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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Ditchdigger who wrote (46629)	2/16/2012 2:33:32 PM
From: E_K_S	Read Replies (1) \| Respond to of 78749

Yes, SFL is at a breakout point. This is my No. 7th position with my last buy in September 2011 at $14.86. The whole shipping sector is breaking higher. SFL is the major lender to FRO (at least has the most exposure) and is benefiting from the Sector bounce. Awhile back, SFL did renegotiate some of their lease agreements w/ FRO to help avoid a default by FRO. In doing so, SFL reduced their minimum lease guarantees in favor of a larger profit sharing percentage. They had no choice to to the deal as Fredricksen their largest shareholder structured the deal. Therefore, if this move higher in the bulk shipping industry is real and the Sector is in for a long sustained uptrend, SFL could be the beneficiary of higher profit sharing returns. It's still small when compared to their previous guaranteed cash flows from their long term leases w/ FRO. With the cost of capital so low, this new arrangement provides a better deal for both companies until rates start to increase. There is still lots of value in SFL but their business is only as good as the market they are lending to (ie. dry bulkers, oil tankers, and jack up drill ships). I expect to see more financing deals as Fredricksen said that he would be deploying more capital on new ship builds. SFL would be the beneficiary. If the chart signals the possibility of a break out, the fundamentals that I watch seem to support a much higher price. Earnings, PE and future cash flows support a $15.00/share stock price and if/when those new ship orders come in w/ long term leases, $19.00-$20.00 share price is not unreasonable. If all of that occurs, SFL should move from a #7 position in the portfolio to a #2 position. More importantly for me is their $1.26/share annual dividend is secure. It should yield around 8% which would indicate a $15.75/share price. So that would be where I would expect the break out would find it's first major resistance. EKS