The Difference Between Owners and CEOs

I listened to the Loews conference call yesterday, the Tisch family owned company. Loews trades at a big discount to the sum of the publicly traded parts, over 30%. In the past year, Loews has been repurchasing shares. Over time the gap should close if they continue to repurchase shares. I was listening to the conference call hoping to get a better understanding of how aggressive Loews will be on the repurchase. I was happy when an analyst asked management about the repurchase. To which James Tisch essentially answered "I'm not telling you".

I am looking to front run Loews. If I know they will be aggressive on the repurchase I will buy the shares now and sell them later when they drive the price up on their aggressive repurchase. This raises the price they need to pay to repurchase shares. James Tisch is in it for the long run so he wants Loews to get as good as price as possible on the repurchase. There is nothing for him to be gained by telling me when he is going to buy.

This is in stark contrast to what CA Technologies did. To great fanfare CA announced an accelerated repurchase plan and a dividend. The stock shot up by 20%. A long term owner would have wanted them to repurchase the shares as cheaply as possible. The accelerated repurchase plan was for $500 million. They could have quietly repurchased those shares with the stock in the low 20's but instead are paying in the high 20's. The CEO of CA Technologies incentives are different than that of  James Tisch's. The CEO of CA is judged by the stock price and is not a long term owner.

As somebody who is willing to sell my CA Technologies position I am happy to know they are in the market every day buying their own stock. I hope to eventually sell to them at higher prices. Unfortunately, I will not be able to do the same with Loews but the way they are handling it is in the better interest of long term shareholders.


No comments: