Wednesday, September 16, 2009

Loews Update

I've written about Loews (L) a couple of times on this site. The first time was June 22 with shares trading at $26.50. The investing thesis was simple. L was trading for less than the sum of its parts.

In June, the publicly traded assets of Loews were alone worth $28.50 a share. The market was placing a negative value on the rest of the company. So what happened and where are we now?

Loews shares have climbed over 30% since my first post to $35.13 a share. Today, the market value for Loews is $15.2 billion, but nothing has really changed.

Loews massive stakes in Boardwalk Pipeline (BWP), CNA Insurance (CNA), and Diamond Offshore (DO) are currently worth $15.8 billion. This is more than the entire market value of Loews!?!

So the thesis is still very much intact.

My newly recalculated NAV estimate is $51 a share. That's 45% higher than the current quote, an improvement over the 65% gap in June. But it still makes no sense.

While some may quibble with the NAV number, it is undeniable that the non-public "stub" of Loews is being assigned a negative value. And it is equally undeniable that its value is much greater than zero.

With $1.5 billion in net cash, various preferred stock holdings and privately held businesses like Highmount (natural gas) and the Loews hotel chain, this analyst thinks the "stub" is worth over $6 billion (and rising).

When considering what to do with all of its cash, Loews management should look no further than its own shares. Repurchases should be far more substantial than they have been. Whatever Loews decides to do, this situation should be an embarrassment. If it persists, Loews should distribute its public holdings to force Mr. Market to rethink his position.

In the meantime, where is the investor relations department?


  1. Love you Blog though you really shouldn't be given this information out for free :)

    Best, Rich from Indianapolis

  2. You are not the first to tell me that! If you have any expertise how to turn this into a moneymaker, I'm all ears (or eyes).