A Tale of Two Tankers: Seaspan or Knightsbridge?

Seaspan (SSW) was cut to "hold" by Lazard on Friday. A cut in ratings by analysts is always a time to reassess a long held position that I've been neglecting analyzing.

This is especially true if one has a nice gain, which I do. I started acquiring Seaspan around Thanksgiving 2005 at $19.44, and have continued to buy bits and pieces up to $22.26 for my tax-deferred IRA. Seaspan Corp is a Hong Kong-based container ship chartering company set up as a REIT so that income is taxable at the investor level rather than at the corporate level. The company has been aggressively acquiring new ships and has new ship orders that will nearly double its fleet by the end of 2009.

So Lazard says "hold" (Wall Street euphemism for "we don't love this stock anymore - get rid of it!"), but I will hold. I like the dividend yield of 6.7%, and I like the fact that I think this dividend will increase. I certainly like Seaspan better than most US based Real Estate Trusts. With most Real Estate Investment Trusts yielding around 4%, I just don't see the point in owning them. I'll wait until all the liquidity creating the current real estate bubble dries up. But container ships . . . I like that, if for no other reason than diversification.

Another shipping play I own in my IRA is Knightsbridge Tankers Limited (VLCCF), the corporate structure is similar except that Knighsbridge owns Very Large Crude Carriers or VLCC's - get the ticker now?). Knightsbridge has a fat but very volatile dividend. I tend to trust volatile dividends more than steady ones because it means that management is not trying to manage (read hide) business volatility.

Disclosures and Confessions: I own SSW. I have bought and sold SSW in the past two years. At current prices I am unlikely to buy or sell Seaspan. I own VLCCF. I have bought and sold VLCCF if the past two years. At currently prices I am more likely to buy than sell Knightsbridge Tankers.

SSW-VLCCF 1-yr comparison chart: