Navios Maritime Partners L.P. owns and operates dry cargo vessels in Asia, Europe, North America, and Australia. Navios Maritime Partners’s insiders have invested more than 3 million shares in the small-cap stocks within the past three months. A well-known argument is that insiders investing more in their own companies’ shares sends an optimistic signal. The MIT Press (1998) published an article showing that stocks following insider buying outperformed the market by 4.5%. However, it may not be sufficient to base your investment decision merely on these signals. I’ve assessed two potential reasons behind the insiders’ latest motivation to buy more shares.
Who Are The Insiders?
Over the past three months, more shares have been bought than sold by Navios Maritime Partners’s’ insiders. In total, individual insiders own over 4 million shares in the business, which makes up around 2.23% of total shares outstanding. .
The entity that bought on the open market in the last three months was
Navios Maritime Holdings Inc.. Although this is an institutional investor, rather than a company executive or board member, the insights gained from direct access to management as a large investor would make it more well-informed than the average retail investor. In this specific instance, I would classify this investor as a company insider.
Does Buying Activity Reflect Future Growth?
At first glance, analysts’ revenue growth expectations of 0.34% over the next three years illustrates a tamed outlook moving forward, however, insiders may be more optimistic than the market, with their net buying activity. Digging deeper into the line items,Navios Maritime Partners is believed to experience a strong double-digit revenue growth next year, which Insiders who believe in higher future growth could increase their shareholdings, signalling conviction in the company strategy. However, this net buying may simply reflect their views that the share price is well-below its intrinsic value.
Did Stock Price Volatility Instigate Buying?
An alternative reason for recent trades could be insiders taking advantage of the share price volatility. A correlation could mean directors are trading on market inefficiencies based on their belief of the company’s intrinsic value. Navios Maritime Partners’s shares ranged between $2.15 and $1.63 over the past three months. This suggests reasonable volatility with a change of 31.9%. This may not be large enough to warrant any significant purchases, therefore the underlying driver may be the insiders’ belief of company growth prospects or simply their personal portfolio rebalancing.
Navios Maritime Partners’s insider meaningful buying activity tells us the shares are currently in favour, which is fairly consistent with earnings growth expectations, as well as the relatively large share price volatility over the same period of trade. However, while insider transactions could be a helpful signal, it is definitely not sufficient on its own to make an investment decision. I’ve compiled two fundamental factors you should further examine:
- Financial Health: Does Navios Maritime Partners have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- Other High Quality Alternatives : Are there other high quality stocks you could be holding instead of Navios Maritime Partners? Explore our interactive list of high quality stocks to get an idea of what else is out there you may be missing!
NB: Figures in this article are calculated using data from the last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.