“The Boardwalk Club — Secret Society #5”

By Travis Johnson, Stock Gumshoe, October 5, 2007

You probably won’t find this shocking, but the Gumshoe is, at heart, a lazy man. So I’m skipping 3 and 4 while I work on them a little more, since they’re gumming up my brain cells, and moving on to the other “easy” teaser from the “secret societies” ad from Stansberry and Associates.

This one tells us that “The Boardwalk Club … has given shareholders the opportunity to make 619% gains since the year 2000.”

They get this secret, Stansberry-bestowed name from one of their holdings.

They focus on “some of the most luxurious goods and investments in America,” which include:

“16 hotels in America’s most exotic locations: Santa Monica, Miami Beach, Beverly Hills, San Diego, and Denver, just to name a few.”

Really? San Diego and Denver are “exotic?” okay ….

A famous watch brand … an insurance business … and some kind of oil drilling business.

So that all sounds pretty good, luxury and oil drilling and insurance, all things that have been in the sweet spot lately. What is the “Boardwalk Club?”

Well, thanks to their unique portfolio and relatively high profile, this one took just a few moments in the Thinkolator 4000 before the Gumshoe, along with a few readers who suggested the solution, could reveal that what we’re talking about here is …

Loews Corp (LTR)

This is the investment holding company of the Tisch family, who are very well known in New York (as part owners of the New York Giants, among other things … the Giants are not in Loews’ portfolio, FYI)

The Watch company is Bulova, the oil drilling arm is Diamond Offshore, an offshore driller that I really like (also traded separately as DO — Loews owns 51%), the hotels are, of course, Loews Hotels, and the insurance company is CNA (Loews owns 89%).

You can add 75% of a pipeline company (Boardwalk Pipeline Partners … aha! That’s where that Boardwalk name comes from … sneaky), a natural gas exploration and production company, and, unfortunately (for me), Lorillard, maker of Newport and other cigarettes.

That last one is why I’ve never owned Loews, though I love their mix of products and companies. Lorillard is a huge part of their business, though probably a declining part, and while I’m generally not interested in socially responsible investing as a guiding principle, I’m personally not willing to invest directly in tobacco companies. I have considered several times an investment in Diamond Offshore, which is my second-favorite offshore drilling company, but the shares climbed so fast that I kept waiting and waiting for a better price … and decided, at least in recent days, to stick with the driller I already own, Seadrill.

Loews is certainly a phenomenally successful holding company, and one that is a bit more focused that many of the big holding companies — the holdings I mentioned above are pretty much it, so while it seems like a fairly large and diverse portfolio it is actually relatively focused if you think of it as an investment portfolio, just a half dozen major investments, with either controlling or 100% interest in all of them.

Unlike some of the others, this is not a partnership — just a corporate holding company, not unlike Berkshire Hathaway, so although you’re still faced with an earnings number that doesn’t necessarily tell the whole story (you really have to delve into the major holdings individually if you want to carefully judge the future value of the firm), you do at least not have to deal with partnership tax complexities.

And just looking at the basic metrics, it certainly looks cheap on its face, with a forward PE under 10 and a very Berkshire-like price/book ratio of about 1.5. You don’t get much of a dividend at the moment, though they have raised the dividend every five years or so in recent memory (still just half a percent, so probably not a big part of the decisionmaking process).

So, the Gumshoe likes Loews, though they don’t seem particularly secret, and he can’t argue much with this selection. Lorillard is the one reason I’ve never seriously considered buying shares of this one (if you have a different perspective and prefer the tobacco business, you can also invest in a tracking stock for just that part of the Loews empire, it’s called Carolina Group and trades as CG).

full disclosure: I do own shares of Seadrill and Berkshire Hathaway, but not of any other company mentioned in this note.

Are you getting our free Daily Update
"reveal" emails? If not,
just click here...



This site uses Akismet to reduce spam. Learn how your comment data is processed.

Inline Feedbacks
View all comments
October 7, 2007 9:43 pm

I know nothing about TLR, but recently, Morningstar was negative about it (see quote below):

Premium to Fair Value Estimate: 45%
From the Analyst Report: “An 89% interest in commercial insurer CNA Financial (CNA) accounts for about 53% of Loews’ equity, 57% of its revenue, and close to 100% of its moat deficiency. CNA’s asbestos liabilities are large and uncertain, which increases the risk that Loews’ cash will be used to keep CNA solvent. CNA frequently incurs underwriting losses, and its average return on equity is far below its cost of equity. CNA has been on the mend for more than a decade, and we don’t anticipate substantial improvement. What’s worse, Loews’ management has given no indication of plans to excise this cancer.”

Add a Topic
Add a Topic
Add a Topic