://www.bloomberg.com/apps/news?pid=20601087&sid=aZTEpr4aNOXU&pos=5
Speaking of Currency, the Ausie is fast approaching parity with US, Nearing its 52 week high of .9406
I have a question for Mr. Jubak and others who post here. It relates tangentially to this post–especially the comments about bond prices dropping as interest rates rise. I’m trying to understand what will happen to the value of TIPS bonds in the current environment. On the one hand, for example, many of Mr. Jubak’s posts point to greater inflation (in commodities and then in consumers from China etc.); on the other, we know interest rates can only go up, reducing the value of bonds in the next few years. I have money invested in a fund account of TIPS, so presumably they stagger with new bonds when they come up, and the time line isn’t quite as long. But could people please give their thoughts about whether TIPS are as safe an investment as I initally considered them to be. My expectations are that we’ll inflate our way out of some of our national debt in the long run. But I also expect interest rates to rise. Are TIPS heading for a fall if interest rates rise? Any guidance and clarity would be helpful to me. Thanks everyone.
I think this is a bad call. The drybulk cargo situation is not very good and subject to overbuilding so it will only get worse. Reaching for yield is not a good idea in this case since others are discounting Drybulk prospects.
More recent specific info on NMM:
http://www.thestreet.com/_yahoo/story/10721716/1/navios-spac-strikes-458m-tanker-deal.html?cm_ven=YAHOO&cm_cat=FREE&cm_ite=NA
Interesting thought, but not for me. I’d be more concerned about the price dropping. I have a hard time buying at the top, especially when I’m not convinced the turn-around is really here.
Personally, I’d take lower yield for better price certaintly. This would seem to be a stock that is held up by hopes that the recovery has taken hold. If data starts to conflict this premise, that would seem to indicate it would fall.
Thanks for the ideas Jim and keep them coming!
Can Someone maybe explain the difference to me between NM and NMM. The first is the stock of Navios Maritime and the second is the LP I get that, but why are there both out there? And why the dramatic difference in price and DY?
Thanks!
Excellent pick Jim. I picked up this stock at $14.25 with the thoughts that the recovery would increase the shipping business and the nice dividend payout. It has been a winner in both price appreciation and dividend payout.
Jim,
For your Dividend Income Portfolio – take a look at Seadrill the deep water driller. It will be listing on NYSE as of next week. The $0.55 qrtly dividend translates to a yield of 8-9% at current pricing. Perhaps less cyclical than a shipper.
Jim, i just am a doubting Thomas. I am wary of the economy being in ‘solid recovery mode’. I am thinking its still a head fake. I want to see how our gov’t deals with the tower of debt we have before i put both feet in to the water of a stock that is so high. But i admit you are more knowledgable than i. I hope you are CORRECT and I am wrong. Thanks so much for all the interesting commentary you provide.
Please be careful of LLC and MLP’s.
I have purchased 5 of them over last year and have been very happy at the yield, safety and price appreciation.
I just found out. via their K1 filing, that these MLP/LLC operate in many states and I am required to file state income tax returns in most states they operate in. (30 states). Since we found out, we have had to file a federal extension and we are scrambling to also file extension in some of these states that do not recognize a federal extension.
Any body else have something like this happen to them?
Jim, Just a thought.
lately i hear too much talk about Gold and Dividends stocks, as if people starting to feel that the market is a head of the economy. and Maybe market is starting to expect a correction.
am i getting the wrong vibes
Tax filing with MLP is a hassle.
phillip e
I’ve owned a few pipeline MLPs for a few years and have not heard about the need to file tax returns in other states in which they operate. Are you sure about that?
Mr. Majestik,
Thank you for the reply!
Well, more panicked than sure.
I am currently searching on the web for some information, and the only thing I found was 1 reference on Ask Task Guru that a poster, tax preparer was asking about the K-1 and tax issue and the pros in his office where not in agreement.
I am hoping the answer is “don’t have to file non-resident state income taxes” , but I have to be sure.
I don’t even know who to ask at this late stage.
Can anyone explain how the taxes work on MLP. It is my understanding that some or all of the dividends are considered to be capital gains and are not taxed until sold.
lcawrse3,
For federal forms, and rough understanding of MLP and stuff we got a rough understanding from this set of posts: http://fairmark.com/forum/read.php?4,48896
(Poster LJM seems to know about MLP’s.)
Hope it helps, but it took me several reads through it, and then my wife explained it to me
Mr. Majestik
phillip e
Regarding MLPs (EEP in my case) and after careful research and several phone calls to about 12 state Revenue services I learned the following
1- Some states require you to file taxes in their state if the MLP does business in that given state and regardless of the gain/loss
2- Some states require you to file taxes only if your gain is GREATER than a minimum personal exemption.
3- Unfortunately considering my time and money combined it doesn’t pay to own an MLP unless the dividend/gains pay for the software/tax preparer fees + the envelopes, ink, mailing supplies.
My $0.02
Thanks
China Posts First Trade Deficit Since 2004 as Imports Soar 66%
http://www.bloomberg.com/apps/news?pid=20601087&sid=apHrv2heUXOs&pos=3
Germany Said to Accept Compromise on Loan to Greece (Update1)
http://www.bloomberg.com/apps/news?pid=20601068&sid=aHAqtKNZHb9k
I like this pick, but I like GNK better.
Regarding the earlier question about TIPs, they should be fine with rising rates. It’s your fixed rate bonds that will get hurt somewhat.
I agree (from my own experience) that the tax hassle associated with MLP is NOT WORTH IT. Any extra yield that you may get from owning MLP may offset by the tax hassle or even worse.
“Navios Maritime Partners L.P. has elected to be treated as a ‘C’ Corporation for
U.S. tax purposes (our investors receive Form 1099-DIV and not Schedule K-1).”
On NMM website, there is a link to Investor info. Then there is “Tax Treatment of Unit distributions”. Click on that and pdf file brings up the info. on tax treatment.
Partnerships that are not treated as C corps. send K-1 form. that gives info. on the states it operates in & the amt. of income attributed to those states allocated to your units. It is for you or tax preparer to find out about each state’s requirement for non-residents; however, it may show losses (passive) that would not require a state filing.
Chinese iron ore imports in March surge by 20pct MoM
http://steelguru.com/news/raw_material.html
As soybean’s goes, so goes Iron ore??
“China Said to Halt Imports of Argentine Soybean Oil (Update2) ”
http://www.bloomberg.com/apps/news?pid=20601087&sid=a3cocHToczU0&pos=4
China seems to be in a world of hurt when it comes to getting enough of what it needs…
“ANDREW Forrest’s Fortescue Metals Group has spurned preliminary approaches from major global mining groups to take over the $15.5 billion company.
”
http://www.theaustralian.com.au/business/fortescue-metals-group-rejects-its-ardent-suitors/story-e6frg8zx-1225852474389
mari,
Thanks for the update on NMM.
Some of the state’s web site(s) describe their filing requirements as “a non resident with any source income ” and further go on to define source income as either a loss or gain.
Jim, I purchased Navios Maritime Partners L.P. thinking I was purchasing a MLP and would receive a K-1 for income tax purpouses. Now I’m not too sure. Please clarify, will US unitholders receive a K-1 or a 1099?
Thanks for your help.
Well I guess I have my answer.
2009 Unit Distributions U.S. Tax Treatment
Navios Maritime Partners L.P. has elected to be treated as a ‘C’ Corporation for
U.S. tax purposes (our investors receive Form 1099-DIV and not Schedule K-1).