By Paul Goodwin, Chief Analyst, Cabot Emerging Markets Investor
From Cabot Wealth Advisory 2/11/16 Sign up for Cabot Wealth Advisory—it’s free!
My stock pick today is tailor-made for challenging market conditions. It’s Seaspan (SSW), a Chinese containership owner and operator that leases its ships on long-term contracts. The company currently has 85 vessels in operation, but expects its fleet to expand to 118 by the end of 2017.
Seaspan is really an outsourcing company at heart. Shippers lease ships and operators, avoiding the expense of owning their own fleet. Seaspan builds ships, hires crews, maintains and operates those ships, all on long-term contracts that insulate shippers (and Seaspan) from fluctuations in shipping rates. New ships are typically engaged for periods of up to seven years before they’re even launched.
SSW has been in a long-term downtrend, with a high at 25 in 2013, 24 in 2014 and 21 in 2015, and a real selloff to as low as 14 last month. Worries about a slowing Chinese (and global) economy have raised concerns about profitability and many investors don’t want to own any Chinese company.
I have had my Cabot Emerging Markets Investor subscribers in SSW for longer than any other stock for one reason. SSW pays an annual dividend that yields north of 9%. And right now, with SSW trading just under 16, the stock is trading at a very reasonable 15 P/E ratio.
Having a substantial income flow can be a powerful solace to investors when the broad market is having a conniption fit. And that’s especially true when the company you’re investing in has revenue transparency of four years or more.
There’s more than one way to skin a bear, and Cabot’s analysts have plenty of solutions for the problem of where to put your money in nasty weather. Click here for more information on Cabot Emerging Markets Investor.
Seaspan (SSW), with headquarters in Hong Kong and Canada, is the largest independent charter owner and manager of containerships in the world.
The company has 96 vessels in operation, and another 22 to be delivered by 2017.
Cash flows at Seaspan are extremely predictable, given that the company’s vessels are chartered for years at a time. The company has $4.6 billion in contracted revenues, and the average remaining charter length is roughly five years.
Revenues were $717 million in 2014, while earnings per share were $0.90. For 2015, analysts are looking for earnings of $1.06 (up 18%) and for 2016, $1.42 (up 34%).
Yet the stock doesn’t reflect it.
SSW (the stock) has suffered this year, dragged down by the selling of most stocks related to commodities. But the fact is, the company’s business is relatively immune to commodity prices.
On a fundamental basis, the stock is relatively cheap here, selling at 18 times earnings.
Plus, there’s a big fat dividend, currently yielding 9.05%.
I think it’s a low-risk, high-potential stock right here, suitable for patient investors looking for income.
So, you could just step up to plate here and take your chances. Buy a few shares of SSW and put it away.
But if you really want to do it right, you should get the latest (and continuing) advice from Paul Goodwin, Cabot’s expert emerging markets analyst. Paul’s had his readers in Seaspan for a long time, and would love to have you join them.
The first step is to click here.
By Paul Goodwin, Chief Analyst, Cabot China & Emerging Markets Report
From Cabot Wealth Advisory 9/24/14 Sign up for Cabot Wealth Advisory—it’s free!
For today’s stock pick, I’m going to recommend a stock I’ve had in the portfolio of Cabot China & Emerging Markets Report since June 2012! That’s a long time for a stock to stay in an aggressive growth portfolio, but there’s a reason for it.
The company is Seaspan (SSW), Hong Kong-based owner and operator of container ships, the massive cargo ships that carry big boxes of goods (the capacity of these ships is expressed in TEU, which is Twenty-foot Equivalent Units, or how many 20-foot-long cargo containers it can hold) all over the world.
Seaspan’s fleet has been expanding steadily via new shipbuilding. The company now has 109 containerships with a total capacity of 840,000 TEU, including 30 ships that are being built for delivery by the end of 2016. The amazing thing about Seaspan’s business is that even the ships that haven’t been floated are already committed to long-term leases by shippers.
Seaspan’s long-term leasing model gives the company exceptional transparency in its future revenue. The four 10,000 TEU vessels now being built at Chinese shipyards are already under five-year, fixed-rate charter agreements with two consecutive one-year options. This deal will add over $130 million to Seaspan’s projected revenue.
SSW isn’t exactly a skyrocket, but the portfolio bought it at 17 and it’s now trading just under 23. But besides holding (and gradually increasing) its price, SSW pays a handsome 6.2% forward annual dividend yield, which makes it a great core holding for a diversified portfolio.
When markets are jumpy and the future is uncertain, it’s good to know that you have a solid, predictable source of gain in your portfolio. Seaspan is just that.
If you'd like more updates on Seaspan as well as additional fast-growing Chinese stocks, consider taking a risk-free trial subscription to Cabot China & Emerging Markets Report. It's been a great year for Chinese stocks and we see even higher upside potential, especially in the stocks we hold in our portfolio. Click here for more information.
By Michael Cintolo, Editor of Cabot Market Letter and Cabot Top Ten Trader
From Cabot Wealth Advisory 6/20/13 Sign up for free Cabot Wealth Advisory
Paul Goodwin, editor of Cabot China & Emerging Markets Report, has been following the company on and off for many years. He discovered the story, and I think there’s years’ worth of steady growth and dividend increases ahead of it.
I’m talking about Seaspan (SSW), a leading owner and operator of containerships. Hey, that’s not exciting, but that’s kind of the point—the company has 69 vessels on the water today, with contracts to have another 20 built by 2015. Long-term, there’s room for even more vessels as global trade picks up.
The big attraction from an income perspective here is that Seaspan is not what’s called a speculative builder—it doesn’t build new vessels and hope a big company uses them. No, all of its vessels built are chartered to fixed-price, multi-year deals (mainly with huge Asia shippers) ahead of time. It’s like buying a commercial property only after you have a bunch of tenants signed up for 10-year leases.
