All of these memories came back while listening to today's Loews (NYSE:L) conference call.
This is a company with real assets - hotels, oil rigs, and pipelines. They even own an insurance company for heaven's sake! Doesn't that old guy in Omaha (what's his name again?) own an insurance company (or 2)? And Loews has CASH... lots of it... Net Cash and Securities has reached $4 billion.
Bruce "We Count Cash" Berkowitz of Fairholme fame should love Loews, but he's AWOL. He prefers Sears (SHLD), which seems to have a similar theme, but less compelling assets compared to Loews.
Does anybody care? Has management given up?
The Q&A session seems to go quicker every quarter. Long-term owners can practically recite the answers.
One lone analyst actually asked if Loews was committed to owning CNA Insurance long-term. It was almost a plea for mercy. Please, please, please. Anything, but insurance. Or perhaps it was a call to action? An attempt to unlock value. No matter. Guess the answer.
Jim Tisch even went so far as to tell the story of Diamond Offshore for the umpteenth time. Loews bought its first rigs for less than scrap value. The business was given up for dead and everyone hated it. But not Loews... they are value investors... good ones! Look at offshore drilling today. Only President Obama thinks offshore drilling is a thing of the past.
In addition to that old Diamond Offshore story, the rest of the Loews quarterly report was a repetition. Shares outstanding down. Cash and securities up. Increasing dividends to the parent company. Stay the course. Boring, but awesome.
The problem: everyone who knows (or cares) already owns L shares. After 2008-2009, one would think that investors would be clamoring for Loews-type companies. But it is met with apathy.
Maybe the Loews Value Story isn't cool in a world where Facebook is supposedly worth $50 billion. Is skepticism dead? Insurance? Assets, cash, profits? A tired concept of a dying age, right? And this, in the same week that News Corp is rumored to be parting with MySpace (ah, those were the days) for the garage sale price of $200 million?
In an apparent attempt to commiserate, another lonely questioner asked Loews managers if it was possible to have too much cash. They answer (predictably) - yes, you can, but no we don't. It's the same yarn quarter after quarter. So too are the questions about possible acquisitions. And the stock answer: No comment.
The problem is NOT a case of too much cash (or insurance), but of unrealized value. Why would Loews buy anything except its own shares? Anything under the Loews' umbrella automatically earns a (minimum) 30% haircut courtesy of Mr. Market.
If you want to see how quickly $4 billion can go missing, just look closely at Loews.
The company owns 242.4 million shares of CNA Insurance (CNA), 70.1 million shares of Diamond Offshore (DO), and 102.7 million shares of Boardwalk Pipeline (BWP). Combined value: $16.2 billion (or $39 a share).
Loews in toto has a market value of $17.8 billion (or $43 a share).
So all the non-publicly traded assets of Loews are valued at $1.6 billion (or $4 a share). A full list of the "missing" assets can be found (on the cloud) at the company website. The highlights include: Loews hotels, Highmount natural gas, and that $4 billion pile of cash and securities (net of ALL debt). Any of these assets could individually account for that $1.6 billion "stub" value. So the rest is free.
Is it Loews and its philosophy that's gotten old and out of touch? Or is Mr. Market senile?
The trouble is that Loews' discount to the sum of its parts is a constant. One gets the impression that management has given up. Their creation trades at a persistent and significant discount, while that other guy's company (Berkshire Hathaway) gets a modicum of respect. Warren Buffett (that's the guy!) even counts Berkowitz among his shareholders.
Perhaps Loews should send a Valentine to Coral Gables?
For those who own Loews, the value story never gets old. It is an investment to own and cherish. But today's conference call was bit sad and slightly embarrassing. And no, I'm not talking about James Tisch announcing his new blog!
It's time for a new approach to Mr. Market. A sledge hammer, perhaps?
How about an offer to go private?
Like Grandpa, Loews would be missed if it was gone. And I'd need to find another story to tell.
Disclosure: Long Loews.