Great American family firms

Ford Motor Co.In the modern age of giant international companies, you might be surprised by how many multi-billion-dollar firms continue to be effectively controlled and managed by descendents of the founding family.
Then again, perhaps it's not such a surprise. The typical family firm tends to have deep, embedded knowledge about its industry, a long-term strategic horizon and a strong balance sheet to help it weather the harsher phases of the economic cycle -- qualities that tend to foster steady, sustainable growth decade after decade.
Here are three great American family firms for buy-and-hold investors to consider.

Ford Motor Co.
Ford, the iconic American carmaker established by Henry Ford in 1903, is still controlled by the Ford family, via a dual-class share structure. William Clay Ford, Jr, the great-grandson of the founder, heads the board of directors as executive chairman.
Ford has been through a tough time in the past few years. But while its major US rivals General Motors and Chrysler went bankrupt, and had to be bailed out by the government, Ford muddled through the recession under its own steam. It has emerged a leaner, fitter company -- and one without the stigma of government ownership.
In the past year, there has been a series of upgrades for Ford from the major credit rating agencies. The company has also reinstated its quarterly dividend, which had been suspended in 2006, signalling the board of directors' resurgent confidence in the future.

Ford has now posted 12 consecutive quarters of pre-tax operating profit, but the equity market is affording the company -- and the sector in general -- a lowly, fear-driven rating stemming from worries about the eurozone where car sales are at their lowest level in nearly 20 years.

At the current share price of $9.35, Ford is trading on just 7.3 times current-year forecast earnings and 6.2 times 2013 earnings. If Ford's recovery continues, with appropriate action taken in Europe, then a combination of earnings growth and a re-rating of the shares to, say, 10 times earnings, would see the share price double by the end of 2014.
Wal-Mart Stores
Capitalised at $250 billion, Wal-Mart is the world's largest retailer. The group operates large discount department stores and other retail formats in the US and around the world, including Asda in the UK.

Wal-Mart was founded in 1962 by Sam Walton, and continues to be controlled by the Walton family who own a 48% stake in the company. Rob Walton, Sam's eldest son, was appointed chairman of the board of directors following his father's death in 1992, and another son, Jim, also sits on the board.

Despite a scandal in April this year -- after the New York Times alleged the company had bribed Mexican officials to speed up expansion in the country -- Wal-Mart's shares have hit new highs in recent months. The support came on the back of news that Warren Buffett's Berkshire Hathaway had added to its already substantial stake in the company in the first quarter.

Buffett told Berkshire shareholders in May that the scandal hadn't change his view on Wal-Mart. He also said, in an interview on Bloomberg Television in July, that Wal-Mart was "very attractive compared to other big companies" when the price was $58 or $59.

After a strong rally, the shares are now at $73.68. Wal-Mart is trading on 15 times current-year forecast earnings, falling to 13.7 times next year. Investors who missed the recent bargain price would perhaps be wise to be patient and hope to see the shares fall back a little.

Loews will be less well known to UK investors than Ford and Wal-Mart. But if I tell you that this $16 billion diversified holding company is something of a Berkshire Hathaway, but on a cheap rating, you'll perhaps be interested to hear more.

Brothers Robert and Laurence Tisch started out as hotel developers in the 1950s but soon expanded into other areas. In 1969 they created a holding company for their diversified interests. Today, three sons of the founders dominate the board of directors and the family retains a substantial shareholding in the business.

The Tisches are savvy value investors in the Buffett mould. Currently, Loews' assets consist of three publicly traded subsidiaries -- CNA Financial, Diamond Offshore Drilling and Boardwalk Pipeline Partners -- and two wholly owned subsidiaries -- HighMount Exploration & Production and Loews Hotels. The holding company also has a large portfolio of cash and investments.

Loews' shares are currently trading at $40.51, while book value per share is over $49. That equates to a price-to-book ratio of 0.8, compared with the company's average of 1.0 -- and a high of 1.5 -- over the last decade. Furthermore, a rough-and-ready calculation suggests the shares are at an even bigger discount if Loews is valued on a sum-of-the-parts basis.

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