Peter Mycroft Psaras'  Instablog

The one stock holding that I have. that did not beat its earnings estimate, Lorillard (LO) did not perform well on Wall Street today and had all short term traders exiting all at one time. The report was not bad and the reaction in this Analysts opinion was way overblown.  This is a short term event and for those of you who are in it as a long term dividend play, the stock will pay you $4 a share in dividends or most of today’s losses over the next year.

As a Lorillard investor you have only lost money on paper and until one sells these are just paper losses.  The management of the company is top notch and for those who want to see it with their own eyes here is today’s conference call transcript for everyone to read. (Thank you Seeking Alpha for that service)

seekingalpha.com/article/168892-lorillar...

The company is expected to earn $6.35 in Free Cash Flow in 2010, so basically we are earning $.68 cents for every dollar that Lorillard invests in Total Capital.  That means that its Free Cash Flow Return on Invested Capital is 68%, which is basically three times what I am looking for as an analyst.  As for its Free Cash Flow Return on Equity(FROE) it is earning about 122% 2010 FROE.

These are amazing numbers and it amazes me that anyone would sell a company that is performing that well on Main Street.  Always remember that Wall Street is an opinion factory and Main Street is where reality lives.  The Lemmings are out today on Lorillard, but if we even had half the Main Street results that Lorillard is actually putting up, it would still be putting up amazing numbers.

Disclosure; Long LO
 

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