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Summary

  • Kahn Brothers Group's US long portfolio decreased marginally this quarter.
  • Kahn substantially increased stakes in Citigroup and Blackberry while reducing Old Republic International and Patterson-UTI Energy.
  • The portfolio continues to be very concentrated with the top-five positions accounting for over 45% of the 13F holdings.

This article is part of a series that provides an ongoing analysis of the changes made to Irving Kahn's US stock portfolio on a quarterly basis. It is based on Kahn Brothers & Company's regulatory 13F Form filed on 08/06/2014. Please visit our Tracking Irving Kahn's Kahn Brothers Portfolio series to get an idea of his investment philosophy and the fund's moves during Q1 2014.

This quarter, Kahn's US long portfolio decreased marginally from $698M to $690M. The number of holdings increased from 42 to 44. Only Trinity Place Holdings remained untouched during the quarter. The largest holding is NY Times which has been in the portfolio since 2006. It accounts for 9.94% of the US long portfolio. Largest five individual stock positions are NY Times, Citigroup Inc., Merck Inc., Pfizer Inc., and New York Community Bancorp. Together, they account for 46.41% of the US long portfolio.

Irving Kahn is a disciple of Benjamin Graham and is the author of "Benjamin Graham The Father of Financial Analysis". At 108 years old, he is by far the oldest protégé and is one of the closest followers of the original teachings of Benjamin Graham.

New Stakes:

Navient Corporation (NASDAQ:NAVI): NAVI is a 2.34% of the US long portfolio stake established this quarter as a result of the spin-off of Navient (private and student loans business) from Sallie Mae (SLM Corporation) that took effect on May 1, 2014. Kahn held over 900K shares of Sallie Mae and the spin-off terms called for one share of NAVI for each share of the parent company held.

Stake Disposals:

None.

Stake Increases:

BP plc (NYSE:BP): BP is a relatively new position in the portfolio that was first purchased in 2010. The stake remained minutely small for the next two years. The current 6.93% of the US long portfolio position was built over the last four quarters at prices between $40 and $53. Last quarter saw a 65% stake increase at prices between $46 and $51 and this quarter saw an additional 5.5% increase at prices between $47.45 and $53.07. The stock currently trades at $47.85. The consistent buying over several quarters indicates a clear bullish bias. For investors attempting to follow Kahn, BP is a good option to consider for further research.

BlackBerry Ltd. (NASDAQ:BBRY): BBRY was a very small ~0.5% of the US long portfolio position established in Q3 2013 at prices between $8 and $10.84. This quarter saw a 270% stake increase at prices between $7.15 and $10.12 and the position now accounts for around 2.5% of the US long portfolio. The stock currently trades at $9.39. The significant buying indicates a bullish bias.

Citigroup Inc. (NYSE:C): C is a top-five position that has been in the portfolio for more than fifteen years - it was a very small position in Kahn's first 13F filing in 1999. The minor position was adjusted over the following years although by 2006 the position still accounted for less than 0.1% of the US long portfolio. The stake was steadily increased after the financial crisis and it currently stands at 9.45% of the US long portfolio. Last quarter saw a ~15% stake increase at prices between $46 and $55 and this quarter saw a further ~12% increase at prices between $45.68 and $48.40. The stock currently trades at $48.14.

Pfizer Inc. (NYSE:PFE): PFE is a top-five position at 9.01% of the US long portfolio. This was a very small stake first purchased in 2000. Most of the current position was purchased in 2007 at prices between $23 and $28. Last quarter, the stake was increased by ~11% at prices between $29.66 and $32.75 and this quarter saw minor additional buying. The stock currently trades at around $28.28.

Sterling Bancorp (NYSE:STL): STL is a small 2.43% of the US long portfolio position that was marginally increased this quarter. As the activity was very minor, it does not indicate a change in bias.

Stake Decreases:

Hologic Inc. (NASDAQ:HOLX): HOLX is a very long-term position. In 1999, the position size was at 1M shares and by 2003 the stake had increased to ~1.8M shares and accounted for around 6% of the US long portfolio. Since then, the position has been substantially reduced (after accounting for three 2-for-1 stock splits in 2005, 2008, and 2009). Even after large stake reductions and AUM growth, the current position still stands at 4.79% of the US long portfolio: the stock appreciated close to fifty-times during the holding period. Last quarter saw a ~15% stake increase at prices between $20 and $22.50 and this quarter saw a marginal stake reduction. The stock currently trades at $25.59.

HOLX experienced some activist involvement in Q4 2013: Carl Icahn acquired 12.5% of the business at around $21 and nominated two board-members.

Merck Inc. (NYSE:MRK): MRK is a top-five position at 9.39% of the US long portfolio. It was a very small stake first purchased in 2000. The position has fluctuated over the years but the bulk of the current stake was purchased during the market lows of 2009 at prices between $24 and $38. This quarter saw minor trimming. The stock currently trades at $55.93.

