What the World's Most Experienced Investor Has Been Buying and Selling

See what the venerable Kahn Brothers Group has been buying.

Feb 5, 2014 at 4:45PM

Every quarter, many money managers have to disclose what they've bought and sold via 13F filings. Their latest moves can shine a bright light on smart stock picks.

Today let's look at Kahn Brothers, chaired by 108-year-old Irving Kahn. The firm was founded in 1978, but Kahn's investing experience goes back long before that: He was a teaching assistant for Benjamin Graham, the key mentor of none other than Warren Buffett. The Kahn Brothers invest "primarily in undervalued and often unpopular securities that present both a margin of safety and attractive prospects for capital appreciation." The company adds, "In the tradition of Graham and Dodd, our investing discipline continues to stress three key words: margin of safety." The firm also says it puts clients first: "We align our interest with our clients' interest, purchasing the same securities for them that we do for ourselves. 'We eat our own cooking.'"

The company's reportable stock portfolio totaled $581 million in value as of Dec. 31, 2013.

Interesting developments
So what does Kahn Brothers' latest quarterly 13F filing tell us? Here are a few interesting details.

The biggest new holdings are SLM Corporation and Sterling Bancorp. Other new holdings of interest include AT&T (NYSE:T) and Monsanto Company (NYSE:MON). Telecom giant AT&T has been underperforming the market in recent years, though some see it getting its act together lately, with customer churn rates dropping and cash flow growing. Still, it faces strong competition, with Verizon recently spending $130 billion to buy from Vodafone the chunk of Verizon Wireless it didn't already own. One promising market for AT&T is the Industrial Internet, involving Big Data, cloud computing, and more. AT&T's stock yields a handsome 5.5%.

Agriculture and seed giant Monsanto is often in the midst of controversy over herbicides, genetically modified organisms, and more. There's more to the company than that, though, as it's continually innovating and has a rich pipeline. Bulls also like its growing soybean business, though corn is still a much bigger revenue-generator. Monsanto stock yields 1.6%.

Among holdings in which Kahn Brothers increased its stake was BP plc (NYSE:BP). The beleaguered oil giant yields 4.9%, but it's a complicated portfolio candidate. BP just reported its fourth-quarter and full-year results, with fourth-quarter net income down 30% over year-ago levels, due in part to weak refining margins, its divestment program, and Deepwater spill-related costs. BP has sold many assets to generate needed funds, but it's also retained a promising project portfolio, and it boasts strong reserve replacement ratios. On the other hand, drilling costs have been rising, and the company's hydrocarbon production has slipped.

Kahn Brothers reduced its stake in lots of companies, including BlackBerry Ltd. (NASDAQ:BBRY) and New York Community Bancorp (NYSE:NYCB). Smartphone specialist BlackBerry is struggling, but some find that it has fallen so far that it's now attractive. Its price-to-earnings ratio is...well, the answer is "not applicable," as its bottom line is in the red. Its U.S. market share among smartphones these days is close to zero. New CEO John Chen has his work cut out for him. BlackBerry does have value in its patents, but it's a rather speculative investment at this point.

New York Community Bancorp yields about 6.2% and is known for having savvy management. It has grown by more than 20% annually since its IPO in 1993, far outpacing rivals as it has acquired other banks and grown its commercial and industrial lending business. The bank's fourth quarter featured earnings down a bit from year-ago levels, in part because of a fall in mortgage volume. Analyst Collyn Gilbert of KBW recently downgraded the stock to "market perform," citing valuation concerns and slightly lower earnings expectations.

Finally, Kahn Brothers' biggest closed positions included Provident New York Bancorp and First Place Financial Corp.

We should never blindly copy any investor's moves, no matter how talented the investor. But it can be useful to keep an eye on what smart folks are doing. 13F forms can be great places to find intriguing candidates for our portfolios.

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4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

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Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

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KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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