Editor's Note: Jon D. Markman writes a weekly column for CNBC on MSN Money that is republished here on TheStreet.com.


Globalization is responsible for a lot of great things: Higher incomes for fast-growing middle classes in Asia, cheaper consumer electronics in the U.S., markets for energy in the Middle East, a shorter workweek in Europe and Kentucky Fried Chicken outlets in Kuwait.

But what is responsible for globalization? Is it an improvement in entrepreneurs' ability to finance emerging markets' factories? The liberalization of command-driven economies in formerly despotic countries? A stroke of luck?

I would suggest that a lot of the credit can be given to the standardized shipping container -- those 40-foot-long boxes you see on the decks of oceangoing ships, on rail-car flatbeds and on truck trailers. Without agreement among the world's manufacturing and freight-forwarding giants on the size and shape of a common box, getting iPods and chairs and auto parts from Shanghai to Seattle and Scotland would be crazy-expensive, not to mention a huge hassle.

Lines in the Shipping Lanes

Shipping those containers seems like an easy task, but the ability to do so is actually something in great demand and low supply these days. To give you an idea of how constricted the supply of all those containers has been this year, consider that the Baltic Exchange's dry-freight index -- a composite of prices for shipping all sorts of "dry" things, such as commodities and containers -- hit a record high of 6,250 this week. It's up a whopping 40% this year alone.

One of the reasons for the surge is that port congestion has been terrible, keeping ships in harbors longer than shippers would like and running up the bills. Plus, there's very little new supply of boats coming on line.

The Financial Times reported that at Newcastle, Australia, a key port in the world supply chain, queuing for loads reached a historic high of 72 vessels on April 16, compared with an average of 26 throughout 2006. That keeps a lot of ships off the high seas, increasing their demand and rates.

For many years there was no satisfactory way to play the rise of container shipping, as most of the carriers are private or government-owned or are small parts of large international conglomerates.

But in the past year, two companies have come public that give us a chance to directly participate: Seaspan ( SSW), based in Vancouver, Canada; and Danaos ( DAC), based in Athens, Greece.

Both should offer a lot of capital appreciation and dividend income over the next several years and would make solid holdings in any portfolio.

I spoke to Seaspan founder and Chief Executive Jerry Wang last week about his company, and I was impressed with his business plan and enthusiasm. You might think enthusiasm is a superficial quality, but as an investor you really want the head of a company to be able to communicate his beliefs well to institutional investors and to the public, because they are the ultimate arbiters of value.

Wang, a Canadian citizen, was working as a consultant for the national Chinese shipping line in 1998 during the Asian financial crisis when he noticed that the demand for ships was weak and prices were low.

He recommended that the shipping line increase its container-ship fleet, but executives demurred, complaining that it would be two years before they could get funding through the government bureaucracy. Wang said he then asked how long it would take to get funding to obtain ships on a long-term charter, and the executives said it would take no time at all because it would be a simple business transaction, not a capital expenditure.

Fleet on Its Feet

That got Wang thinking. He went home and called up some business acquaintances and proposed that they borrow some money and partner up to create a company that would buy container ships cheaply and put them out on long-term charter to the Chinese and other carriers.

He obtained the backing of Montana copper and construction magnate Dennis Washington, the chairman of Washington Group International ( WNG), and together they persuaded some European banks to provide financing.

Wang's big idea was to create the Southwest Airlines ( LUV) of container-ship lines. He wanted all new ships to be interchangeable so they would be easy to run and maintain.

He wanted to be the low-price leader, and he wanted to grow by at least 15% per year. In the late 1990s, with shipping at low tide, he was able to buy five new ships from Samsung Heavy Industries and needed to wait only 13 months. Demand is so strong now that if you can find a shipmaker who will take your order, you have to wait four years.

Seaspan's fleet is now up to 47 new container ships, and all are on 10-year fixed-rate contracts. On Monday, the company announced that it had ordered eight more ships from Hyundai Heavy Industries in South Korea for $132.5 million per vessel, to be delivered between the end of 2009 and the end of 2010.

Each of the ships has already been chartered to the Chinese container-ship line Cosco on a 12-year lease with three additional one-year options.

Wang shoots for a return on invested capital of 12% and does that by borrowing 60% and using 40% cash. He focuses closely on "counterparty risk," which means that he will charter out only to the top 15 shipping lines in the world. He doesn't want deadbeats in his accounts payable.

Floating Warehouses

Why container ships? They are the least exposed to spot pricing and the easiest to operate. They are truly the motive power behind world trade, as they have become an integral part of the international supply chain.

Many companies, such as Wal-Mart Stores ( WMT), are trying to skip the step of warehousing goods altogether. They manufacture in China, ship to the U.S. in a container on one of Seaspan's ships and then have their trucker pick up the box and deliver it straight to one of their distribution centers or even directly to a store. In essence, container ships have become floating warehouses.

Seaspan has been using its formula to grow earnings around 30% a year and pay a 6% dividend. Wang has pledged to systematically increase the dividend while at the same time preserving around 20% of earnings each year to buy more ships. His intermediate-term goal is to get to around 125 ships by 2012 as long as he can continue to earn the same return on capital.

I'm a huge fan of this strategy and recommend that both conservative and growth-oriented investors take advantage of a recent dip to buy Seaspan shares for my 2008 target in the mid-$30s. Add the juicy 6.2% dividend yield, and you're looking at potential for 30% in total return over the next year. I can hardly contain myself.

At the time of publication, Jon Markman owned shares of Seaspan and Danaos.

Jon D. Markman is editor of the independent investment newsletter The Daily Advantage. While Markman cannot provide personalized investment advice or recommendations, he appreciates your feedback; click here to send him an email.

More from Opinion

Week of the Women From Finance to Fast Food

Week of the Women From Finance to Fast Food

Tuesday Turnaround: Micron, Autonomous Driving, and J.C. Penney

Tuesday Turnaround: Micron, Autonomous Driving, and J.C. Penney

Cable Stock Investors Should Keep an Eye On Wireless Broadband's Rise

Cable Stock Investors Should Keep an Eye On Wireless Broadband's Rise

Trump Blinks on China Trade War That's Looking Harder to Win

Trump Blinks on China Trade War That's Looking Harder to Win

Monday Madness: GE, China, and Micron

Monday Madness: GE, China, and Micron