Throughout financial history, you can find their likeness all over the world – even as far back as ancient Rome and Greece…or ancient Egypt, Mesopotamia and Persia. And in more modern times, you find their likeness in conglomerates – holding companies that deal in many different businesses. Run by a talented team – guided by solid investing principles – such a “does anything” structure can lead to great long-term track records of wealth creation for its shareholders. The old Teledyne, created by the late great Henry Singleton was one of the best. Warren Buffett’s Berkshire Hathaway is another modern example.

And I’ve recommended a few of these free-form merchants to the subscribers of Capital & Crisis. One such company is Loews Corp. ( NYSEL:L ), which is celebrating its 50th anniversary. Run by the Tisch family, which holds more than 20% of the stock, Loews has generated an annual return of 16% over those 50 years, compared with only 5.7% for the S&P 500. Of course, the past is no predictor of the future, but I like the philosophy and investments here. At today’s price, picking up Loews’ stock is like picking up free money, as I’ll show you.

The mix of assets has changed over time. Loews once owned movie theaters and supertankers, for instance. Not today. Last year, it dumped its tobacco company and picked up a natural gas explorer and producer. The Tisches are free to go where the opportunity is.

There are several things I really like about how the Tisches manage Loews, beyond the flexibility of the conglomerate approach. Two in particular stand out:

Share repurchases. Over time, Loews has cut the numbers of shares outstanding by buying back stock from time to time. Loews reduced its share count by 18% in 2008 and 30% since 2000. That means that over time, you own a bigger stake in the company. This is in great contrast to many companies in which the opposite is true. When share counts rise, that is dilution for the existing shareholders. Same assets, but now you share them with a lot more people.

This is one aspect of investing that most people simply do not follow much, but one that I pay a great deal of attention to. I have no use for managers who treat their shares like candy they hand out to themselves and their friends. In my book, Invest Like a Dealmaker, I cite research that shows how low price-to-book stocks with falling share counts beat out those where share counts rise. Respect the share count. Loews does that.

Additionally, I like how the Tisch’s commit themselves to maintaining an excellent financial condition. That means lots of cash and liquidity. I find it impressive that in 2008 – when most everyone was scrambling for cash – Loews was able to invest $2.5 billion and still finish the year with $2.3 billion cash at the holding company level.

Perhaps best of all is the value you get in owning Loews stock. Today, the company has three publicly traded subsidiaries. It owns 90% of CNA Financial, a large insurance company with ample levels of liquidity. It owns 50.4% of Diamond Offshore (NYSE:DO), a driller with sales of $3.5 billion last year and a backlog of $10 billion. It also has $700 million in cash and no debt. And Loews owns 74% of Boardwalk Pipeline (NYSE:BWP). Boardwalk has over 14,000 miles of pipeline in some of the most prolific natural gas basins in the country – the Barnett Share, Fayetteville, Haynesville and other places.

Forget that these investments are cheap in their own right. After all, Diamond Offshore is priced at less than half of its high and trades for only 8 times earnings. Boardwalk is nearly half its recent high and pays 9%. CNA is a third of its 52-week high and half of book value. Let’s just accept today’s market prices. Based on those market prices, the Loews’ stock price of $28 equals those investments.

Of course, Loews owns more than this. Loews owns HighMount Exploration, a natural gas company with 2.2 trillion cubic feet of reserves. HighMount probably chips in another $3.50 per share in value. Then there is the net cash, plus general partnership interests, preferred stock and Loews Hotels. The value of all these private investments is around $12-13 per share, by my estimate. That means Loews stock is worth at least $37-38 per share – even in this depressed environment.

With Loews at $25 per share as I write, the stock market is telling you that portfolio of private investments is worthless. Looks like a buy to me.

As I think about this crazy market, I don’t mind putting some dough with guys who’ve produced superior long-term track records, who’ve lots of cash and who pursue an investing philosophy I can warm up to. In this case, we also get in at a cheap price.

There is certainly a lot going on the market today – plenty to chew on and figure out. I look forward to seeing how it all unfolds. In the meantime, I feel good about investing alongside proven operators like Loews’ management.

