An Ambassador's Buffet-Like Bet
03/26/2004 12:00 am EST
Vivian Lewis, editor of Global Investing, encourages the participation of experts and well-connected individuals who also happen to be followers and contributors to her advisory services. Her latest buy, a Buffet-style meritocracy, comes from retired US Ambassador Harry Geisel.
Vivian Lewis explains that the idea behind Danish shipping conglomerate A.P. Moeller-Maersk (AMKAF Other OTC) comes as a result of communications with retired US Ambassador Harry Geisel. He is an expert on the shipping industry, as well as the insurance sector - and a shareholder of Berkshire Hathaway. The latest issue of Global Investing features the reasoning behind his bullish posture on the firm, as well as Vivian's decision to add the stock to her model portfolio:
"Warren Buffett might approve of Maersk, an equity-heavy meritocracy that is controlled by management. This shipping super-power from little Denmark is a top-quality investment that commands a serious 'Buffett-like' price- around $8,000 a share. Maersk, which took over Sea Land in 1999, is well known for its shipping containers. But it was a story in The Wall Street Journal last November that made me check if the company had ADRs. Dissatisfied with the Port of Singapore and its prices, Maersk used its clout to turn a mangrove swamp 25 miles away in Malaysia into a huge port and got a 30% stake in the facilities.
"It did the same thing in Oman, Los Angeles, Buenos Aires, and Shanghai. Dominating container ships, with almost twice the capacity of the next largest company, Maersk could then force other carriers feeding it to follow to its new ports, where Maersk profits as part owner of the new facilities. It is also in the energy business, operating terminals and the largest oil and gas producer in the Danish sector of the North Sea. It also produces oil and gas in Qatar, Algeria, Kazakhstan, and Norway. It runs a large fleet of offshore supply vessels and on- and off-shore drill rigs. Maersk is not cheap compared to its peers. However, in terms of size, diversification, and quality of business, Maersk has no peer."
Meanwhile, Vivian Lewis adds, "Chinese Premier Wen Jiabao was visited by Danish Premier Anders Fogh Rasmussen. In the Great Hall of the People in Beijing both witnessed the signing by A.P. Moller-Maersk of contracts with Dalian New Shipbuilding and Guangzhou Shipyard International. The Chinese will build four tankers for Maersk. After these contracts, Maersk's total orders from China reached 51 large ocean going vessels, valued at $1.5 billion, making it the largest client of Chinese shipyards. The stock price has been weak, but the company's prospects continue to improve and we consider the stock a buy."