It’s More Insurance, Energy, and Hotels for This Loews Insider

According to a filing with the SEC, a member of the Board of Directors at Loews Corporation (NYSE:L) purchased 5,000 shares of the company’s stock on November 29th at an average price of $40.99 per share. Ken Miller now owns 17,000 shares of Loews, so this recent buy of about $200,000 was an increase of over 40% in his holdings. Loews has a number of business interests: a casualty and property insurance company, substantial energy holdings (including offshore drilling rigs, exploration and production operations in Texas, and natural gas pipelines), and a number of hotels in North America. On average, insider purchases are bullish signs for a stock as they indicate that the insider is so confident in the company’s prospects that they are willing to forgo the benefits of diversification. However, our database of insider filings shows that there has been significant insider sales activity at Loews in November; while insider sales can often be rational as insiders look to diversify, it’s something to note.

In the third quarter of 2012, Loews Corporation experienced an 8% increase in revenue compared to the same period in 2011, but this was driven mostly by investment income and gains. Insurance premiums were up, but were offset entirely by a fall in contract drilling revenue. With operating expenses generally up, earnings rose 9% (reversing the trend of lower net income that had occurred in the first half of the year). In terms of net income, the insurance business seems to bring in about twice as much money as the contract drilling operations, which in turn make 3-4 times as much profits as pipelines. Oil and gas exploration and production was unprofitable generally due to a special charge, while the hotels business has been roughly breaking even. Loews currently trades at 19 times trailing earnings, suggesting that investors foresee similar future growth rates to what the company recorded last quarter, but only 11 times forward earnings estimates as analysts expect a much better bottom line next year.

RENAISSANCE TECHNOLOGIES

Renaissance Technologies, whose success since inception has made founder Jim Simons a billionaire, initiated a position of about 700,000 shares in Loews Corporation during the third quarter (check out more of Renaissance Technologies’ stock picks). Billionaire Mason Hawkins’ mutual fund Southeastern Asset Management had Loews as the second largest position by market value in its 13F portfolio, with its 38 million shares being worth $1.6 billion at that time (find more stocks that Southeastern has over $1 billion invested in).

Two leading property and casualty insurance companies are American International Group, Inc. (NYSE:AIG) and The Travelers Companies, Inc. (NYSE:TRV). AIG’s value status- it’s currently valued at 10 times consensus earnings for 2013, and a P/B ratio of 0.5- helped make it one of the most popular stocks among hedge funds for the third quarter (see the full rankings). We think it’s a buy, but note that its forward P/E is about even with where Loews is (Loews also trades at a discount to the book value of its equity, but given its other business interests it’s tougher to make a comparison there). Travelers has a forward P/E multiple of 11, and that figure is based on high growth expectations even though earnings were actually down slightly in the third quarter from a year earlier. Both of these companies are larger than Loews in terms of market cap, and as a less diversified company Loews would likely warrant a lower multiple if its other operations were similarly priced.

As a result we’d look at contract offshore driller Transocean LTD (NYSE:RIG) and pipeline company Kinder Morgan Inc (NYSE:KMI). Again, these companies are pure plays, and are market leaders in their industries, so we’d expect them to trade at a premium to Loews. Transocean trades at 10 times forward earnings estimates, while Kinder Morgan carries a forward P/E of 25. Of course, pipelines are a much smaller source of business for Loews than either insurance or drilling.

We’d conclude that an investor would probably do better by investing in a combination of these market-leading stocks, weighted to reflect the various sizes of Loews’ businesses, rather than buying the stock. Of course that approach could also allow an investor to avoid, say, the pipeline business entirely. Loews should be trading at a discount relative to a mix of larger, more focused companies in similar industries and we’d also consider the insider purchase in the context of heavy insider selling.

blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

6 Movies That You Should Watch to Better Understand The Cold War

Top 15 Best Paying Jobs for Women in 2014

Top 6 Things Rich People Do Differently Every Day

5 Retirement Mistakes To Avoid (and Einstein’s Famous Quote)

11 Smartest People in the World

6 Films About the Financial World You Need To Watch (While “The Wolf” is Not Around)

Warren Buffett and Billionaires Are Crazy About These 7 Stocks

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Top 9 Most Popular Free iPhone Apps

Top 10 Least Expensive Private Business Schools in the US

Top 15 Most Expensive Countries in the World – 2014

Top 6 Tax Scams and How to Protect Yourself

Top Businesses to Invest In

Top 5 Things You Might Be Doing Wrong With Your Business

Top 5 Strategic Technology Trends in 2014

Top Rags to Riches Stories

Parenting Behavior That Promotes Future Leaders

Top 5 Mistakes Made by Small Businesses

Top 5 Most Common and Potentially Devastating Financial Blunders

Top 5 Highest Paying Jobs for Web Designers

Top 6 Most Respected Professions that Also Pay Well

Top 5 Pitfalls Investors Should Avoid

Top 6 Lawyers and Policy Makers Under 30

Top 6 New Year’s Resolutions for Entrepreneurs

Top 7 Locations to Check in on Facebook

Top 5 Mistakes made by Rookie eBay Sellers

Top 7 eBook Publishers in 2013

Top 6 Health Industry Trends in 2014

5 Lessons for Entrepreneurs from Seth Godin

Top 5 Success Tips from Jordan Belfort – the Wolf of Wall Street

Best Master’s in Finance Degree Programs

Top 6 Earning Celebrities Over 50

The most expensive sports to play

Top 7 Earning Celebrities Under 25

Best 7 Online Courses to Take: Free Finance MOOCs

Top 6 Bad Habits that Promote Failure

20 Most Valuable Soccer Teams in the World in 2013

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!