During the second half of the 20th century, Larry Tisch and his brother, Bob, turned an investment in a New Jersey resort hotel into a multibillion-dollar conglomerate -- Loews . How did they do it?

Larry, the financial mastermind, had a knack for spotting value. In 1960, the brothers took control of Loews, at that time a major movie-theater chain. But they were less interested in the movie theaters themselves, and more enticed by the real estate on which those theaters stood.

Loews is now a $10 billion company comprising insurance, hotels, and offshore oil and gas. Larry's son, James Tisch, the current CEO, recently reflected on the guiding principles on which Loews was built.

"No. 1, don't bet the company."
"First and foremost," says Tisch, "everything we have is fully protected." What does that mean for the individual investor?

For a start, avoid companies that use large amounts of debt to finance their activity. These companies are anything but "fully protected" if their business experiences a downturn. In fact, the shackles of interest and principal payments are the heaviest when a company is least able to shoulder them. Companies in this situation are extremely restricted in their operating flexibility.

What does a "fully protected" company look like? The following companies have the highest interest coverage ratios in their industry (the ratio of operating earnings to interest expense -- a measure of their ability to pay the interest on their debt):

Company

Primary Sector

EBIT/ Interest Expense

eBay (Nasdaq: EBAY)

Information Technology

264.4

Johnson & Johnson (Nasdaq: JNJ)

Health care

218.5

ExxonMobil (NYSE:XOM)

Energy

112.3

Mosaic (NYSE: MOS)

Materials

41.2

Dell (Nasdaq: DELL)

Information Technology Continued...