Value Stocks Episode 8 – Seaspan Corporation
- Overlooked industry in terms of its importance in facilitating global trade.
- 10 years of deplorable industry conditions.
- Industry metrics point to a near term recover in leasing rates.
In this episode we discuss Seaspan Corporation (NYSE: SSW). Seaspan has become a relatively popular company to discuss within value investing circles due to Fairfax Financials’ (OTCPK: FRFFH) $1 billion investment in the company as well as it being led by former Berkshire Hathaway management star David Sokol as Chairman. While this was an industry neither of us got too excited about researching, our main motivation to do the episode was because the container shipping industry has been stuck in a downturn for almost 10 years and is finally starting to see a bit of optimism in the horizon based on a few important industry metrics. We hope you enjoy the episode.
Podcast Summary Notes
0:00 – Company Introduction
- What do they do?
- What is their market cap?
- Do you own the stock?
2:45 – Why did you want to talk about this company?
- Fairfax’s $ 1 billion investment
- David Sokol is now the Chairman of the company
- Very cyclical business which has been in a very severe downturn since the financial crisis
4:15 – What do you like about the company?
- Probably one of the better managed companies in this industry
- David Sokol
- Cyclical upside in the stock based on industry insider commentary and metrics
- Fairfax involvement
8:50 – What do you dislike about the company?
- Industry historical performance
- Heavy government intervention
- High capital and high debt
- Dilution of shares through Fairfax deal
18:25 – Thoughts on management?
- Excellent in terms of how the rest of the industry has performed
22:20 – What are your thoughts on moat?
- Network among carriers
- Access to the debt market
- Industry knowledge
- Overall, it’s a fairly standardized product
25:30 – What are your thoughts on growth, cash flow, and capital allocation?
- Lots of debt used to buy assets with the hope of a significant price recovery
- Disappointment if management doubled down on more ships during a time of high pricing environment rather than pay down debt or buy back shares
28:30 – Valuation/Intrinsic Value of the business
- How did you calculate the intrinsic value?
- Is it an above average business?
40:00 – Final thoughts on the business