Tracking Kahn Brothers Portfolio - Q1 2015 Update

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Includes: AF, ASTE, BAC, BB, BMY, BP, C, CMCSA, CTMMA, CVX, FFIC, FNFG, GE, GNE, GSK, HOLX, IBM, IDT, KEY, LARK, MBI, MON, MRK, NAVI, NEU, NTP, NYCB, NYT, ORI, PFE, PHII, PTEN, SEB, SLM, STL, STR, STRP, T, TPHS, USG, VOLVY, VOXX, XOM
by: John Vincent
Summary

Kahn Brothers Group's US long portfolio increased ~2% from $580M to $592M this quarter.

Patterson-UTI Energy & Blackberry were increased substantially while Navient Corporation, SLM Corporation, and Sterling Bancorp saw reductions.

The portfolio continues to be very concentrated with the top-five positions accounting for close to 60% 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 & Company's regulatory 13F Form filed on 05/06/2015. 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 Q4 2014.

This quarter, Kahn Brothers' US long portfolio increased ~2% from $580M to $592M. The number of holdings decreased from 44 to 42. The larger positions (more than 0.5% of the portfolio each) remained steady at 22. The largest individual stock position is Pfizer Inc. which has been in the portfolio since 2000. It accounts for 10.64% of the US long portfolio. Largest five positions are Pfizer Inc., Merck Inc., Citigroup Inc., New York Times, and New York Community Bancorp. Together, they account for 58.93% 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.

New Stakes:

None.

Stake Disposals:

None.

Stake Increases:

BlackBerry Ltd. (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 and last quarter saw another ~10% increase at prices between $8.90 and $12.06. The position was again increased by ~28% this quarter at prices between $8.80 and $12.60 and the stake is currently at 3.56% of the US long portfolio. The stock currently trades at $9.80. The significant buying indicates a bullish bias.

Patterson-UTI Energy (NASDAQ:PTEN): PTEN is a 3.11% 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 last year by two-thirds at prices between $23 and $38. Last quarter saw an about-turn as the position was increased by just over 42% at prices between $14.33 and $32.53. The pattern continued this quarter with a ~10% increase at prices between $13.72 and $19.46. The stock currently trades at $21.74.

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% of the US long portfolio position was built in 2013 at prices between $40 and $53. The stock currently trades near the low-end of that range at $42.50. Last quarter saw a minor ~4% trimming while this quarter saw a ~5% increase. For investors attempting to follow Kahn, BP is a good option to consider for further research.

Stake Decreases:

Navient Corporation (NASDAQ:NAVI): NAVI is a 2.08% of the US long portfolio stake established in Q2 2014 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. Last quarter saw a 5.57% reduction at prices between $17.13 and $22.57 and the selling accelerated this quarter: ~29% reduction at prices between $19.16 and $22.37. The stock currently trades at $19.58.

SLM (Sallie Mae) Corporation (NASDAQ:SLM): SLM is a 0.25% 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 consistent selling over several quarters at prices between $17 and $27. Last quarter saw a further 21% reduction at prices between $8.47 and $10.34 and this quarter the remaining position was almost sold out at prices between $8.97 and $10.32. The stock currently trades at around $10.36.

Note: The prices quoted understate the performance of this stake. SLM price-per-share dropped around two-thirds in May 2014 as a result of the spin-off of Navient . SLM holders received one share of NAVI for each share of SLM held.

Sterling Bancorp (NYSE:STL): STL is a small 2.43% of the US long portfolio position that was marginally decreased last quarter. It was decreased by another ~17% this quarter at prices between $13.08 and $14.03. The stock currently trades at $13.19. The original stake is a very long-term position that has been in the portfolio since 2004 (Provident Bancorp at the time).

Citigroup Inc. (NYSE:C): C is Kahn's third-largest position. It is a very long-term holding and was a 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 9.84% of the US long portfolio. Q1 2014 saw a ~15% stake increase at prices between $46 and $55 and the following quarter saw a further ~12% increase at prices between $45.68 and $48.40. The position was reduced by ~14% last quarter at prices between $49.50 and $56.40 and another ~5% this quarter at prices between $46.95 and $54.26. The stock currently trades at $52.82.

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 stock appreciated over fifty-times during the holding period. Q1 2014 saw a ~15% stake increase at prices between $20 and $22.50. The last four quarters saw a combined ~12% reduction at prices between $23 and $33.25. The remaining position is still fairly large at 7.69% of the US long portfolio. The stock currently trades at $33.47.

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

Note: The value of HOLX holdings reported in the Q4 2014 13F did not tally with the share price as of 12/31/2014. The reported value should have been ~$39M as compared to ~$12M indicated in the 13F and the spreadsheet.

