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Loews and Graham Holdings Are Selling Below Book Value

Buying stocks below book value can be a highly profitable strategy

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Nov 08, 2021
  • These stocks are trading below their book value.
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Sure, the stock market’s on the expensive side. But some stocks are still selling for less than book value (essentially, corporate net worth).

Why should you care? Because, despite skeptics who say that book value is an obsolete measure, buying stocks below book value can be a highly profitable strategy.

Beginning in 1998, I’ve devoted 20 columns to stocks selling below book. The average 12-month total return on my selections has been 17.1%, well ahead of the 11.8% figure for the Standard & Poor’s 500 Index -- an index that has seemed closed to unbeatable in the past few years.

Fourteen of my 20 columns have shown a profit, and 13 have beaten the index.

Bear in mind that my column results are hypothetical: They don’t reflect actual trades, trading costs or taxes. These results shouldn’t be confused with the performance of portfolios I manage for clients. Also, past performance doesn’t predict future results.

Last year, my below-book picks returned 51.1%, outdistancing the S&P, which racked up a 34.2% gain. Three of my four picks beat the index, with the largest gain (88%) coming from G-III Apparel Group Ltd. (

GIII, Financial). The worst performer was Photronics Inc. (PLAB, Financial), which gained 29%.

Now, how about a few new candidates?


Loews Corp. (

L, Financial), based in New York City, is the home base of the Tisch family, which has controlled the company since its inception in 1946. It owns 89% of CNA Financial Corp. and 53% of Diamond Offshore Drilling Inc. (DOFSQ). It owns outright the Loews chain of hotels and Boardwalk Pipeline Partners.

In the past, Loews owned Lorillard Tobacco Co., the Bulova Watch Co., the Loews chain of movie theatres and a chunk of CBS broadcasting. Clearly, the Tisches are willing to buy and sell assets, but they tend to keep their holdings for a substantial number of years.

The stock has been a laggard, returning only 54% in the past decade (including dividends), while the S&P 500 has returned 358%. But in an expensive market, this stock is dirt cheap, logging in at 0.8 times book value, 9 times earnings and 1.1 times revenue.

Dorian LPG

Based in Stamford, Connecticut, Dorian LPG Ltd. (

LPG, Financial) transports liquid petroleum gas internationally using a fleet of 22 specialized tankers.

Liquefied petroleum gas, or LPG, is different from liquefied natural gas, or LNG. The former is propane or butane; the latter is methane. But I believe the economics of both will be similar, and that the U.S. will be a major exporter of both.

Dorian’s earnings history comprises eight years; it has been profitable in five. Profitability appears to be improving, and the stock seems very cheap to me at 0.55 times book value and seven times earnings.

Graham Holdings

I’m bringing back Graham Holdings Co. (

GHC, Financial) from last year’s list. It returned 41%, but I think there’s room for additional gains.

This is the remnant of the old Washington Post empire. The Post itself was sold to Jeff Bezos (head of (

AMZN, Financial)), and the main remaining asset is the Kaplan chain, which offers test preparation and professional education. It also has some TV stations, home health care and hospice operations.

Over the past 10 years, Graham has increased its book value by 7% a year, and growth has accelerated lately. Yet the stock sells for only 0.77 times book value and six times earnings -- extremely cheap multiples in any market, and especially this one.

Argonaut Gold

Finally, and speculatively, I recommend Argonaut Gold Inc. (

ARNGF, Financial), which is a “penny stock,” that is, one selling for less than $5 a share. Argonaut sells for just a whisker below book value, and less than six times earnings. Its 14-year earnings history includes seven annual gains and seven losses.

A Canadian company that maintains a headquarters in Reno, Nevada, Argonaut mines gold mainly in Mexico and Nevada. One holder is Donald Smith & Co, an investment manager whose founder was famous for buying stocks below book value.

The price of gold strengthened from a low around $1,200 an ounce in September 2018 to a peak of about $2,000 in August 2020. Since then, its trend has been choppy with a downward bias; the price at this writing is $1,819 an ounce. With gold at this price, Argonaut has shown a profit for four quarters running.

With a whiff of inflation in the air, and with central banks printing money aggressively, I believe the present climate bodes well for gold and gold-related investments.

Disclosure: John Dorfman is chairman of Dorfman Value Investments in Boston. His firm of clients may own or trade securities discussed in this column. He can be reached at [email protected].


I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Disclosure: I have no positions in the stocks discussed this week, personally or for clients.
The views of this author are solely their own opinion and are not endorsed or guaranteed by
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