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Irving Kahn’s Top Holdings: New York Community Bancorp, ScheringPlough Corp, BristolMyers Squibb Company, Pfizer Inc, Merck & Co. and Wyeth

June 10, 2009 | About:
Summary Besides New York Community Bancorp Inc. (NYB), 104-year old value investor Irving Kahn’s other top five holdings include: ScheringPlough Corp. (SGP), BristolMyers Squibb Company (BMY), Pfizer Inc (PFE), Merck & Co. Inc. (MRK), and Wyeth (WYE),

Backgroud

Irving Kahn is a probably the oldest living value investor in the world. He is 104 and has been practicing value investing for 77 years. He served as a teaching assistant for Benjamin Graham. Ben Graham had the gift of influence people, for other people working with him also became good value investors. These people include: Warren Buffett and future value investors William J. Ruane, Walter J. Schloss and Charles Brandes

In 1978, he founded Kahn Brothers Group, Inc., the privately owned investment advisory and broker-dealer firm that he founded with his sons, Alan and Thomas, in 1978. The firm has approximately $348 million in equities under management according to the Form 13-F filed with the SEC on April 28, 2009. Kahn still performs an active role at the company at the age of 103.

Just to ensure you will read it, I include here an excerpt from a great article in www.smartmoney.com:


AFTER DROPPING OUT OF CITY College to work on Wall Street in 1928, Irving Kahn had a front-row seat to investors’ successes and failures during the Depression, especially those of mentor and friend Benjamin Graham. Investing buffs know Graham as the legendary father of value investing, whose disciples include Warren Buffett. After taking a beating in the 1929 crash, Graham set out to find the least risky way to make money — conveying his findings in the landmark book Security Analysis and through investing courses. (Not to mention racking up millions over a multidecade investment career.) Kahn helped him on all fronts, crunching numbers and researching stock picks. In fact, when you talk to Kahn, it often seems as if he sees the Depression through Graham’s eyes, peppering his recollections with self-effacing comments, such as, “I can tell you about myself by telling you what I did for Graham.”

Like many investors (and many New Yorkers), Kahn is supremely skeptical — be it of a company’s prospects or of inquiries from a curious reporter asking about the similarities between now and the 1930s. Kahn, who sounds more like a professor than a money manager, actually asks more questions than he answers, dodging most queries about himself. When prodded, the public school-educated son of Polish immigrants says the problem after the Depression was not so much the lack of money to invest but rather “knowing how to use it without losing it. There were too many bargains.” A bargain isn’t a sure thing, and Kahn learned from Graham to buy only investments he deemed “riskless.” He also learned when to get out even if that meant leaving money on the table.

Kahn hasn’t deviated from that philosophy, even now that he’s chairman of his investment firm, Kahn Brothers Group. He still shows up five days a week to hunt for overlooked companies with good businesses and little debt that are trading for less than the value of their assets. Kahn’s youngest son, Tom, 64, runs the firm, which has returned an average of 10.9 percent a year since 1994 through the end of 2008, better than the S&P 500’s 6.8 percent average. After that kind of performance in his nearly eight decades as an investor, the elder Kahn can clearly afford the finer things in life. But he steadfastly prefers hamburgers at low-key neighborhood joints over the haute cuisine at the many pricey restaurants near his Upper East Side home. At 103, he has succumbed to taking a cab to the office but takes the bus home — using his senior citizen’s discount. After so many years in the business, it’s a wonder Kahn continues the grind. But his son Tom says, “Investing is his hobby. It keeps him alive.” That’s quite a tonic, but the Kahn genes also have something to do with it. The family — including Kahn’s 107-year-old elder sister and their 99-year-old “baby” brother — has been the subject of several studies on aging.

Despite the constant comparisons with the Depression, Kahn says it’s “absurd” to think the U.S. is headed for a repeat of the 1930s when people “felt so helpless.” Back then, the Feds refused to aid banks and were powerless to adjust interest rates or insure accounts. In fact, Kahn points out, up through 1971, the Federal Reserve couldn’t even lend money if it wasn’t backed by gold. Today our government is creating billions of dollars — literally — to help get the economy back on track, we have programs to insure individuals don’t lose their bank deposits, and there’s a general sense that Washington will do what it takes to help both Wall Street and Main Street. That’s not to downplay the troubles ahead, and Kahn is the first to suggest ultrasafe government bonds for part of a portfolio. But as an investor who has seen dozens of economic downturns, Kahn plainly says this is just part of the natural cycle of the market. “Investors have no reason to feel bearish,” he says. “True value investors are glad the markets are down.”


