Tracking Kahn Brothers Portfolio - Q3 2018 Update

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Includes: AGO, BAC, BB, BMY, BP, C, CMCSA, CVX, GNE, GSK, HOLX, IDT, IDWM, MBI, MRK, NAVI, NTP, NVS, NYCB, NYT, ORI, PFE, PTEN, RFL, SEB, STL, T, TPHS, VOXX, XOM, ZDGE
by: John Vincent

Summary

Kahn Brothers Group's 13F portfolio value increased from $628.4M to $651.2M this quarter.

New York Community Bancorp and Nam Tai Property stakes were increased while reducing New York Times and Sterling Bancorp during the quarter.

The portfolio continues to be very concentrated with the top five positions accounting for ~46% of the 13F holdings.

This article is part of a series that provides an ongoing analysis of the changes made to Kahn Brothers’ 13F stock portfolio on a quarterly basis. It is based on Kahn Brothers’ regulatory 13F Form filed on 10/30/2018. 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 Q2 2018.

This quarter, Kahn Brothers’ 13F portfolio value increased 3.62% from $628.4M to $651.2M. The number of holdings remained steady at 31. The largest individual stock position is Citigroup which accounts for 10.24% of the portfolio. Largest five positions are Citigroup Inc., BP plc, Merck Inc., Assured Guaranty, and Blackberry Ltd. Together, they account for 46.06% of the 13F 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 one of the closest followers of the original teachings of Benjamin Graham.

Stake Increases:

BP plc (BP): BP stake was first purchased in 2010. The position remained minutely small for the next two years. The bulk of the current 9.94% of the portfolio stake (second largest 13F stake) was built in 2013 at prices between $40 and $53. The position has seen a ~60% stake increase since at prices between $28.50 and $53. The stock currently trades at $43.37. Last three quarters saw marginal trimming while this quarter saw a minor increase.

Assured Guaranty (AGO): AGO is a 8.24% of the portfolio stake established in Q1 2017 at prices between $36 and $42.50 and doubled the following quarter at prices between $37 and $42. The three quarters thru Q1 2018 had seen a combined ~60% increase at prices between $33 and $45. The stock is now at $39.98. There were marginal increases in the last two quarters. For investors attempting to follow Kahn Brothers, AGO is a good option to consider for further research.

GlaxoSmithKline plc (GSK): GSK is a large 7.66% of the portfolio position. It was a very small 0.41% of the portfolio stake as of Q3 2015. That original position was increased by roughly eighteen-times over the next six quarters at prices between $37.50 and $45. The stock is currently at $39.06. There was a ~20% increase over Q4 2017 & Q1 2018 at prices between $34.50 and $41. Last two quarters have seen marginal increases.

New York Community Bancorp (NYCB): NYCB is a 6.29% of the 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 $15.50 and $19 while the following year saw another ~20% reduction at prices between $13.79 and $17.18. The stock currently trades at $9.58. There was ~15% further selling last year at prices between $11.75 and $15.91. Q1 2018 saw an about turn: ~16% stake increase at prices between $12.75 and $14.50 and that was followed with a ~40% increase last quarter at prices between $11 and $13. This quarter also saw a ~30% further increase at prices between $10.25 and $11.75. For investors attempting to follow Kahn Brothers, NYCB is a good option to consider for further research.

Note: Last month, S&P cut its long-term issuer ratings on NYCB to a notch below investment grade. This follows NYCB’s announcement to borrow $300M for buybacks.

VOXX International (VOXX): VOXX has been in the portfolio since 2001 when the company was named Audiovox. The current position stands at ~3% of the portfolio. Recent activity follows: There was an almost one-third increase in Q2 2017 at prices between $4.65 and $8.90 and that was followed with another ~60% stake increase the following quarter at prices between $6.40 and $8.85. The stock is now at $5.10. There was marginal trimming in the last two quarters while this quarter saw a ~4% increase.

Note: Kahn Brothers owns ~15% of the Class A shares thru the ownership of 3.79M shares – John J. Shalam has majority control thru ownership of the Class B shares.

Nam Tai Property Inc. (NTP): The original NTP position was a ~2% stake established in 2001. It saw a ~10% reduction in Q2 2016 at prices between $5.28 and $6.14 and that was followed with another ~40% selling in Q4 2016 at prices between $7.15 and $9.50. There was a ~20% stake increase this quarter at prices between $9.75 and $11. The last major buying was in Q3 2015: ~24% increase at prices between $4.25 and $6.38. The stock currently trades at $9.23.

Note: Kahn Brothers controls ~5.8% of the business through their ownership of 2.2M shares of NTP.

Stake Decreases:

Citigroup Inc. (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. By 2006, the position still accounted for less than 0.1% of the portfolio. The 2009-10 timeframe saw a huge stake built at a cost-basis in the 30s. The stock currently trades at $65.46 and it stands at 10.24% of the portfolio. There was a ~3% selling in Q1 2018 and that was followed with marginal trimming in the last two quarters.

Merck Inc. (MRK): MRK is the third-largest position at 9.66% of the 13F 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 in 2009 at prices between $24 and $38. The position has since been sold down by roughly 40% over the last nine years through minor trimming almost every quarter. The stock currently trades at $73.61.

