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Look at Loews: An Under the Radar Conglomerate

06/28/2019 5:00 am EST

Focus: FINANCIALS

Mike Larson

Editor, Weiss' Safe Money Report and Under-the-Radar Stocks

Chances are you’ve heard of Warren Buffett’s conglomerate Berkshire Hathaway (BRK.A). But you may not have heard of its much-smaller doppelganger company called Loews Corporation (L), asserts Mike Larson, editor of Under the Radar Stocks.

Based in New York, Loews Corp. shouldn’t be mistaken for Lowe’s Companies Inc. (LOW), the home improvement retailer. Loews was founded by Laurence Tisch in the aftermath of World War II as a vehicle to invest in a hotel. Over the years, the Tisch family expanded their hotel operations.

They then took the company public in 1959 and broadened the conglomerate’s holdings over the years into other industries like tobacco, movie theaters, and insurance. The family members are now billionaires, with James Tisch serving as Loews’ CEO.

Loews has always emphasized a value investing approach, just like Buffett. That’s why the stock has performed so well over the years. It has delivered average compound annual returns of 17% between the mid-1960s and the end of 2018. That compares to only 10% for the S&P 500.

Currently, as you can see in this organizational chart, its largest investment holding is an 89% stake in the insurance firm CNA Financial Corp. (CNA).

It also owns a chunk of the offshore petroleum production firm Diamond Offshore Drilling (DO), a natural gas pipeline operator, a plastic packaging company, and the Loews Hotels chain.

It has deployed roughly $6 billion in capital acquiring new business, investing in existing subsidiaries, and buying back shares in recent years. But importantly, it doesn’t just buy back stock in an automatic, pre-programmed fashion. The company does so opportunistically when the stock is cheap relative to the firm’s intrinsic value.

Recent operating results also look solid. In the first quarter, net income jumped 34% to $394 million, or $1.27 per share, from $293 million, or 89 cents per share, in the year earlier period.

The results benefitted from improved investment income and gains at CNA, better earnings at its Boardwalk Pipeline unit, and solid hotel profits. Those forces were only partially offset by weakness in oil drilling and higher operating expenses in the lodging business.

After a long period of consolidation in 2018 and early 2019, Loews shares began to break out to the upside in the past several weeks. That’s an encouraging technical signal. In short, there aren’t a ton of stocks I would recommend you buy at this time. But Loews is a solid, relatively conservative addition. Go ahead and add the stock at the market.

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