Kahn Brothers Advisors LLC is an Investment Advisor company providing brokerage and money management services to clients. An old member of the NY Stock Exchange, Kahn Brothers was founded in 1978 as Kahn Brothers & Company, Inc. The fund primarily invests in companies which are unpopular and undervalued. Co-founder and former chairman Irving Kahn (pictured), who recently passed away at the age of 109 started his career in the 1930’s and studied under Benjamin Graham, who also counted Warren Buffett as one of his proteges. The total value of the equity portfolio of Kahn Brothers stood at $592.07 million as of March 31. In this article we will take a look at four companies: Pfizer Inc. (NYSE:PFE), Merck & Co., Inc. (NYSE:MRK), Citigroup Inc (NYSE:C), and International Business Machines Corp. (NYSE:IBM), which rank as major holdings in the portfolio of Kahn Brothers.
Kahn Brothers is just one of more than 700 hedge funds that we track in our database, whose equity portfolios we collate quarterly as part of our small-cap strategy. Even though most smaller investors believe that tracking 13F filings is a fruitless endeavor because they are filed with a delay of a maximum of 45 days after the end of a calendar quarter, the results of our research prove that is not the case. To be on the safe side, we used a delay of 60 days in our backtests that involved the 13F filings of funds between 1999 and 2012 and we still managed to gain an annual alpha in the double digits. Moreover, since the official launch of our strategy in August 2012, our small-cap strategy has obtained returns of more than 137%, beating the S&P 500 Total Return Index by 82 percentage points (see the details).
On the top spot in Kahn Brothers’ portfolio is is Pfizer Inc. (NYSE:PFE), in which the fund owns 1.81 million shares valued at $63.01 million. Pfizer Inc. is a pharmaceutical corporation headquartered in New York. The company produces and researches vaccines and drugs. Pfizer Inc. (NYSE:PFE), one of the most profitable companies in the world, had first quarter earnings of $0.51 per share on revenue of $10.9 billion. It also bought back $6.0 billion worth of common stock during the quarter. During the first quarter Pfizer’s new products enjoyed strong sales and it continued to push growth by announcing the purchase of Hospira, Inc. Pfizer Inc. (NYSE:PFE) continues to advance its products and is well-positioned in new domains of biology. During the remainder of 2015 it will continue to focus on its key products such as Viagra, Xeljanz, Prevnar 13, Eliquis and Nexium 24HR, which helped fuel its recent revenue growth. Billionaire Ken Fisher has the largest holding of Pfizer in our database at 31.21 million shares.
In second position is Merck & Co. Inc (NYSE:MRK), in which Kahn Brothers holds 1.03 million shares with a value of $59.19 million. During the first quarter Merck posted earnings were $0.33 per share with revenue coming in at $9.4 billion, a decrease of 8% compared with the first quarter of 2014. Merck experienced positive sales growth in a number of key segments including the animal health domain, oncology, hospital acute care, vaccines, drugs, diabetes, while it suffered a sales decline in hepatitis C. In the first quarter the company was focused on important launches of new products Keytruda, Belsomra, and Zerbaxa. At current exchange rates Merck & Co. Inc continues to anticipate full year 2015 profit to be between $38 billion and $40 billion. The most significant hedge fund holdings in Merck & Co. Inc are held by AQR Capital Management and billionaire Fisher.
We move next to Citigroup Inc (NYSE:C), a multinational provider of banking and financial services, in which 1.13 million shares are held by Kahn Brothers, those shares having a value of $58.27 million. Citigroup Inc (NYSE:C) posted solid first quarter revenue of $19.7 billion, with net income rising by 24% to $4.8 billion from $3.9 billion a year ago. Some of the improved operating profit came from lower expenses, with operating expenses coming in at $9.7 billion for the first quarter, a 4% decrease compared with the first quarter of 2014. The largest hedge fund holdings in Citigroup are held by Seth Klarman‘s Baupost Group with 102.67 million shares, Eton Park Capital and Eagle Capital Management.
Lastly we come to International Business Machines Corp. (NYSE:IBM), in which Kahn Brothers owns 7,158 shares worth $1.15 million. Founded in 1911, International Business Machines Corp is one of the leaders in desktop computing and is headquartered in Armonk, New York. In the first quarter, IBM had earnings of $2.4 billion or $2.44 per share and expects full year earnings of $14.17 to $14.93 per share. Buffett also remains a big believer in International Business Machines Corp. (NYSE:IBM), owning 76.97 million shares of the company as of the end of 2014.
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