Tracking Kahn Brothers Portfolio - Q4 2015 Update

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Includes: AF, BAC, BBRY, BMY, BP, C, CMCSA, CVX, FNFG, GE, GNE, GSK, HOLX, IBM, IDT, IDWM, KEY, LARK, MBI, MON, MRK, NAVI, NTP, NVS, NYCB, NYT, ORI, PFE, PTEN, SEB, SLM, STL, STRP, T, TPHS, VOLVY, VOXX, XOM
by: John Vincent

Summary

Kahn Brothers Group's US long portfolio increased ~4% from $540M to $560M this quarter.

Small stakes in VOXX International and GlaxoSmithKline were increased significantly during the quarter.

The portfolio continues to be very concentrated with the top five positions accounting for 48% of the 13F holdings.

This article is part of a series that provides an ongoing analysis of the changes made to Kahn Brothers' US stock portfolio on a quarterly basis. It is based on Kahn Brothers' regulatory 13F Form filed on 02/08/2016. Please visit our Tracking Kahn Brothers Portfolio series to get an idea of their investment philosophy and our last update for the fund's moves during Q3 2015.

This quarter, Kahn Brothers' US long portfolio increased 3.60% from $540M to $560M. The number of holdings remained steady at 38. The larger positions (more than 0.5% of the portfolio each) decreased from 22 to 21. The largest individual stock position is Citigroup Inc. which has been in the portfolio since their first 13F filing in 1999. It accounts for 10.39% of the US long portfolio. Largest five positions are Citigroup Inc., Merck Inc., New York Times, Hologic Inc., and Pfizer Inc. Together, they account for 47.74% of the US long portfolio.

Irving Kahn was a disciple of Benjamin Graham and is the author of "Benjamin Graham The Father of Financial Analysis". He was by far the oldest protégé (died 2/26/2015 at age 109) and was one of the closest followers of the original teachings of Benjamin Graham.

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 6.09% of the US long portfolio position was built in 2013 at prices between $40 and $53. The stock currently trades well below the low-end of that range at $29.92. Last quarter saw a ~13% increase at prices between $29.38 and $41.29 and this quarter saw a further ~6% increase at prices between $30 and $37. For investors attempting to follow Kahn Brothers, 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. Q2 2014 saw a 270% stake increase at prices between $7.15 and $10.12. The position was again increased by ~28% in Q1 2015 at prices between $8.80 and $12.60 and another ~40% the following quarter at prices between $8.18 and $10.48. Last two quarters have also seen minor increases. The stake is currently at 6.30% of the US long portfolio. The stock currently trades at $6.80. The significant build-up indicates a bullish bias.

Citigroup Inc. (NYSE:C): C is Kahn's largest position. It is a very long-term holding and was a small position in Kahn Brothers' first 13F filing in 1999. The minor position was adjusted over the following years although by 2006 the stake still accounted for less than 0.1% of the US long portfolio. The position was steadily increased after the financial crisis and it currently stands at 10.39% of the US long portfolio. There has been an overall reduction of ~20% over the last five quarters at prices between $47 and $59. This quarter saw a marginal increase. The stock currently trades at $37.81.

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). The last six quarters had seen a combined ~13% reduction at prices between $37 and $43. There was a marginal increase this quarter. The current position is still a top-five stake at 9.33% of the US long portfolio. The stock currently trades at $32.75. The stock has appreciated over 30-times during the holding period.

Note: There was recent activist involvement in HOLX. Carl Icahn acquired 12.5% of the business in Q4 2013 at around $21 and nominated two board-members. The stock has returned ~56% since.

IDW (previously CTM) Media (OTCPK:IDWM): IDWM is a long-term stake that was increased marginally in the last three quarters. The original position is from the spinoff of CTM Media from IDT Corporation in 2009. As a percentage of the portfolio, the position is very small at 0.57%.

Merck Inc. (NYSE:MRK): MRK is the second-largest position at 9.54% 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. The last three quarters had seen marginal trimming while this quarter saw a very minor increase. The stock currently trades at $48.84.

Nam Tai Property Inc. (NYSE:NTP): The 3.77% of the US long portfolio NTP stake was increased by more than one-third in Q1 2014 at prices between $5.59 and $7.27. Q4 2014 saw an about-turn as the position was reduced by 21% at prices between $4.18 and $6.07. Last quarter saw a ~24% increase at prices between $4.25 and $6.38. The stock currently trades at $5.20. The original position was a ~2% (~400K shares) stake established in 2001. This quarter saw a marginal further increase.

Note: Kahn Brothers controls 9.8% of the business through their ownership of just over 3.65M shares of NTP.

Seaboard Corporation (NYSEMKT:SEB): SEB is another very long-term position that was reduced significantly over the last sixteen 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 4.92% of the US long portfolio even though the position-size was reduced by around two-thirds to ~9.5K shares: the stock is a twenty-bagger during this period. The last major buying was in Q1 2014 when there was a 28% stake increase at prices between $2450 and $2795. Last five quarters had seen a combined ~24% reduction at prices between $2380 and $4640. This quarter, the pattern reversed: ~9% increase at prices between $2892 and $3441. The stock currently trades at $2615.

