The Oldest Value Investor Alive
Irvin Kahn, 105, is the oldest active money manager on Wall Street.
The Daily Beast interviewed Kahn back in August amid the market panic over Europe’s debt crisis. The full article can be found here: Advice from a 105-Year-Old Banker.
Not surprisingly, Kahn has preserved his old-school, value investor skepticism about the folly of markets:
Small and gnomish, Kahn counsels patience in hard times as he holds forth on market distortions and the roots of economic unrest, which he pins on “a bunch of gamblers going crazy on the floor of the exchange.” “Wall Street,” he adds, “has always been a very poor judge of value. The depths of the Depression turned out to be a useful time to learn that lesson. At Columbia Business School, Kahn served as an assistant to economist Benjamin Graham, the value-investing guru whose principles of caution and defensive investing inspired a cadre of disciples that includes Warren Buffett. It’s an investment strategy born of the beating Graham had taken in ’29, and Kahn adopted it as his own. “I stopped wasting time on what people claimed a stock was worth and started looking at the numbers,” he says. “This may surprise you, but there were a large number of valuable buys during the Depression.
As the Daily Beast article points out, Kahn’s remarkable longevity, and that of his two siblings, who are 109 and 101, is being studied by the Longevity Genes Project at the Albert Einstein College of Medicine.
A fourth sibling died in 2005 at the age of 102.
The Kahn Brothers Group – an investment management firm – has a little over $700 million in assets under management, according to recent filings.
In addition to a wonderful description of the principles of value investing and the importance of seeking a margin of safety, the Kahn Brothers Group’s investment philosophy is elegantly summarized by a metaphor they use on their website:
Kahn Brothers thinks of a portfolio as an orchard of fruit trees. One cannot expect fruit every year from each species of tree. Investments can and often do have varied and unpredictable timetables to maturity. We believe a suitable time horizon for investment fruit to ripen for harvest can be three to five years or longer. Indeed, a key factor in realizing outstanding performance is having the discipline and patience to maintain time-tested principles and not abandon the orchard before the fruit has ripened.
Kahn Brothers views the investment process as a combination of art and science. Each investment decision has both quantitative and qualitative aspects. While a novice can readily duplicate the former, the latter can only be acquired after decades of analyzing investment opportunities. A key element to outstanding investment performance is bringing these two factors together.
As disciples of Benjamin Graham, it isn’t surprising that the firm’s investment criteria focuses on small to mid-cap businesses in relatively mature industries that are easy to understand. They prefer companies with strong financial positions and emphasize balance sheet strength when looking at Graham-inspired metrics to evaluate their opportunity set – e.g. net-nets, discounts to tangible book, low P/E (using normalized earning power estimates), special situations, and fallen angels.
A quick summary of their most recent 13-F filing highlights these attributes reflected in their holdings. Disclosure: I am long Hologic.
Top Positions by Market Value Company Name Ticker Market Value Current Change (USD $) Position In Position Bristol-Myers Squibb Co BMY US 50,549,446 1,610,881 -63,377 Pfizer Inc PFE US 45,771,080 2,588,862 -45,178 New York Community Bancorp NYB US 43,235,806 3,633,261 -53,805 Merck & Co. Inc. MRK US 42,821,696 1,309,532 -132,488 Seaboard Corp SEB US 27,444,308 15,230 -290 SLM Corp SLM US 24,252,339 1,947,979 -40,000 Hologic Inc HOLX US 24,122,969 1,585,994 -37,100 Old Republic Intl Corp ORI US 24,011,284 2,691,848 14,969 MBIA Inc MBI US 22,023,738 3,029,400 -41,800 Citigroup Inc C US 21,755,024 849,308 139,122 Top Position Increases by Market Value Company Name Ticker MV Change Current Change (USD $) Position In Position Astec Industries Inc ASTE US 131,500 127,000 30,000 Nam Tai Electronics Inc NTE US -1,599,966 2,710,997 9,736 Provident New York Bancorp PBNY US -1,962,312 1,005,166 70,671 Audiovox Corp-A VOXX US -4,526,761 2,284,902 26,850 Medquist Holdings Inc MEDH US -5,148,960 1,010,041 20,500 Top Position Decreases By Market Value Company Name Ticker MV Change Current Change (USD $) Position In Position Patterson-Uti Energy Inc PTEN US -12,797,186 816,380 -36,300 New York Community Bancorp NYB US -12,033,313 3,633,261 -53,805 Seaboard Corp SEB US -10,083,052 15,230 -290 SLM Corp SLM US -9,165,588 1,947,979 -40,000 Hologic Inc HOLX US -8,614,837 1,585,994 -37,100 SOURCE: SEC 13F-HR FILER: Kahn Brothers Group Inc QUARTER ENDED: 09/30/2011 SEC RECEIVED: 11/09/2011