Published on May 15, 2013

Loews CorporationLoews Corporation is a diversified holding company with the majority of its intrinsic value attributable to majority stakes in three publicly traded subsidiaries: CNA Financial, Diamond Offshore, and Boardwalk Pipeline. Based on market quotations as of May 10, 2013, the value of shares owned by Loews in these three publicly traded subsidiaries was $16,360 million.

With Loews Corporation’s market capitalization of $17,721 million, investors are paying $1,361 million for the rest of Loews, commonly referred to as the “Loews stub”, which had tangible book value of $3,808 million as of March 31, 2013. The Loews stub includes wholly owned subsidiaries HighMount Exploration & Production LLC and Loews Hotels along with cash and investments at the holding company level.

We first wrote about the valuation of the Loews stub in early 2012 when the discount was somewhat larger than it is today.  For an updated analysis, please read the follow-up posted on BeyondProxy.

Disclosure:  Individuals associated with The Rational Walk LLC own shares of Loews Corporation.

Loews Corporation: Still Cheap on Sum-of-the-Parts Valuation Basis
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2 thoughts on “Loews Corporation: Still Cheap on Sum-of-the-Parts Valuation Basis

  • May 21, 2013 at 7:01 pm
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    Hi Ravi –

    Great writeup. If one suspects the stub to be the most significantly undervalued part, then why invest in only long Loew’s without shorting out the other risks. Would you expect maybe buying cheap calls on L (to keep the capital invested small) while shorting the 3 stocks to outperform just investing in L itself over time?

    Thanks!
    Danny

  • May 21, 2013 at 7:36 pm
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    It is tempting to consider a strategy of being long on Loews and short the majority owned publicly traded companies. But I have never shorted a stock and I wouldn’t want to incur the carrying costs associated with being long Loews while short CNA, DO, and BWP since the dividends on these companies is far higher than what Loews pays. Of course, being long just Loews requires some confidence that the majority owned companies are not overvalued in the market. I guess I just prefer to keep things simple by being long the stock.

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