Investing can be a long and arduous journey, but maintaining a steady course over long distances can be as profitable for Fools as it can be for the world's dry-bulk vessel fleet.
From the early stages of the perfect storm that continues to challenge shippers, I have kept Diana Shipping (NYSE: DSX ) and Navios Holdings (NYSE: NM ) at the center of my radar because I consider them to display superior seaworthiness relative to their peers. Since then, I have noted Diana's early adaptations and nuanced understanding of the challenges at hand, but the time has come for a closer look at Navios Holdings.
Like a Capesize sponge, Navios absorbed a 39% decline in the average daily charter rate for vessels and a hefty 56% drop in revenue to post a $12 million net gain in the first quarter of 2009. A commensurate 69% reduction of operating expenses provided the key to a profitable quarter, but the company's greatest achievement remains the strong liquidity position and the security of future revenue flows relative to its peers.
With indebtedness at just 43% of book value and $241 million in cash, Navios shares none of the acute debt repayment concerns of competitors like DryShips (Nasdaq: DRYS ) , but that didn't stop Navios affiliate Navios Maritime Partners (NYSE: NMM ) from joining the torrent of companies tapping this rally-enthused market for capital. From Bank of America (NYSE: BAC ) to Forest Oil (NYSE: FST ) , the fundraising frenzy is not limited to the dry bulk sector by any means. Both Diana Shipping and the oil-toting Nordic American Tanker Shipping (NYSE: NAT ) have followed suit. Given the dire warnings issued by Diana Shipping's president about a potential financial calamity descending upon banks that finance the shipping industry, however, the shippers in particular may have serious strategic interest in raising capital before the ability to do so evaporates.
If global overcapacity is the crux of the sector's medium-term woes, then Navios Holdings' order book of seven new Capesize vessels could be considered counter-cyclical. With time charter contracts or contracts of affreightment in place for each of them, however, and the significant bonus of insurance coverage to protect from customer defaults, I believe Navios' growth profile to be reasonable under the circumstances. Toss in a lingering (for now) 5% dividend yield, a diverse fleet composed of owned and chartered-in vessels, and an intriguing port facility in Uruguay, and Navios Holdings continues to return signs of life on this Fool's long-term radar.