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Chance Felling
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Worked for a Fortune 500 Company for 10 years out of college. Couldn't take the meetings and indecision.....we'd have meetings to schedule our meetings. Started buying rental houses, 1 become 2, 2 homes became 4, 8, 32, 64, 100+. Went into hotel and office complex real estate business. 40+... More
  • Paragon Shipping: Still Floating 2 comments
    Jan 6, 2011 1:33 PM | about stocks: PRGN

    Paragon Shipping (NASDAQ:PRGN) is sailing under-the-radar for a company with significant value.  Even though it is in the headwinds of a) The Baltic Dry Index b) large number of new ship supply entering the business  3) lousy industry, the company stock price is positioned in a value-investor's sweet spot. 

    1.  At  today's price, the company is paying a 5.86% dividend.  Take  it

    2.  The dividend payout ratio is a safe 32%.  Better than some dividend aristocrats.  Forward 12 payout ratio is just above 50%, but still provides some margin of safety.

    3.  The P/E ratio of both trailing 12 and forward 12 estimate is about 6 and 10, respectively.

    4.  Price / Book is 33%.

    5.  The stock is close to its 12-month low of $3.36 on 12/21/10.

    6.  The company has a majority of its fleet signed to fixed-rate charters for the intermediate future.   

    7.  This is a big-one for me:  You are actually buying something.  They have huge ships carrying cargoes everyday.  You can touch, see, stand on, and understand the asset side of the balance sheet.   

    8.  A good way to make money is to buy what is "neglected" or "out of favor."

    There are always reasons NOT to like a stock.  However, with this case you get value, a presumably safe dividend, some locked in rate/charter stability, and upside for the future.  Where else are you going to get a 5-6% return with potential for 100-200% price appreciation in the coming years?  Show me the investment, and I'll buy it.

    Disclosure:  Long PRGN 

    Investors should always do their own analysis and come to their own conclusions before purchasing a stock or making an investment

    Disclosure: I am long PRGN.

    Stocks: PRGN
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  • Amvona
    , contributor
    Comments (222) | Send Message
     
    Thank you for the article - you may want to investigate the following:

     

    - Why is the business incorporated in the Marshall Islands? Does Marshall islands affords shareholder rights that you are comfortable with should something go wrong?.

     

    - How do Greek Shipping Co. CEO's and Founders feel about running publicly traded companies? This is a new ownership concept for the old club - previously a very closed group. Is there a cultural clash of Greek business values with those we tend to appreciate in the US? - i.e. the idea that shareholders actually own the company etc.

     

    - Is it likly PRGN will dilute shareholders again in the not too distant future? We think so.

     

    - Effects on profits of PRGN, when related entities, owned by the founders are siphoned away from shareholders of PRGN to non-publicly traded companies incorporated in jurisdictions that make the Marshall Islands look pretty good.

     

    - Not really a value play by conservative standards, given the high leverage, which is contstantly increasing. Safety of principle is not clear here.

     

    - It is true, the market cap. makes their 12+ ships look cheap - but those things depreciate radically fast - and after about 10 years they're often scrapped. So an avg. fleet age of some six years - whic is the case with PRGN sounds young, but is it really?

     

    - The real risk is not really from the new build order book in China, it's really the liklihood raw materials shipments will slow down - esp. the Australia - China route - which will effect the BDI further. While it is true that PRGN has their vessells covered for an avg. length of some 24 mo. or so, they will expire, and need to be renewed, and the question is, what will China's growth look like at that time, and what will the related shipping rates look like?

     

    - Greek ship owners have had the privledge of running their business tax free in Greece for quite sometime - will that change with the Greek governments need to raise more capital? Shipping is a huge part of the Greek economy, yet pays virtually no income tax to the Greek Government - will that last?
    7 Jan 2011, 10:38 AM Reply Like
  • Chance Felling
    , contributor
    Comment (1) | Send Message
     
    Author’s reply » All the points you make are valid.......and I've thought about the shareholder dilution at length. You state your facts clearly and I'll continue with more research.

     

    You state that the fixed rates will expire in 24 months? That is a great point but all leases expire. They may get some / all of them renewed in the next 24 months...I understand rate is a huge factor in this.

     

    You state the Greek Government may change tax structure? A good point, but this could happen with ANY foreign based company.

     

    What will demand from China look like in two years? Nobody knows for sure what demand from any country could look like in 2-4 years. The world is changing too fast. But if I had to bet, I'd bet it is still somewhat strong.

     

    Not a value play? There aren't many by every "value" metric. I agree debt is high, but they have some cash flow stability to cover.

     

    You can't ignore the dividend, strength of the dividend coverage, stability with fixed rates, etc. If you have some better value plays that are a going-concern businesses, high dividend, safe coverage that stock price has been NEGLECTED let me know. I'll buy it.
    9 Jan 2011, 10:15 AM Reply Like
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