by Tim Melvin | November 8, 2013 6:30 am
13F filings give an excellent look at what some of the best and brightest fund managers and hedge fund types have been doing with their assets in the third quarter of the year.
The big guns like the Tiger Cubs and John Paulson will have every letter of their filings analyzed and picked over by the time filing deadlines passes next week. But knowing who bought more Microsoft (MSFT) or Gold ETFS isn’t valuable information when everyone knows it at the same time. I do, however, find a great deal of value in examining the activities of some lesser-known but wildly successful managers are doing.
Irving Khan has been in the investment business for more than 85 years now. The last I heard, he was still going into the office at the age of 107. Mr. Kahn was Ben Graham’s teaching assistant in the now-legendary Columbia classroom where the art of value investing was born. He started Kahn Brothers in 1978 and still works there today, although his son has the larger role at the firm these days. Kahn Brothers buys stocks that are cheap and have a large margin of safety. It might not be the biggest fund on Wall Street, but it’s one of the smartest and longest lasting value investing firms.
Khan was not incredibly active in the quarter, which isn’t surprising — he follows strict buying criteria related to book value and margin of safety, and tends to hold for much longer than most investors. Khan Brothers did take a stake in embattled smart phone company Blackberry (BBRY), which has gone on the auction block. The firm also upped its stake in BP (BP) by more than 500% during the third quarter and bought more shares of New York Community Bank (NYCB).
I always find it very interesting to see what long-term investors are selling in a given quarter. Kahn Brothers lightened up on many financials that have shot up and now trade above book value. The firm sold out of Flushing Financial (FFIC), TCF Financial (TCB) and Dime Community Bank (DCOM). Khan apparently shares my views on the large-cap drug stocks, easing up on both Pfizer (PFE) and Bristol Meyers (BMY) over the summer. Khan Brothers also sold the last of the Travelers shares (TRV) it has owned since 2008 at more than twice the purchase price.
There will be a lot of attention paid to the rock star hedge fund managers 13F filings over the next week. But it’s far more valuable to look at someone who started investing back in the Jazz Age and who has stayed profitable for eight decades.
As of this writing, Tim Melvin did not hold a position in any of the aforementioned securities.
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