Markets Consolidate as Prem Watsa’s Bet Continues to Soar

For the first time in recent memory, each of the four major stock market indexes we track ended the week lower.

The Nasdaq fell 0.34% and the Dow Jones pulled back 0.4%. The S&P 500 closed down by a hair’s breadth with a 0.01% drop, while the MSCI Emerging Markets Index ended the week 1.08% lower.

Your Smart Money Masters’ holdings continued to confirm that many positions have little correlation to the overall market. BlackBerry (BBRY) soared yet another 11%, Kraft Heinz (KHC) recovered 3.10% and Markel Corp (MKL) rose 2.33%.

Both Markel Corp (MKL) and Kraft Heinz (KHC) rose back above their respective 50-day moving averages and are now a BUY.

Positions that remain a HOLD include Berkshire Hathaway (BRK-B), Navigator Holdings (NVGS) and Liberty Broadband (LBRDK).

Several of you have contacted me in connection with Wilbur Ross’ bet on Navigator Holdings (NVGS).

As the chart below confirms, this stock has been on a wild ride.

On the one hand, Navigator Holdings can soar when the news is good. The shares jumped more than 27% on March 2, primarily driven by much-better-than-expected profits.

On the other hand, the stock can fall precipitously as it has recently.

Navigator Holdings (NVGS) since Feb. 10  (date of initial recommendation)

That’s ironic given that the company continues to perform on a fundamental level.

For Q1 2017, Navigator reported $0.10 earnings per share, beating the consensus estimate of $0.08 by $0.02. The business had revenue of $77.30 million during the quarter, compared to analysts’ expectations of $63.83 million.

The collapse of Navigator Holdings’ stock price in light of its continued better-than-expected results is puzzling.

Such are the mysteries of Mr. Market’s mood swings.

The big picture case for Navigator Holdings remains valuation.

Yesterday, Navigator Holdings Ltd. closed at $8.30 per share.

At the same time, several valuation models I look at give the stock a value of $27.50.

That means the stock is undervalued by about 70%.

Put another way, Navigator Holdings would have to soar 225% to trade at fair value.

I currently have a stop price of $8.00 on the stock.

Today, I am recommending that you lower your stop to $6.50, to keep you from being stopped out of this position.

Finally, don’t forget to sign up for my free conference call this afternoon at 1:00 PM (EST) by clicking here now.

I will be answering several of your questions and providing you with a more detailed update on your Smart Money Masters’ portfolio.

Portfolio Update

Sincerely,

Nicholas A. Vardy