Irving Kahn, along with brothers Alan and Thomas, founded Kahn Brothers & Company Inc. in 1978. The company currently has over $800 million in assets under management. Irving, who is over 100 years old, is still an active investor. He is a Chartered Financial Analyst with over 78 years experience in the investment business.
Kahn Brothers employs a bottom-up stock selection approach and invests in undervalued equity securities that are usually out of favor in the market. They usually analyze investments based on asset valuations, operating performance metrics and long-term fundamental business prospects. They also spend a considerable amount of effort evaluating the downside risk of every investment. He is quoted as saying: “I’m at the stage in life where I get a lot of pleasure out of finding a cheap stock,” adding that his research still pushes him to work evenings and weekends.
Kahn Brothers views the investment process as a combination of art and science. Each investment decision has both quantitative and qualitative aspects. A key element to outstanding investment performance is bringing these two factors together.
He is quoted as saying: “I’m at the stage in life where I get a lot of pleasure out of finding a cheap stock,” adding that his research still pushes him to work evenings and weekends.
Here are some of the best buys:
SLM Corp (SLM): Sallie Mae is the largest student lender in the country. It makes and holds student loans through the guaranteed Federal Family Education Loan Program as well as through private channels. It also engages in debt-management operations, including accounts receivable and collections services, and runs college savings programs.
The market for private student loans should grow as the number of students and the cost of higher education both continue to rise. Legacy FFELP loans provide a stable and secure stream of cash flows.
BP Plc (BP): BP Plc is the holding company of one of the world's largest petroleum and petrochemicals groups. Their main activities are exploration and production of crude oil and natural gas; refining, marketing, supply and transportation; and manufacturing and marketing of petrochemicals. They have a growing activity in gas and power and in solar power generation.
The company operates in Europe, North and South America, Australasia and Africa.
The company expects to complete its asset sales by the first quarter of 2012 and plans for an additional $15 billion in divestments before 2014. The company is offloading its non-core upstream properties while creating a portfolio with potentially stronger growth from a smaller base. Its new strategy of active portfolio management, higher exploration activity with additional precautionary actions as well as refining and marketing repositioning is expected to create value for shareholders.
KeyCorp (KEY): KeyCorp's community bank footprint spans 14 states. By refocusing on its community bank and building strong relationships, Key should be able to improve its credit quality and gather more deposits. Key is exiting the loan portfolios that have the highest charge-off ratios and concentrating in expanding those with better credit quality.
Key has relatively less exposure to interest rate fluctuations because 40% of revenue comes from fees. This should provide a more consistent income stream even during challenging credit times.
Citigroup Inc. (C): Citigroup Inc., the leading global financial services company does business in more than hundred countries, providing consumers, corporations, governments, and institutions with a broad range of financial products and services, including consumer banking and credit, corporate and investment banking, securities brokerage, and wealth management.
Major brand names under Citigroup's trademark red umbrella include Citibank, CitiFinancial, Primerica, Smith Barney and Banamex.
Financially speaking, the company has a tangible common equity ratio of 7.5% and an allowance for loan losses sufficient to cover more than 5% of its loan book. The company is also now consistently profitable.
Chevron Corp (CVX): Chevron is an integrated energy company with exploration, production, and refining operations worldwide. It is the second-largest oil company in the U.S and refineries are located in the U.S., South Africa and Asia.
Chevron has one of the strongest balance sheets and lowest debt/capital ratio among its peer group. Strong cash flow from operations should be sufficient to fund investments and pay the dividend.
Investments in LNG projects around the world will allow the company to better exploit abandoned resources. Significant ownership of refineries in Asia offers access to growth markets and offsets suffering U.S. refining margins. Downstream returns should improve with a reduction in capital employed and completion of cost-reduction projects.