BOSTON (TheStreet) -- Even before last week's stock-market sell-off -- the biggest losing streak in three years -- large-cap stocks were getting thumped, despite analysts' and money managers' claims they're among the best bets.But the record tells a different story. The large-cap stock benchmark, the S&P 500 Index, has lost an annual average of 0.2% over the past three years, including 5.9% so far in 2011. Over the past decade, it's up 4%, less than bonds.
Loews ( L) has been a holding since Smith started managing the fund. It is a diversified holding company, with a big bet on the insurance industry, and is in the same mold as Warren Buffett's Berkshire Hathaway. Its subsidiaries consist of a 90% stake in the insurer CNA Financial ( CNA), the seventh-largest U.S. commercial insurer and the 13th-biggest U.S. property & casualty insurer; a 50% stake in Diamond Offshore Drilling ( DO), an oil industry contract driller; a 66% position in Boardwalk Pipeline Partners ( BWP), which owns three interstate natural gas pipeline systems; and is the parent company of Loews Hotels, a luxury resort hotel chain, and HighMount Exploration & Production, an explorer for and producer of natural gas. Smith said he likes it because Lowes owns 80% of the big insurance firm CAN. He said insurance, although cyclical, is a great business, because a company can use money from premiums for investing, "so you get free money for years." The company has been run by the Tisch family for decades and "they are what I call interested owners because the family is still its largest shareholder. And their stock is owned outright; there are no options agreements." Loews shares are down 9% this year and 6% over the past 12 months, resulting in a market valuation of $14 billion. Over the past 10 years, they have an average annual return of 10.4%.
Comcast ( CMCSA), the second-largest fund holding at 4.2%, is the biggest operator in the TV cable industry. Its networks reach 52 million households and it recently combined its cable networks with NBC Universal to create a new 51%-owned venture early this year. Smith said its huge cash flow is reliable as people are not apt to give up the TV remote control, and by proxy, cable TV service, even if they're being pinched financially. Early this year it committed to buying back $2.1 billion of its stock in 2011, a 75% increase from last year. Comcast's shares are up 1% this year and 23% over the past 12 months, giving it a market valuation of $58 billion. Its shares have a 2.06% projected dividend yield.
Boeing ( BA), the world's largest airplane manufacturer, is in the fund's top 10 holdings at 3% of the portfolio, an investment that is consistent with Smith's belief that the aerospace industry is going to grow throughout the pending recession. Boeing's sales are split equally between the commercial aircraft and defense industries. The firm generated $64 billion in sales in 2010. Its shares have a 2.75 % dividend yield. Boeing's shares are down 4.6% this year and 2.4% over the past 12 months, resulting in a market valuation of $34 billion. But over 10 years, it has a 9.3% average annual return.