Do you have a good financial advisor? They are hard to come by, from my experience. If you are in business you probably get somebody fresh out of business school (if that) calling at least every other day. I am very cynical about the entire financial industry and think that much of what passes for good professional advice is neither good nor professional. I harped on this a little yesterday in Sunday Funnies: Analysts must have a great sense of humor.
If one were to measure many of our foremost fianancial institutions by how well they manage their own affairs, then most of them would come up wanting. The investment banks, ratings agencies, mortgage banks and even the federal watchdogs have made a poor showing over the past year and we are all paying for it.
Recently I made the acquaintance of a Michael G., who is a broker with a major financial institution that is advising a good friend of mine and seems to contradict my generally negative opinion of the industry. He was the seed that grew into my Precision Drilling Services TR (NYSE: PDS) recommendation and last month I was happy to post Chasing Value: PDS up 75% in Q1, announces distribution.
In my conversation with Mike, Seaspan Corp (NYSE: SSW) was his latest intrigue. According to AOL Money & Finance data, Seaspan maintains a fleet of about 30 vessels. Its charter operations are managed by sister company Seaspan Management Services Limited. Both companies are a part of The Washington Marine Group, a group of companies that focus on marine transportation and ship building.
Some company history is in order because the company is an assemblage of parts, including several acquisitions and the contracting of new ships. Although AOL provides the following ten year chart, it has only been public since its initial public offering on the New York Stock Exchange on August 8, 2005. Early investors were rewarded, but late comers have not had a smooth voyage as the last year of the chart indicates.
So, what about Seaspan Corp now? Last month it reported a first quarter loss, but it also declared a first quarter dividend of $0.475 per share. At Friday's market close of $27.61 that equates to 6.9% yield, which is particularly attractive since treasury rates and CD rates have shrunk. Given the stocks 52-week range from $23.50 - $37.75, I am also pleased that there is room at the top.
Seaspan carries significant debt on its books, but its cash flow seems predictable when you consider the companies long-term leases, which is something The Motley Fools reported in Don't Turn Down Seaspan.
I usually shun analysts reports, however, for those who care, last month Goldman Sachs initiated coverage with a buy rating and $35 price target. GS sees the company benefiting from secular trends while avoiding short-term cyclicality by using long-term contracts. They also noted high visibility, a strong balance sheet and the 7% dividend yield.
Looking at a few more metrics you will find a projected P/E of 22, which is fine if growth really is the 30% discussed here and there. On the other hand, SSW has negative earnings, and ROE and a P/S over 7, so I am not as excited about it as I have been about other stocks.
I am not ready to buy this one myself, but it does seem worth putting on my watch list.
Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm. He writes the columns Chasing Value and Serious Money. Disclosure: I own shares of PDS but not SSW.
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Reader Comments (Page 1 of 1)
5-19-2008 @ 2:31PM
Harry said...
You are absolutely right to be cynical about the financial industry, advisors and planners. There is plenty of information available online from funds to international companies. I took over my own planning 10 years ago and have averaged 14% a year over five year periods. My investing ranges from Russia, to Brazil and right here in America.
5-20-2008 @ 9:42AM
navigator said...
Enjoyed your comments on SSW and your bio profile.
I believe very strongly in reinvesting dividends (distributions) from high yielding stocks as a long term driver of profit. Got into SSW as a diversification from Master Limited Partnerships (MLPs), mostly pipeline companies like KMP, EPD, ETP etc. The strength of SSW is their blue chip, long term, customer base and expansion plans. Their ability to raise funding for new ships in these turbulent economic times validates their very conservative business plan. This stock, like MLPs, will move in relation to their dividend growth. Add the dividend and stock appreciation, and long term growth of 15% a year is very realistic.