For my student-fund class this semester, I was required to pitch a ‘special situation’ investment, a broad category that encompasses pairs trades, merger arbitrage, liquidations, etc.
Unfortunately, most of my current ideas in this space were disallowed due to market cap restrictions and other covenants in our school’s IPS, so I pitched a trade based on the ‘stub’ portion of Loews Corporation (L), a holding company run by the Tisch family.
The prices in the presentation are from a week or two ago but the story hasn’t changed much, as the current stub is valued at only ~$1.87/share for assets worth up to $19 or $20 per share.
However, the stub trade is volatile and expensive from a carrying cost perspective – in the end, I suggested a straight buy on the equity. The fact that management has compounded book value at 16% annually for fifty years is pretty impressive stuff.
Google Docs Link: Loews – Investment Pitch
A few other write-ups on Loews: