Does this mean it's time to sell? While a short-term retrenchment is possible and even likely (happening today) as traders take profits, we continue to take a long-term view and believe the answer is no.
Both companies are moving higher on company-specific developments -
- GSL: potential equity financing for counter-party CMA CGM (which leases all of GSL's container ships) to shore up its balance sheet.
- Seaspan: sale leaseback financing to remove all future funding commitments for the company's large new-build order book to be delivered over the next two years.
Why keep holding? In both cases, fair values remain meaningfully higher than current trading levels based on excess cash generation and stable business models that adequately support high levels of leverage (debt). Our February post on Seaspan largely provides the answer for SSW, but we'll come back with more commentary in the near future, including discussion on Global Ship Lease.
Disclosure: long GSL, SSW.
© 2010 Jeffrey Walkenhorst
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