VOXX International (NASDAQ:VOXX): VOXX has been in the portfolio since 2001 when the company was named Audiovox. The current position stands at 1.72% of the US long portfolio. Q1 2014 saw a 24% stake increase at prices between $12.37 and $17. The next five quarters had seen a combined ~26% reduction at prices between $7 and $13. Last quarter saw a minor increase and that was followed with a ~13% increase this quarter at prices between $5.05 and $7.88. The stock currently trades at $3.69.

Note: Kahn Brothers controls ~8.4% of the business through the ownership of 1.83M shares of VOXX.

Genie Energy Ltd. (NYSE:GNE), GlaxoSmithKline plc (NYSE:GSK), IDT Corporation (NYSE:IDT), and Straight Path Comm. (NYSEMKT:STRP): These are small positions (less than ~1% of the US long portfolio each) that were increased this quarter. The position sizes are too small to indicate a clear bias.

Stake Decreases:

MBIA Inc. (NYSE:MBI): MBI has been in the portfolio since 2007. The majority of the current 5.11% position was purchased during the financial crisis in 2008 and 2009 at low prices. Q1 2014 saw a 19% stake increase at prices between $10.94 and $15.08 but the following quarters saw a combined ~24% decrease at prices between $8 and $13. The pattern reversed in Q2 2015: a ~76% increase at prices between $5.06 and $9.81 and that was followed with another ~30% increase last quarter at prices between $5.58 and $7.68. The stock currently trades at $6.30. This quarter saw marginal selling. For investors attempting to follow Kahn Brothers, MBI is a very good option to consider for further research.

New York Community Bancorp (NYSE:NYCB): NYCB is a fairly large 8.03% of the US long portfolio stake. It is a very long-term position that was first purchased in 2000. The stake was built up to a large ~10% position (over 1.4M shares) by 2003 and in 2004 the position was doubled. Since then, the stake had been kept largely steady although adjustments occurred every year. 2015 saw a ~18% overall reduction at prices between $15.45 and $19.03. The stock currently trades at $15.30.

The New York Times Company (NYSE:NYT): NYT is a top-three 9.41% of the US long portfolio position. Last seven quarters have seen a combined ~20% reduction at prices between $11.52 and $16.61. The stock currently trades at $12.44. 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 2.69% position that has been in the portfolio for over sixteen years. The last significantly large purchase happened in 2012 when around 600K shares were acquired at prices between $8 and $11. The position has wavered since and the last three quarters have seen reductions: Q2 2015 saw a huge ~40% (~750K shares) reduction at prices between $14.85 and $16.23 and last quarter saw another ~24% reduction at prices between $15.05 and $16.84. There was a ~4% further reduction this quarter. The stock currently trades at $17.45.

Pfizer Inc. (NYSE:PFE): PFE is a top-five position at 9.05 % 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. In Q1 2014, the stake was increased by ~11% at prices between $29.66 and $32.75. Last six quarters have seen a combined ~26% reduction at prices between $27.83 and $36.06. The stock currently trades at $28.56.

Patterson-UTI Energy (NASDAQ:PTEN): PTEN is a 2.88% 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. The position was reduced by ~55% in Q1 to Q3 2014 at prices between $23 and $38. Q4 2014 saw an about-turn as the position was increased by just over 42% at prices between $14.33 and $32.53. The activity has been minor since. This quarter saw a marginal reduction. The stock currently trades at $13.27.

Sterling Bancorp (NYSE:STL): STL is a small 2.97% of the US long portfolio position that was decreased by ~28% in the last five quarters at prices between $12.58 and $17.56. The stock currently trades at $13.75. The original stake is a very long-term position that was established in 2004 (Provident Bancorp at the time).

Trinity Place Holdings (NYSEMKT:TPHS): The very small ~1% stake in TPHS saw a ~9% reduction this quarter.

Note: Other very small positions (less than 0.5% of the portfolio each) in the portfolio include AT&T (NYSE:T), Astoria Financial (NYSE:AF), Bank of America (NYSE:BAC), Bristol Myers Squibb (NYSE:BMY), Chevron (NYSE:CVX), Comcast (NASDAQ:CMCSA), , Exxon Mobil (NYSE:XOM), First Niagara Financial (NASDAQ:FNFG), General Electric (NYSE:GE), IBM Corporation (NYSE:IBM), KeyCorp (NYSE:KEY), Landmark Bancorp (NASDAQ:LARK), Monsanto (NYSE:MON), Navient (NASDAQ:NAVI), Novartis (NYSE:NVS), SLM Corp (NASDAQ:SLM), and Volvo AB (OTCPK:VOLVY).

The spreadsheet below highlights changes to Kahn's US stock holdings in Q4 2015:

Click to enlarge

Disclosure: I am/we are long BAC, BBRY, BP, IBM.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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