 |
| Dow | Nasdaq | About Us | Disclaimer |  |
RSS Feed |  |
Follow us on Twitter |
|
Featured Advisors |
Monday August 09, 2010
Loews Corp. (L) : Investing with the Tisch family
by Adrian Day, editor The Global Analyst  Loews Corp. (L) is a holding company run by the New York Tisch family. The stock is selling at less than nine times earnings, and an almost 30% discount to its NAV, based on a sum of the parts. The businesses are mostly doing well; the balance sheet is rock solid; and the shares are undervalued. At any given time, there may be one or two holdings that are troubled, but the Tisches are famously patient investors, giving time and, where appropriate, additional capital to their holdings. Though generally taking a hands-off approach to the businesses, they will, again where appropriate, force management changes. 
In recent years, CNA Insurance was the problem child, but, now they are out of the loss-making lines, the business is turning around. The investment portfolio is improving, with investment income higher. And earlier this month, they sold their environment liabilities (including asbestos) to a unit of Berkshire Hathaway for $2 billion. The private hotel business was in a recession funk, but occupancy and rates have firmed. And at loss-making HighMount gas unit, a new CEO has been installed while some non-core assets are being sold. So all these businesses are turning around. Other businesses continue to do well, including Diamond Offshore, the offshore driller, and Boardwalk Pipelines. These two companies, as well as CNA, are public. More important arguably than the specific businesses is the overall company, with conservative and patient value investors piling up cash--$3.4 billion (with less than $900 million of debt)—awaiting sound opportunities. This strategy has served the company well over the years. In the meantime, the company is buying back its discounted shares, repurchasing over 17 million shares over the past year, or 4% of the shares outstanding. Although, as a holding company, Loews typically sells at a discount, this is wider than normal, due, perhaps both to the high level of cash on the balance sheet as well as genuine concerns about the prospects for Diamond Offshore following the Obama drilling moratorium. I suspect, however, that this is more likely to be viewed as an opportunity by the contrarian Tisches who could increase acquisitions of distressed rig operators. Of course, Loews is exposed to the broad market. If the value of the shares it owns falls, then so too does its NAV and its own share price. Overall, Loews is a great business with a solid balance sheet and strong management, and can be purchased for long-term holdings. Learn more about this financial newsletter at Adrian Day's The Global Analyst. |
News Flash
|
|