Merck Inc. (NYSE:MRK): MRK is Kahn's second-largest position at 10 % 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. Last quarter saw a ~5% reduction while this quarter saw a ~2% trimming. The stock currently trades at $60.26.

MBIA Inc. (NYSE:MBI): MBI has been the portfolio since 2007. Most of the current 3.08% 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. Q3 2014 saw an about turn as the position was reduced by 7.35% at prices between $9.11 and $11.04 and last quarter the pattern continued with a ~15% reduction at prices between $8.62 and $10.44. This quarter also saw marginal selling. The stock currently trades at $8.51.

Nam Tai Property Inc. (NYSE:NTP): The 1.95% 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. Last quarter saw an about-turn as the position was reduced by 21% at prices between $4.18 and $6.07. This quarter saw minor additional trimming. The stock currently trades at $5. The original position was a ~2% (~400K shares) stake established in 2001.

Note: Kahn controls 6.85% of the business through his ownership of just over 2.9M shares of NTP.

New York Community Bancorp (NYSE:NYCB): NYCB is a top-five position that was increased by ~15% in Q1 2014 at prices between $15.35 and $17.34. It was reduced by 5.38% in Q3 2014 at prices between $15.45 and $16.43 and another 4.14% last quarter at prices between $14.86 and $16.26. This quarter saw a further ~4% reduction at prices between $15.25 and $16.91. The stock currently trades at $17.39. 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 has been kept largely steady although adjustments have occurred every year. For investors attempting to follow Kahn, NYCB is a good option to consider for further research.

The New York Times Company (NYSE:NYT): NYT is a top-five position at 9.15% of the US long portfolio. The stake was increased by ~12% in Q1 2014 at prices between $13.75 and $17.12. Q2 2014 saw an about-turn as the position was decreased by around 5.5% at prices between $14.64 and $17.26. Last quarter saw a further 6.69% reduction at prices between $11.22 and $13.61 and that was followed with a ~3% trimming this quarter. The stock currently trades at $13.43. 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 $15.12. Q1 2014 saw a ~10% increase at prices between $14.70 and $17.27 but the next two quarters saw significant selling: ~17% reduction in Q2 2014 at prices between $15.79 and $17.23 and 6.48% reduction in Q3 2014 at prices between $14.28 and $16.82. Last two quarters have seen a further ~12% reduction at prices between $13.74 and $15.36. The position currently accounts for 4.73% of the US long portfolio.

Pfizer Inc. (NYSE:PFE): PFE is Kahn's largest position at 10.64% 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 three quarters have seen a combined ~15% reduction at prices between $27.70 and $35.05. The stock currently trades at $33.46.

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 6.24% of the US long portfolio even though the position-size was reduced by around two-thirds to ~9K shares: the stock is an eighteen-bagger during this period. Q1 2014 saw a 28% stake increase at prices between $2450 and $2795. Last three quarters have seen a combined ~18% reduction at prices between $2480 and $4640. The stock currently trades at $3466.

VOXX International (NASDAQ:VOXX): VOXX has been in the portfolio since 2001 when the company was named Audiovox. The current position stands at 2.42% of the US long portfolio. Q1 2014 saw a 24% stake increase at prices between $12.37 and $17. Last three quarters have seen a ~26% reduction at prices between $6.86 and $11.08. The stock currently trades at $8.57.

Note: Kahn Brothers controls 7.14% of the business through the ownership of ~1.56M shares of VOXX.

Straight Path Comm. (NYSEMKT:STRP), Trinity Place Holdings (OTCQB:TPHS), 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 this quarter.

Kept Steady:

None.

Other very small positions (less than 0.5% of the portfolio each) in the portfolio include AT&T (NYSE:T), Astoria Financial (NYSE:AF), Astec Industries (NASDAQ:ASTE), Bank of America (NYSE:BAC), Bristol Myers Squibb (NYSE:BMY), Chevron (NYSE:CVX), Comcast (NASDAQ:CMCSA), CTM Media (OTCPK:CTMMA), Exxon Mobil (NYSE:XOM), First Niagara Financial (NASDAQ:FNFG), Flushing Financial (NASDAQ:FFIC), General Electric (NYSE:GE), GlaxoSmithKline plc (NYSE:GSK), IBM Corporation (NYSE:IBM), KeyCorp (NYSE:KEY), Landmark Bancorp (NASDAQ:LARK), Monsanto (NYSE:MON), NewMarket Corporation (NYSE:NEU), PHI Inc. (NASDAQ:PHII), Questar Corporation (NYSE:STR), and Volvo AB (OTCPK:VOLVY). A minutely small (less than 0.1% of portfolio) position in USG Inc. (NYSE:USG) as of last quarter was eliminated this quarter.

The spreadsheet below highlights changes to Kahn's US stock holdings in Q1 2015:

Disclosure: The author is long BP, BBRY. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

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