Tracking Kahn Brothers Portfolio - Q1 2019 Update

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Includes: AGO, BAC, BB, BMY, BP, C, CELG, CMCSA, CVX, CWEGF, 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 $554.7M to $640M this quarter.

Bristol-Myers Squibb stake was increased while reducing New York Times, Sterling Bancorp, and Hologic 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 05/06/2019. Please visit our Tracking Kahn Brothers Portfolio series to get an idea of its investment philosophy and our last update for the fund's moves during Q4 2018.

This quarter, Kahn Brothers' 13F portfolio value increased ~15% from $554.7M to $640.04M. The number of holdings increased from 31 to 32. The largest individual stock position is Merck (NYSE:MRK) which accounts for 10.80% of the portfolio. Largest five positions are Merck Inc., BP plc (NYSE:BP), Citigroup Inc. (NYSE:C), Assured Guaranty (NYSE:AGO), and GlaxoSmithKline plc (NYSE:GSK). 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

Bristol-Myers Squibb (BMY): The 3.76% of the portfolio BMY stake was built this quarter at prices between $45 and $54 and the stock currently trades at $47.23.

Note: BMY experienced a ~14% price drop following the Celgene (CELG) acquisition announcement in early January.

GlaxoSmithKline plc (GSK): GSK is a large (top five) 8.33% 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 $39.66. There was a ~20% increase over Q4 2017 and Q1 2018 at prices between $34.50 and $41. Last four quarters have seen marginal increases.

Patterson-UTI Energy (PTEN): PTEN is a 3.74% 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 $12.87. Last quarter saw a ~17% stake increase at prices between $9.50 and $18 while this quarter there was a ~6% further increase.

Stake Decreases

Merck Inc. (MRK): MRK is the largest position at ~11% of the 13F portfolio. It was a very small stake first purchased in 2000. The position had 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 ten years through minor trimming almost every quarter. The stock currently trades at $78.33.

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 9.37% 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 $41.65. Last two quarters have seen minor trimming.

Citigroup Inc. (C): C is Kahn's third-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 time frame saw a huge stake built at a cost-basis in the 30s. The stock currently trades at $67.63 and it stands at 8.95% of the portfolio. Last five quarters have seen only minor adjustments.

Assured Guaranty (AGO): AGO is a large (top five) 8.60% 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 through Q1 2018 had seen a combined ~60% increase at prices between $33 and $45. The stock is now at $46.29. Last two quarters have seen minor trimming.

New York Community Bancorp (NYCB): NYCB is a 7.75% 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 through 2017 saw a ~30% overall reduction at prices between $13.50 and $19. Last year saw an about turn: ~130% stake increase at prices between $9 and $14.50. It is now at $11.25. For investors attempting to follow Kahn Brothers, NYCB is a good option to consider for further research. There was marginal selling this quarter.

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 through 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 ~7% of the portfolio position. The stock is at $8.84. Last few quarters have seen only marginal activity.

MBIA Inc. (MBI): MBI has been in the portfolio since 2007. The majority of the current 6.56% 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 $10.14. Last four quarters have seen marginal selling.

Seaboard Corporation (SEB): SEB is another very long-term position that was reduced significantly over the last two decades. 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 ~5% of the portfolio even though the position-size was reduced by more than two-thirds to ~7.33K 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 $2,450 and $2,795. The last five years have seen a ~36% selling at prices between $2,550 and $4,700. The stock currently trades at ~$4,204.

Pfizer Inc. (PFE): PFE is a 3.54% 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 through Q1 2016 had seen a one-third reduction at prices between $28 and $36. The next two years had also seen another two-thirds selling at prices between $30 and $39. The stock currently trades at $40.64. Last four quarters saw minor trimming.

The New York Times Company (NYT): NYT is a 3.45% 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. 2014 to 2017 had seen a combined ~50% reduction at prices between $11 and $25. Last four quarters have also seen a ~70% selling at prices between $22 and $34. The stock currently trades at $34.80. Kahn Brothers is harvesting gains.

Nam Tai Property Inc. (NTP): The original NTP position was a ~2% stake established in 2001. The original stake saw a ~40% selling in Q4 2016 at prices between $7.15 and $9.50. There was a ~20% stake increase in Q3 2018 at prices between $9.75 and $11 while last quarter saw a ~14% reduction. The stock currently trades at $9.36. There was minor trimming this quarter.

Note: Kahn Brothers controls ~5% of the business through its ownership of 1.9M shares of NTP.

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 follow: 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 2.57% of the portfolio. The stock is now at $45.50 and has appreciated over 35-times during the holding period. Last six quarters saw a combined ~55% reduction.

VOXX International (VOXX): VOXX has been in the portfolio since 2001 when the company was named Audiovox. The current position stands at 2.55% of the portfolio. Recent activity follow: 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 $4.14. Last few quarters have seen only minor adjustments.

Note: Kahn Brothers owns ~15% of the Class A shares through the ownership of 3.54M shares - John J. Shalam has majority control through ownership of the Class B shares.

Sterling Bancorp (STL): STL is now a small 1.32% of the portfolio position. The original stake was 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. 2017 saw a combined ~11% trimming at prices between $21 and $26. Last three quarters saw another ~45% selling at prices between $15.75 and $24.50. The stock is now at $21.34.

IDT Corporation (IDT) and Rafael Holdings (RFL): IDT is a very small 0.65% 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 $7.31. It is a very long-term position that has returned many-fold over the years. There was minor trimming over the last five quarters.

Note: The prices quoted above are adjusted for the spinoff of Rafael Holdings that closed in March 2018. RFL started trading at ~$7 per share. The stock has more than doubled and currently goes for $16.95.

Kept Steady:

Trinity Place Holdings (TPHS): The very small ~0.59% position was kept steady this quarter.

Note: Other very small positions (less than 0.5% of the portfolio each) in the portfolio include AT&T (T), Bank of America (BAC), Chevron (CVX), Comcast (CMCSA), Crew Energy (OTCPK:CWEGF), Exxon Mobil (XOM), Genie Energy Ltd. (GNE), IDW Media (OTCPK:IDWM), Navient (NAVI), Novartis (NVS), Old Republic (ORI), and Zedge Inc. (ZDGE). GNE and ZDGE are spinoffs of IDT.

The spreadsheet below highlights changes to Kahn's 13F stock holdings in Q1 2019:

Irving Kahn - Kahn Brothers - Q1 2019 13F Report

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