BlackBerry Ltd. (BB): BB was a very small ~0.5% of the 13F 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 five quarters thru Q1 2016 saw the position more than doubled at prices between $6 and $11. There was another ~40% increase in Q2 2016 at prices between $6.29 and $8.09. It is currently a large (top five) ~8% of the portfolio position. The stock is at $9.25. Last few quarters have seen only marginal activity.

MBIA Inc. (MBI): MBI has been in the portfolio since 2007. The majority of the current 7.47% position was purchased during the financial crisis in 2008 and 2009 at low prices. Q1 2014 saw a ~20% stake increase at prices between $11 and $15 but the following quarters saw a combined ~24% reduction at prices between $8 and $13. The pattern reversed in Q2 2015: a ~75% increase at prices between $5 and $9.81 and that was followed with another ~30% increase in the following quarter at prices between $5.50 and $7.70. The stock currently trades at $9.90. There was a ~6% increase in Q4 2017 while last two quarters saw marginal selling.

The New York Times Company (NYT): NYT is a fairly large 5.14% of the portfolio position. The stake was first purchased in 2006 and the bulk of the current position was built in 2011 and 2012 at prices between $5.75 and $10.75. The last four years had seen a combined ~50% reduction at prices between $11 and $25. There was another ~20% selling last quarter at prices between $22 and $27 and that was followed with a similar reduction this quarter at prices between $21.75 and $26.75. The stock currently trades at $26.40.

Hologic Inc. (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 portfolio. Since then, the position has been substantially reduced (after accounting for three 2-for-1 stock splits in 2005, 2008, and 2009). Recent activity follows: Q1 2017 saw a ~22% selling at prices between $39 and $43 and that was followed with another similar reduction over the next two quarters at prices between $36.50 and $46.50. The current position is at 3.64% of the portfolio. The stock is now at $38.99 and has appreciated over 35-times during the holding period. Last four quarters saw a combined ~21% reduction.

Pfizer Inc. (PFE): PFE is a 3.64% of the portfolio position. 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. The seven quarters thru Q1 2016 had seen a one-third reduction at prices between $28 and $36. The last two years had also seen another two-thirds selling at prices between $30 and $39. The stock currently trades at $43.06. Last two quarters saw minor trimming.

Patterson-UTI Energy (PTEN): PTEN is a 3.60% of the 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% between Q1 and Q3 2014 at prices between $23 and $38. Q4 2014 saw an about-turn as the stake was increased by just over 40% at prices between $14.25 and $32.50. Q3 2017 saw another ~40% stake increase at prices between $15 and $22. The stock currently trades at $16.64. There was a ~8% increase in Q4 2017 while the last three quarters saw only very minor activity.

Sterling Bancorp (STL): STL is a 2.31% of the portfolio position. The original stake is a very long-term position that was established in 2004 (Provident Bancorp at the time). The six quarters through Q1 2016 had seen a ~25% reduction at prices between $12.50 and $17.75. Last year saw a combined ~11% trimming at prices between $21 and $26 and that was followed with a ~20% selling this quarter at prices between $21.80 and $24.50. The stock currently trades at $17.98.

IDT Corporation (IDT): IDT is a very small 0.52% portfolio position that saw a roughly one-third stake increase in Q2 2017 at prices between $10 and $15. Q4 2017 saw another ~20% increase at prices between $7.75 and $13.25. The stock is now at $7.04. It is a very long-term position that has returned many-fold over the years. There was marginal trimming in the last three quarters.

Note: the prices quoted above are adjusted for the spinoff of Rafael Holdings that closed in March.

IDW (previously CTM) Media (OTCPK:IDWM): The original IDW position is from the spinoff of CTM Media from IDT Corporation in 2009. The 0.43% stake saw a ~4% trimming in Q1 2018 and a marginal reduction in the last two quarters.

Trinity Place Holdings (TPHS): The very small ~0.90% position saw marginal trimming this quarter.

Kept Steady:

Seaboard Corporation (SEB): SEB is another very long-term position that was reduced significantly over the last eighteen years. The position size was ~29K shares in 1999 and accounted for around ~2% of the 13F portfolio. The tremendous share price appreciation in the interim has resulted in the current stake accounting for 4.43% of the portfolio even though the position-size was reduced by more than two-thirds to ~7.77K 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. The five quarters thru Q3 2015 had seen a combined ~24% reduction at prices between $2380 and $4640. Last two years also saw another ~22% trimming at prices between $2485 and $4620. The stock currently trades at ~$3865.

Note: Other very small positions (less than 0.5% of the portfolio each) in the portfolio include AT&T (T), Bank of America (BAC), Bristol Myers Squibb (BMY), Chevron (CVX), Comcast (CMCSA), Exxon Mobil (XOM), Genie Energy Ltd. (GNE), Navient (NAVI), Novartis (NVS), Old Republic (ORI), Rafael Holding (RFL), and Zedge Inc. (ZDGE). RFL, GNE and ZDGE are spinoffs of IDT.

The spreadsheet below highlights changes to Kahn’s 13F stock holdings in Q3 2018:

Irving Kahn - Kahn Brothers - Q3 2018 13F Report

Disclosure: I am/we are long BAC, BB, BP, IDT.

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.

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