If you thought hog farming, commodity trading, and global shipping were pretty unrelated businesses to be in, think again. Seaboard (SEB) has vertically integrated its business and has created around 2 Billion of shareholder equity in the process. At a market cap of just 7% or so above book value, Seaboard looks undervalued when factoring in the company’s 6.4X PE ratio and stellar long-term growth rate.
In fact, Seaboard has managed to more than double its cash flows from operating activities over the past three years. Many analysts have questioned this growth rate, but the fact remains that the company is one of the best managed conglomerate businesses in the world. With any commodity business, however, one must view the cyclical nature of the industry with a good deal of skepticism and certainly shipping is thought to be cheap for a good reason right now.
Investors in Genco Shipping GNK and Excel Maritime EXM know exactly what I am talking about. Unlike the dry bulk shippers, Seaboard has a more diversified business model which can even out the volatility during the hard times. Renaissance Technologies and Kahn Brothers & Company are two of the larger names invested here, but I expect the hedge fund community to take notice if earnings and cash flow remain on a positive trajectory.