Hedge Fund Kahn Brothers’ Stock Picks for 2013 Include Citigroup

New York Community Bancorp, Inc. (NYSE:NYCB) was another of Kahn Brothers’ favorite stocks. It is a $6 billion market cap bank holding company offering an attractive dividend yield. It is also valued at about the book value of its equity and at 12 times trailing earnings, so while not a screaming buy in value terms we would not be calling it overvalued either. With the business seeing slight growth it may be a good prospect for income investors.

Merck & Co., Inc. (NYSE:MRK) joined Pfizer as a pharmaceutical stock in the fund’s portfolio. The 1.1 million shares which Kahn Brother owned was roughly even with its stake from three months earlier. As a pharmaceutical company it’s unsurprising that Merck has a relatively low correlation with the broader market at a beta of 0.4 as well as a fairly high dividend yield. Point State Capital, managed by Sean Cullinan and other portfolio managers from Duquesne Capital, owned 6.5 million shares of Pfizer at the end of the third quarter.

Kahn Brothers slightly increased its holdings of The New York Times Company (NYSE:NYT) to a total of 4.8 million shares. The fund was the largest holder of the stock in our database of 13F filings, as many hedge funds shy away from the newspaper business. Revenue was down 10% in the fourth quarter of 2012 versus a year earlier, and Wall Street analysts expect the decline to continue. Even so, the forward earnings multiple is a fairly high 18. 11% of the outstanding shares are held short.

Disclosure: I own no shares of any stocks mentioned in this article.