Monday, August 3, 2009

Frustrated at Loews

The folks at Loews are getting frustrated. Along with the recent earnings update, the company posted a Company Overview along with a section entitled "Valuing Loews". A better heading should be, "Hey Wall Street, Do You Know How to Add?!?"

No doubt this is an effort to illustrate the shocking and persistent NAV discount that I've discussed before in these pages. I know, book value may grow over time, but long-term holders of Loews will get an added boost if the market starts recognizing that this company does not deserve the typical conglomerate discount.

To quantify, this is a company with a NAV of $46+ a share (my calculation) and a current market value of $31.90 a share. It would take a 44% gain for Loews to get to fair value!

Here are a couple of quotes from the aforementioned Company Overview:
The availability of public market valuations for three of our businesses also helps investors determine an estimated sum-of-the-parts valuation for Loews common stock. While we believe that Loews’s true value is more than just the sum of its parts, such a readily calculable valuation metric is indeed beneficial to investors.

On June 30, 2009, the value of Loews’s 90 percent ownership of CNA common stock, our 50.4 percent ownership of Diamond Offshore common stock and our 71 percent limited partnership interest in Boardwalk Pipeline totaled approximately $12.2 billion, or $28.00 per share of Loews common stock.

Other assets attributed to Loews common stock include our two wholly owned subsidiaries, HighMount and Loews Hotels; our 100 percent ownership of Boardwalk Pipeline’s general partner; our holding company cash and investments net of holding company debt; our holdings of CNA senior preferred stock; and Boardwalk Pipeline Class B units and subordinated debt.
The highlighting above is mine.

Shares outstanding have recently fallen to 433 million thanks to share repurchases and today the public holdings have a current value of $13.7 billion or $31.75 per Loews share. As a result, the market continues to assign a ZERO value to all the non-publicly traded assets of Loews.

So much for the premium the company wants.

Burying this valuation information on the company website isn't going to solve the problem.

At least Loews is repurchasing shares. I've bought more too!


  1. I hope it doesn't wind up a value trap for you. I've found out myself that it can get frustrating sitting on a value play only to find it getting hammered worse.

    At least Lowe's management is reacting rationally to the discount.

  2. Intrinsic value is growing at Loews. Value traps require a declining intrinsic value.