James S. Tisch – Loews Corp.
We haven’t been buying back shares because the market is high even though relative value is good
“As I’m sure you know, we are well aware of Loews’ sum of the parts valuation. In fact, it’s something that I track constantly. Judging by the increase in our stock price over the past nine months, it certainly seems that we should have been more active repurchasing our stock. What’s held us back is that while Loews almost only seems relatively cheap and even more so now, given the widening discount, the market still seems very high to us. We’ve been nervous about the equity market for a while and we’ve been struggling to reconcile our view of the market’s absolute level with the relative value of Loews’ stock. As you know we take a long-term view on share repurchases. We look for opportunities to repurchase Loews’ stock when both its relative and absolute values are attractive. We know that if the stock market declines, our share price will likely move in the same direction. So, given our nervousness about the stock market, we’ve been waiting for a time to repurchase shares at a more advantageous price. Some of you may think we maybe too cautious. You may be right, only time will tell. Historically though, we have shown that once we are comfortable buying back shares, we buy back a lot of them.”
Underinvestment in oil exploration will take its toll
“Our guess is that the underinvestment in oil exploration and production over the past three years is going to start to take its toll as projects that were completed before that period start to come online and start to deplete. And it’s our view that in the coming years there will be a significant need for the offshore oil that has provided up to 30% of the worldwide oil supply. So I would say that we feel that right now, even though you didn’t ask about it, we feel that right now we’re bouncing along at the bottom with respect to offshore oil drilling. But we believe that there are, as I said, a few greenshoots, and we think that in the coming months and years, there will be more.”
The fact is that there is a lot of complacency
“we think about absolute value versus relative value. I don’t think that Loews in any way is overpriced versus the stock market. But the stock market trading at 17x, 18x, or 19x earnings, the fact that interest rates are still as low as they are when we’re seeing economic growth of 2.5%. The fact that there is a lot of complacency in all markets, not just the equity markets, leads me and I’m pleased to say a significant number of other market commentators, to the view that this complacency that we’re seeing in the markets can lead to a decline in equity values.”