Source: If Stocks Terrify You, Buy This

This from Investment U:

Most investors have never heard of, or purchased, shares of a master limited partnership (MLP). But, with many yielding more than 10% and prices at historically low levels, these bargains are getting hard to ignore.

Few investors know that master limited partnerships are publicly traded asset pools. They have the tax benefits of a partnership plus the liquidity of a publicly traded stock.

Because they invest in many different types of assets, most master limited partnerships have significant debts on the balance sheet and have suffered from the credit crisis. But not all debt is bad debt. And their crisis could be your opportunity.

Profit From Master Limited Partnerships In the Energy Sector

I prefer master limited partnerships in the energy sector because their business is easy to understand. The ones that interest me own the pipes that move oil and natural gas from production to marketplace. Some of these companies also process natural gas, and they may even own an oil or gas field directly.

These companies are like utilities for energy production. Without their infrastructure, oil and gas couldn’t move to the consumers who need it. They play an integral part in the supply chain, and this makes their income stream steady and predictable.

The market has unfairly beaten up the prices of these partnerships. And the bankruptcy at Lehman Brothers only made things worse. They were dumping assets even before they went under. As a lender and advisor in this sector, Lehman was a major player in master limited partnerships.

One of my favorite master limited partnerships is Boardwalk Pipeline Partners (NYSE: BWP) – a firm that handles the storage and transportation of natural gas. Its largest shareholder, Loews Corp. (NYSE: L) heavily influenced BWP by assembling the core company assets, and taking the partnership public. It still owns 52% of the shares.

Loews Corp is controlled by the prominent Tisch family – known for their financial discipline. Boardwalk is no exception. It generates consistent cash flows and has limited debt. It has a ratio of long-term debt to capital of only 38%. Yet at a current share price of $16.30, it yields 11.5%.

Boardwalk’s shares have fallen 48% over the past 12 months. But even if energy prices stay depressed, it should rebound when the market sell-off subsides.

The Master Limited Partnership of NYSE: KMP

Another master limited partnership that I like is Kinder Morgan Energy Partners (NYSE: KMP). KMP is the largest independent owner and operator of petroleum-products pipeline in the United States, transporting more than two million barrels a day of gasoline, jet fuel, diesel fuel and natural gas liquids through over 8,300 miles of pipelines.

It is a major transporter of natural gas in Texas, the Rocky Mountains and the Midwest. The natural gas pipelines business segment consists of approximately 14,700 miles of pipelines with transportation capacity of about seven billion cubic feet per day, and working gas storage capacity of about 35 billion cubic feet. They also own or operate additional natural gas gathering, treating and processing facilities.

CEO David Kinder said in the dividend announcement, “While no company is 100% immune to external conditions, KMP continues to demonstrate that our diversified portfolio of stable assets is capable of generating consistently strong cash flow, even in extremely difficult market conditions.”

Having been formed in 1992, Kinder Morgan has now raised dividends for 12 years in a row – an exceptional record for a company that young. In fact, this pipeline giant just announced it was raising its payout again – increasing cash distributions per partnership unit from 99 cents to $1.02. With today’s price of $48.45, this puts its yield at 8.4%.

Master Limited Partnership Investing With An ETF

Another option for master limited partnerships is an exchange traded fund (ETF) that specializes in investing in the energy sector. The master limited partnership & Strategic Equity Fund (NYSE: MTP) holds a basket of energy master limited partnerships, and it’s currently yielding nearly 14%.

Many of these partnerships look incredibly inexpensive and they’re generating steady income. The income they offer will pay you until the share prices recover – perfect for investors looking for an alternative to stocks in this volatile market.

Owning these makes you a limited partner, which allows you to claim a share of the master limited partnership’s depreciation on your tax returns. In addition, they avoid the corporate income tax, on both state and federal levels. You still would owe tax payments ­(just like your other investments), but you suffer no double taxation.

This is why master limited partnerships are not appropriate for tax-deferred accounts – such as an IRA – because you would lose the ability to deduct this depreciation.

If crude oil and gas prices fail to stabilize, then sentiment against these master limited partnerships could stay negative. And that could mean even better bargain shopping down the road…

Source: Master Limited Partnerships: A New Way to Shop for Bargains