The Oldest Value Investor Alive

A mystery in longevity

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.

And,

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

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