That business model has allowed the firm to expand quickly, an average of 20% per year in terms of its overall vessel capacity. And since 2004, its lowest utilization rate has been 98.9%! As of May, the firm had more than $6 billion of contracted revenues in the years ahead from its various charters.
All of this has led to big cash flow, which Seaspan’s management is committed to returning to shareholders. It’s paid a dividend each quarter since its IPO in 2005; there was a dividend cut during the bust in 2009, but the payout has soared in recent years and should keep increasing going forward. The quarterly dividend was 19 cents per share in early 2011, then it was hiked to 25 cents in February 2012, and to 31 cents in March of this year. Seaspan also has a small share repurchase plan.
Just as impressive as all that is the stock itself. It traded very tightly for much of last year, then had a nice run earlier this year, moving from about 16 to 23 with little volatility. It’s since dipped only a couple of points and is still standing around its 50-day moving average, despite the carnage in other income stocks.
Sure, in the short-term, SSW could fall lower, especially if the market falls and interest rates continue to rise. But the dividend payment looks not only safe, but likely to increase in the years ahead, and the major trend of the stock remains solidly up. I like it. More information.
By Timothy Lutts, Editor of Cabot Stock of the Month
From Cabot Wealth Advisory 2/21/13 Sign up for free Cabot Wealth Advisory e-newsletter
The eighth stock is Seaspan Corporation (SSW), which was selected by Paul Goodwin, editor of Cabot China & Emerging Markets Report.
Seaspan is one of the world’s leading owners of containerships. The stock has appeared numerous times in various Cabot advisories, because when shipping stocks are strong, it rises to the top. Paul likes it for the long term (forever) because management is top-notch, because the industry has very high barriers to entry, and because there’s a very fat dividend yield. Here’s what he wrote back in May of last year, just before he added it to the portfolio of Cabot China & Emerging Markets Report.
“When a ship is heading in the right direction, the captain will sometimes say to the helmsman, “Steady as she goes.” Seaspan is headed in the right direction.
“This Hong Kong-based company is a major owner/operator of containerships, the primary movers of non-bulk goods in international trade. Seaspan has a fleet of 69 ships, most of which are under long-term time charter agreements of 10 or 12 years. When Seaspan has a ship built, it generally has a long-term client for the ship’s hauling services long before it ever hits the water; the firm doesn’t engage in so-called “speculative” building.
“Seaspan was founded by Gerry Wang, a Canadian consultant who was working for the Chinese national shipping line in the late 1990s. He foresaw the swelling of demand that China’s expanding export economy would produce, and when the Chinese government refused to allocate the capital necessary to build a containership fleet that was up to the task, he put together the financing and started Seaspan. Wang is CEO today.
“Seaspan essentially rents the space on its ships, as it retains ownership and provides the ships’ crews and regularly scheduled maintenance. This business model avoids any risk from leaseholders that might be tempted to skimp on upkeep.
“Containerships are classed by their cargo capacity, and that capacity is expressed in terms of the number of 20-foot shipping containers it can carry. Seaspan’s smaller ships can accommodate 2,500 TEU (twenty-foot equivalent units) and are leased for $16,800 per day, while larger ones (up to 13,500 TEU) command rates of $55,000 per day. These rates vary, including automatic rate increases built into contracts, and you can get a bargain on an older 4,800 TEU ship for just $10,000 per day. Or you could, if they weren’t already under contract.
“The transparency of Seaspan’s fleet, rate structure and contract lengths takes a lot of guesswork out of the job of analyzing the company’s prospects. In fact, while most competitors’ fortunes wax and wane primarily on the basis of trends in global shipping that affect demand, Seaspan’s long-term contracts with high-quality clientele (it does business with only eight shipping companies, and none have reneged on a contract even during 2008) give it tremendous clarity on future cash flows.
“Right now, the company’s business is perfectly on track …
“SSW is likely undervalued at this point, as the Shanghai Container Freight Index spiked higher by 20% in March. Further, the percentage of idle containerships in the global fleet fell from 5.8% in March to 3.7% in April. The stock’s P/E ratio of just seven times earnings is pretty cheap for a stock that pays a robust dividend.”
That dividend is now $0.25 per quarter, making a yield of 5.1%. And Seaspan's fleet now consists of 89 containerships, including 16 newbuild containerships on order scheduled for delivery by the end of 2015. Furthermore, Seaspan may order as many as 15 more ships over the next year, locking in construction prices that are the lowest they’ve been in four years. Which means if the years ahead bring increased global trade, and shipping rates rise as management expects, Seaspan’s earnings could go through the roof!
In short, both the long-term and short-term stories look good here.
However, this may not be the best time to buy it. While I’ve been featuring these 10 stocks in alphabetical order, SSW has advanced from 18 to 20 so far this year (and from 17 when Paul recommended it), which means it’s not quite the bargain it was. Furthermore, in recent weeks it’s been hitting resistance that stopped the stock in both March 2012 and March 2011. So there’s a real risk it will be stopped here again.
On the other hand, a high-volume breakout above that resistance level could see the start of a great new uptrend. My suggestion is that you take a no-risk trial subscription to Cabot China & Emerging Markets Report, so you can keep current on all Paul’s thoughts on the stock, while learning about other great international opportunities. For details, click here.
|Seaspan Corporation (SSW)
Bupa Centre, Unit 2
852 2540 1686
|Index Membership: N/A
Full Time Employees: N/A
10/27/15 Seaspan (SSW): Upside Potential Dwarfs Downside Potential
9/24/14 Seaspan (SSW): Handsome 6.2% yield
6/20/13 Seaspan (SSW): A growing income stock
2/21/13 Seaspan (SSW): Earnings could go through the roof