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Kahn Brothers’ Top Picks to Close 2014, as Founder Irving Kahn Passes at 109

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Irving Kahn, the oldest active investor on Wall Street, died this week at age 109. The successful manager is succeeded by his sons, who he co-founded Kahn Brothers Group with in 1978, and where he still worked three times a week into late 2014. The fund recently disclosed its top picks for the past quarter, and we’ll take a look at them now in memory of the inspirational investor. According to the 13F Form the fund recently filed with the U.S. Securities and Exchange Commission, the hedge fund’s largest position was in Citigroup Inc (NYSE:C). The hedge fund’s top five picks also contained Merck & Co., Inc. (NYSE:MRK), Pfizer Inc. (NYSE:PFE), and New York Times Co (NYSE:NYT).Irving Kahn

Kahn Brothers Group was founded in 1978 by Irving Kahn and his two sons, Alan and Thomas. Prior to launching his own firm, Mr. Kahn worked at Abraham & Company and Lehman Brothers. Furthermore, the former hedge fund manager followed in the footsteps of his partner Benjamin Graham, becoming an advocate of “contrarian” value investing. At the time of Irving Kahn’s death, his privately owned investment firm had around $1 billion in assets under management. Furthermore, in its last 13F filing, Kahn Brothers Group disclosed an equity portfolio with a market value of $580 million, down from $614 million at the end of the third quarter. While its holdings are quite diversified, stocks from the financial sector account for more than 35% of the hedge fund’s equity portfolio.

The largest holding in Kahn Brothers Group’s equity portfolio last quarter was represented by Citigroup Inc (NYSE:C), where the fund held a stake of 1.19 million shares. Although Kahn Brothers trimmed its stake in the company by 3% during the fourth quarter, it continues to bet big on Citigroup, as the equity accounts for more than 11% of the fund’s total holdings. Despite the hedge fund’s bullish stance, the stock only gained 3.5% throughout 2014, while shares have dropped more than 2% year-to-date. Nevertheless, as a long-term investment, Citigroup Inc (NYSE:C) has been quite profitable, delivering returns of 55% over the past five years. Furthermore, the company has the backing of other major institutional investors, such as Ken Fisher’s Fisher Asset Management, which holds a large stake of 11.64 million shares.

Kahn Brothers Group was also betting big on Merck & Co., Inc. (NYSE:MRK), with a stake of 1.05 million shares. The stock gained approximately 14% during 2014, after growing by 22.5% the year before, and is a favorite amongst institutional investors and billionaire hedge fund managers. In addition to Kahn Brothers Group, Merck & Co., Inc. (NYSE:MRK) also had the backing of Fisher Asset Management, which owned 6.64 million shares. Phillip Gross and Robert Atchinson were also betting on the stock, as was the hedge fund D E Shaw. In December of 2014, the pharmaceutical company announced the acquisition of Cubist Pharmaceuticals Inc. (NASDAQ:CBST) – which would see it absorb a net debt of $1.1 billion – and which had a negative impact on shares. Nevertheless, the stock regained its upwards trajectory on the back of the shared optimism displayed by investors.

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