MBIA Inc. (NYSE:MBI): MBI has been the portfolio since 2007. Most of the current 4.03% position was purchased during the financial crisis in 2008 and 2009 at low prices. Last quarter saw a 19% stake increase at prices between $10.94 and $15.08 and this quarter saw very minor selling. The stock currently trades at $9.35.

Nam Tai Property Inc. (NYSE:NTP): The 4.12% of the US long portfolio NTP stake was increased by more than one-third last quarter at prices between $5.59 and $7.27. The stock currently trades at $6.98. This quarter saw marginal trimming. The original position was a ~2% (~400K shares) stake established in 2001 and the current position stands at just over 3.7M shares.

New York Community Bancorp (NYSE:NYCB): NYCB is a top-five position that was increased by ~15% last quarter at prices between $15.35 and $17.34. It was marginally trimmed this quarter. The stock currently trades at $15.58. It is a very long-term position that was first purchased in 2000. The stake was built up to a large ~10% stake (over 1.4M shares) by 2003 and in 2004 the position was doubled. Since then, the stake has been kept largely steady although adjustments have occurred every year. For investors attempting to follow Kahn, NYCB is a very good option to consider for further research.

The New York Times Company (NYSE:NYT): NYT is Kahn's largest position at 9.94% of the US long portfolio (around $69M). The stake was increased by ~12% last quarter at prices between $13.75 and $17.12. This quarter saw an about-turn as the position was decreased by around 5.5% at prices between $14.64 and $17.26. The stock currently trades at $12.89. The position was first purchased in 2006 and the bulk of the current stake was built in 2011 and 2012 at prices between $5.81 and $10.67.

Old Republic International (NYSE:ORI): ORI is another very long-term position that has been in the portfolio for over fifteen years. The last significantly large purchase happened in 2012 when around 600K shares were purchased at prices between $8 and $11. The stock currently trades at $14.50. Last quarter saw a ~10% stake increase at prices between $14.70 and $17.27 but this quarter saw significant selling: ~17% sold at prices between $15.79 and $17.23. The position currently accounts for close to 5% of the US long portfolio.

Patterson-UTI Energy (NASDAQ:PTEN): PTEN is a 4.57% of the US long portfolio position first purchased in 2009. Most of the current stake was purchased in 2010 and 2012 at prices between $13 and $22. Last three quarters saw the position getting reduced by more than half at prices between $21 and $35. The stock currently trades at $33.73. The activity indicates a bearish bias.

Seaboard Corporation (NYSEMKT:SEB): SEB is another very long-term position that was reduced significantly over the last fifteen years. The position size was ~29K shares in 1999 and accounted for around ~2% of the US long portfolio. The tremendous share price appreciation in the interim has resulted in the current stake accounting for 4.97% of the US long portfolio even though the position-size was reduced by around two-thirds to 11.4K shares: the stock was a ten-bagger during the period. Last quarter saw a 28% stake increase at prices between $2450 and $2795 and this quarter saw very minor selling. The stock currently trades just outside that range at $2840.

SLM (Sallie Mae) Corporation (NASDAQ:SLM): SLM is a 1.10% of the US long portfolio position that has been in the portfolio for over fifteen years. The bulk of the current position was purchased in 2008 and 2010 at an average cost-basis around the mid-teens. The position was reduced by more than half as of Q1 2014 through consistently selling over several quarters at prices between $17 and $27. This quarter saw minor additional selling. The stock currently trades at around $8.92 - the low price is primarily due to the effect of the spin-off of Navient effective May 1, 2014 whereby SLM holders received one share of NAVI for each share of SLM held.

VOXX International (NASDAQ:VOXX): VOXX has been in the portfolio since 2001 when the company was named Audiovox. The current position stands at 2.81% of the US long portfolio. Last quarter saw a 24% stake increase at prices between $12.37 and $17 and this quarter saw very minor trimming. The stock currently trades well below the low end of that range at $9.38. For investors attempting to follow Kahn, VOXX is a very good option to consider for further research.

Genie Energy Ltd. (NYSE:GNE) & IDT Corporation (NYSE:IDT): These are small positions (less than ~2% of the US long portfolio each) that were decreased marginally this quarter. As the activity was minor, it does not indicate a change in bias.

Kept Steady:

Trinity Place Holdings (OTCQB:TPHS): TPHS is a small 1.13% of the US long portfolio position that was left untouched this quarter.

The spreadsheet below highlights changes to Kahn's US stock holdings in Q2 2014:

(click to enlarge)

Editor's Note: This article discusses one or more securities that do not trade on a major exchange. Please be aware of the risks associated with these stocks.

Source: Tracking Kahn Brothers' Portfolio - Q2 2014 Update