By Alex Oleinic
As always, several weeks after the end of each calendar quarter, institutional investors are required to file their 13F forms with the Securities and Exchange Commission, where they disclose the U.S.-traded holdings in their equity portfolios. One of the funds that has recently filed its 13F is Kahn Brothers, managed by the legendary 107-year old Irving Kahn. Let's take a look at his five largest holdings at the end of the first quarter.
Why should we pay attention?
Quantitative research has discovered that it can benefit everyday investors by keying in on hedge fund sentiment. It has been revealed that those who track specific hedge fund activity can outperform the S&P 500 by an average of 18 percentage points per year, over a long term period (learn the secrets here).
Pfizer still in the lead
In the newest 13F portfolio of Kahn Brothers, Pfizer (NYSE:PFE) is the most valuable stock. Irving Kahn's fund reported holding 2,572,436 shares of the company, up from about 2.4 million shares disclosed at the end of 2012. The value of the stake also increased and currently amounts to about $74.2 million, versus $61.9 million in the previous 13F. At the end of April, Pfizer reported an adjusted diluted EPS worth $0.54, while its revenues totaled $13.5 billion in the first quarter of 2013. Holdings of Pfizer could be found in the equity portfolios of over 70 other elite hedge funds at the end of last year, and Pfizer's stock sports a year-to-date return of around 15%.
The best of the rest
Citigroup (NYSE:C) is the next on the list, with Kahn Brothers holding a stake comprising 1,375,933 shares, worth about $60.9 million. In the previous 13F, the fund reported owning 1,343,810 shares, the value of the stake being $53.2 million. Citigroup is one of the few stocks with more than 100 of the 450 hedge funds we track holding long positions, and Martin Hughes and David Tepper are just a few of the names who are bullish. Citigroup shares sport a year-to-date return of over 20%, though they're still trading at a meager forward P/E of 9.0x.
With a stake of 3,861,908, New York Community Bancorp (NYSE:NYCB) is also one of the largest holdings in the equity portfolio of Irving Kahn's fund. Kahn Brothers was bullish on the company, increasing the number of shares by 266,233 shares and as a result raising the value of the stake to $55.4 million, from $47.1 million, reported earlier. For the first quarter of 2013, New York Community reported assets of $44.5 billion and cash earnings of $128.6 million. Also, the company posted a cash EPS of $0.29 and announced a quarterly dividend of $0.25 per share. If we take a look at the performance of the bank's stock, we can see a year-to-date return of -0.89%, and a forward P/E of below 14.
According to the latest 13F, Merck (NYSE:MRK) is the fourth most valuable holding in the equity portfolio of Kahn Brothers. The fund currently holds 1,164,661 shares of the company, the value of the holding being almost $51.5 million, up from 1,090,437 shares worth $44.6 million, reported at the end of December. The stock of Merck has been performing well, having a year-to-date return of more than 10%. During the first three months of the year, sales of Merck have declined to $10.7 billion, compared to $11.7 billion a year earlier. At the same time, the company posted a GAAP EPS of $0.52 per share, versus $0.56 in the first quarter of 2012.
The New York Times (NYSE:NYT) is a company in which Irving Kahn's fund also holds a sizable stake. In the latest 13F, Kahn Brothers disclosed a position of about 5.1 million shares, worth $50.5 million, versus 4.7 shares worth $40.7 million, reported in the previous 13F. In its latest quarterly earnings report, the Times posted a diluted EPS from continuing operations of $0.02 per share, down from $0.06 a year ago. At the same time, the operating profit of the company surged to $22.9 million, versus $12.6 million in the first quarter of last year. The Times' stock is trading at a forward P/E of 22.6x, and has a YTD return of almost 9%.
To sum up
Irving Fisher has added one more position in its equity portfolio according to the new 13F, and currently holds stakes in 47 companies. The five largest holdings that we've discussed above reveal a diversity of companies from different sectors: pharmaceutical, banking, media, and more. In this way, by capturing the most profitable sectors of the economy, Kahn Brothers can make sure that it will be able to post some strong returns moving forward; just what we'd expect out of a 107-year old veteran.