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Loews Hits the Highs

After dismal results in 1998 and 1999, Loews (LTR) now appears to be in the right businesses at the right time. Its huge stakes in insurance, tobacco, and offshore oil-and-gas drilling have turned out to be godsends: They have sent Loews' sales and profits to levels exceeding expectations. "Once regarded by the Street as a private preserve of the Tisch family, Loews has emerged as a triple-crown value winner," says Robert Lyon, president of Institutional Capital, which holds 6 million shares, or 3.5%, of Loews. The Tisch family owns about 50%. CEO James Tisch, notes Lyon, has become more "communicative" about Loews' strategy.

The stock streaked from 44 in mid-January to 72 four months later, before easing to 68 on June 6. It trades at a price-earnings ratio of 10.5 on estimated 2001 earnings. Lyon argues that Loews deserves a higher multiple. The stock "very conservatively is worth 95," he says.

On a sum-of-the-parts valuation, Lyon estimates Loews' worth at 100 a share: Lyon values Loews' 87% stake in insurer CNA Financial at 30 a share in Loews stock. Loews also owns 53% of Diamond Offshore Drilling, valued at 15. And Loews' Lorillard Tobacco unit is valued at 45, based on a 10 multiple on estimated 2002 earnings of $4.50 a share. With cash of $10 a share, total value adds up to 100. This doesn't include holdings in Bulova and Loews Hotels. Lyon sees Loews earning $8.33 a share in 2002, up from an estimated $6.43 in 2001.

Marc Cohen of Goldman Sachs, who is also high on Loews, says Lorillard has been posting solid income growth, and CNA continues to improve margins. By Gene G. Marcial

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