Top Holdings

No. 1: New York Community Bancorp Inc. (NYB), Weightings: 11.6% - 3,611,402 Shares

New York Community Bancorp Inc. is the holding company for New York Community Bank the fifth largest thrift in the nation. New York Community Bancorp Inc. has a market cap of $3.67 billion; its shares were traded at around $10.62 with a P/E ratio of 10.5 and P/S ratio of 2.2. The dividend yield of New York Community Bancorp Inc. stocks is 9.4%. New York Community Bancorp Inc. had an annual average earning growth of 20.5% over the past 10 years. GuruFocus rated New York Community Bancorp Inc. the business predictability rank of 2.5-star.

Kahn maintained 3,613,614 shares in 4Q06 and now he has 3,611,402, virtually unchanged.

No. 2: ScheringPlough Corp. (SGP), Weightings: 10.98% - 1,620,836 Shares

Schering-Plough Corporation and its subsidiaries are engaged in the discovery development manufacturing and marketing of pharmaceutical products worldwide. ScheringPlough Corp. has a market cap of $38.33 billion; its shares were traded at around $23.57 with a P/E ratio of 13.2 and P/S ratio of 2.1. The dividend yield of ScheringPlough Corp. stocks is 1.1%. SGP is being acquired by Merck.

Kahn has 2,048,295 shares of SGP back in 4Q06 and now he has 1,620,836 shares.

No. 3: BristolMyers Squibb Company (BMY), Weightings: 9.38% - 1,488,322 Shares

Bristol-Myers Squibb Company is a global leader in the research and development of innovative lifesaving and life-enhancing treatments for heart disease; high blood pressure; stroke; diabetes; cancer; HIV/AIDS and other infectious diseases; depression schizophrenia and other mental disorders; pain; and other conditions. BristolMyers Squibb Company has a market cap of $38.53 billion; its shares were traded at around $19.45 with a P/E ratio of 10.6 and P/S ratio of 1.9. The dividend yield of BristolMyers Squibb Company stocks is 6.4%.

Kahn bought into BMY in or before 2006 when he had 1.224 million shares. His ownership fluctuated only fractionally during the past two and half years. As of 1Q09, he owns 1.488 million shares.

No. 4: Pfizer Inc (PFE), Weightings: 7.72% - 1,971,552 Shares

Pfizer Inc has a market cap of $95.35 billion; its shares were traded at around $14.13 with a P/E ratio of 6 and P/S ratio of 2. The dividend yield of Pfizer Inc stocks is 4.6%. Pfizer Inc had an annual average earning growth of 11% over the past 10 years. GuruFocus rated Pfizer Inc the business predictability rank of 2.5-star.

Kahn had 508,938 shares of Pfizer and now he has 1,971,552 shares. He has held this position steady since 2Q08.

No. 5: Merck & Co. Inc. (MRK), Weightings: 6.69% - 869,232 Shares

Merck & Co. Inc. is a global research-driven pharmaceutical company dedicated to putting patients first. Merck & Co. Inc. has a market cap of $54.23 billion; its shares were traded at around $25.72 with a P/E ratio of 7.8 and P/S ratio of 2.3. The dividend yield of Merck & Co. Inc. stocks is 5.9%.

Khan’s ownership of Merck mirrors that of BMY. He had 923,888 shares back in 4Q06 and 869,232 shares as of 1Q09. He actually bought about 200,000 shares of Merch in 1Q09.

No. 6: Wyeth (WYE), Weightings: 7.31% - 590,294 Shares

Wyeth is one of the world's largest research-driven pharmaceutical and health care products companies. Wyeth has a market cap of $58.54 billion; its shares were traded at around $43.9 with a P/E ratio of 12.6 and P/S ratio of 2.6. The dividend yield of Wyeth stocks is 2.7%. Wyeth had an annual average earning growth of 5.8% over the past 10 years. Wyeth is being acquired by Pfizer.

Kahn had 361,672 shares of WYE and now he has 590,294 shares.

Conclusion

Irving Kahn runs a very passive portfolio and yet very concentrated in big pharmaceuticals. Big pharms have been out of favor lately. Since the quarter beginning on April 1, 2009, his performance lags that of S&P 500.

But is that a bad thing for the rest of us? Aren’t we supposed to look for value in the out-of-favor sectors? On the other hand, when you live more than one hundred years old, I guess you can overlook a few bumps along the road.



About the author:

guruek
Ravi Nagarajan is a private investor and Editor of The Rational Walk website. Ravi focuses on applying value investing techniques to find securities trading well below intrinsic business value. Ravi has over 15 years of experience in the financial markets and started investing on a full time basis in 2009. From 1996 to 2009, Ravi held a number of technical and executive level positions in the commercial software industry. Ravi graduated Summa Cum Laude from Santa Clara University with a degree in finance. Visit his website The Rational Walk

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