What Factors Led to Navios Partners’ Dismal Stock Performance?
Worst year on record for dry bulk
So far, 2015 has been the worst year on record for the dry bulk shipping industry. After the BDI (Baltic Dry Index) fell to a record low of 509 on February 18, 2015, it surpassed its previous low within a year to set a new all-time low of 498 on November 20.
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Most of the players in the dry bulk shipping space have also fallen significantly since the beginning of the year. DryShips (DRYS) fell the most, by 83%, as of November 27, 2015. Star Bulk Carriers (SBLK) followed DryShips and returned -78%. Navios Maritime Holdings (NM) forms 2% of the Guggenheim Shipping ETF’s (SEA) holdings. Navios Maritime Holdings and Safe Bulkers (SB) fell by 60% and 60%, respectively, year-to-date.
Navios Maritime Partners (NMM) and Diana Shipping (DSX) fell by 73% and 28%, respectively. The SPDR Metals and Mining ETF (XME) provides exposure to the metals and mining space. The recent selloff was mainly due to fresh concerns of weak demand from China (FXI) (MCHI).
Steel fell in Navios Partners
Since releasing its 3Q15 results on November 3, Navios Maritime Partners has fallen by 50%. NMM cut its distributions by 52% from $1.77 per unit to $0.85 per unit annually. This move spooked investors and led the stock to hit a new 52-week low for 13 days in the last 18 trading days, as of November 27.
In addition to investors’ concerns regarding further dividend cuts, the tax-loss selling could be another reason for this unprecedented decline in Navios Maritime Partners’ share price.
Tax-loss selling occurs when an investor sells a stock at a loss in order to set it off against any other realized capital gains in a portfolio. According to the IRS’s wash sale rule, investors must wait at least 30 days before buying back either the same or a similar kind of security.
Most likely, some of the pressure from tax-loss selling into the year end should subside come January 2016, as sellers buy back the stocks they sold just for tax offsets in late 2015. New investors could be tempted by the low valuations, which could add to fresh investor interest in the stock.
In this series, we’ll see whether Navios Maritime Partners (NMM) can maintain its current distributions. We’ll also see how its current dividend yield compares to its peers and its own historical yields. Based on this information, we’ll see whether there is still more downside for NMM’s stock.