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Savings Experiment: Snow RemovalThis was one of my last to make the list of 8 for 2008, and did not show up in previous stories, but investors should take note. Everything we read and hear about the investment climate in 2008 makes one rather tepid about the stock market. One of my friends even suggested to me a few days ago that he was considering going to all cash. That is a bad idea. A better idea is to find investments that will do well in this environment. Loews Corp. (NYSE: LTR) might very well be that company. The stock closed on December 28, 2007, at $49.35.
In a recent news release, Loews announced a plan to spin-off Lorillard. By mid-summer LTR should be separated from this tobacco company and maker of the Newport brand of cigarettes. This will free up some cash for stock buybacks, according to the article, and also from some liability. This might be good news to many but is not the reason I like Loews so much.
The real reason is that in searching out investment opportunities I took an interest in Diamond Offshore (NYSE: DO) as a major player in the search for oil offshore. Well it turns out that Loews is a major shareholder. When I was reviewing insurance companies, which were way down in 2007, and I think oversold now, I came across CNA Financial (NYSE: CNA), which has fallen on hard times and may be a comeback story. Then I learn that Loews owns a major stake in CNA too.
The intrigue did not end there. Last year and this, I was high on Duke Energy (NYSE: DUK) which split-off its subsidiary Spectra Energy (NYSE: SE), so I have been watching the natural gas industry. Loews seems to be everywhere I want to be; they are movers and shakers owning Boardwalk Pipeline (NYSE: BWP) out of Texas.
It just seemed to me that through Loews you are getting a miniature version of Berkshire Hathaway (NYSE: BRK.A) with equally impressive management (very important) in the Tisch family. They have controlled Loews for decades and I imagine have nothing but grateful shareholders to show for it as the five-year chart portrays.
Loews had a great run from 2004 to mid 2007, and then it became erratic. But the spin-off of Lorillard, along with stock buybacks and increased liquidity, may be setting the stage for the next rise.
Loews has a reasonable P/E around 11 (TTM), a P/S of 1.62, and a P/B of 1.55, and a PEG ratio (something I look at less frequently) of 0.57. Loews adds strong management, good diversification, and the potential to take advantage of opportunistic investing in 2008 at what I believe is a reasonable price.
To find potential opportunities and verify my track record, read Chasing Value and Serious Money.
DISCLOSURE: I am an active investor. I do not own shares of LTR but may acquire shares at a future date.
Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm.
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Reader Comments (Page 1 of 1)
1-05-2008 @ 3:17PM
michael schneider said...
I have held Loews for some time in my personal portfolio and I recommended it in the free Barrel view newsletter to my readers several weeks ago as a great way to by a diversified group of stocks at a cheap price. Soon afterwards, Barron's came out with a good item on Loew's that listed the value of the company at $64--about 12% more than the figure I was using ($57). Great. This week I recommended it at http://www.Barrelomoney.com on a new list of stocks that look good for the long term. Some of their segments may face difficulties but the tobacco stocks should hold up well in an economic slowdown and the oil parts (Diamond Offshore, the Boardwalk Pipeline company and other development interests) should keep doing well and the company has quite a bit of cash also. Loews is off it's high but I think we are agreeing that the stock should move higher with the spin off of the tobacco unit. Both your item and the Barron's piece compare Loews to Berkshire Hathaway. Another good comparison would be to the old Canadian Pacific stock that few people wanted years ago and that eventually split up oil, coal, hotel and railroad interests. The stock traded around $21 and a round lot would have cost $2100. Icahn bought up the hotels this year and if you add that portion with the dividends paid out I think the stock has pretty much paid for itself and Encana is now worth around $9,000 while the rail part is worth around $3500.