Shipping vs. Hedge Funds: Net Asset Values

Publicly-listed ship owners often trade at a discount to their net asset value (“NAV”): the cash amount a company would net if it were to sell all of its assets and use the proceeds to pay off all of its liabilities.

Ships’ market values can be readily determined, so their NAVs can be calculated fairly accurately. Public stock portfolios make calculating NAV even easier than calculating ships’ NAV. The discounted NAV trade is a constant point of contention for capital market participants that isn’t unique to shipping.

Two of the most prominent hedge fund managers have publicly-traded companies that regularly report their NAV––Bill Ackman’s Pershing Square Capital Management, L.P. (PSH) and Dan Loeb’s Third Point LLC (TPOU).

Comparing P/NAV ratios of Ackman’s PSH and Loeb’s TPOU to John Fredriksen’s Frontline Management AS (FRO) and Golden Ocean Group (GOGL) shows that the opportunity to co-invest with shipping industry titan Fredriksen in his companies more than holds up in comparison of co-investing with two titans of Wall Street.