Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Merck & Co., Inc. (MRK), Pfizer Inc. (PFE) & More: Stocks a 106-Year-Old Ben Graham Student Loves the Most

Page 1 of 2

Benjamin Graham’s oldest student, who is still alive, is 106-year-old Irving Kahn. He was taught the principles of searching for large profits in small-risk investments by the father of value investing. He has been running Kahn Brothers since 1978. The fund mainly invests in undervalued and out-of-favor stocks on the market. It would be interesting for value investors to find out where a 106-year-old Benjamin Graham student has invested money.

Pfizer Inc. (NYSE:PFE)

Irving Kahn’s top position

The top position in his portfolio is Pfizer Inc. (NYSE:PFE) with nearly 2.5 million shares, accounting for 10.7% of his total portfolio. Pfizer Inc. (NYSE:PFE) is considered one of the largest global biopharmaceutical companies, operating under five business segments: Primary Care, Specialty Care and Oncology, Established Products and Emerging Markets, Animal Health, and Consumer Healthcare.

The majority of its revenue, $20.2 billion, or 34.2% of total 2012 revenue, was generated from the Established Products and Emerging Markets segment. The Primary Care segment ranked second with $15.6 billion in revenue, while Specialty Care and Oncology contributed around $15.46 billion in sales.

Pfizer Inc. (NYSE:PFE) is really a cash cow business with consistent positive cash flow in the past 10 years. While operating cash flow has increased from $11.74 billion in 2003 to more than $17 billion in 2012, its free cash flow rose from $9 billion to more than $15.7 billion in the same period. I personally think that Pfizer Inc. (NYSE:PFE) would attract a lot of risk adverse income investors as it has consistently paid dividends for the past 10 years. In 2012, it paid out $0.88 per share in dividend.

Pfizer Inc. (NYSE:PFE) also has a strong balance sheet. As of December 2012, it had $81.3 billion in total stockholders’ equity, $32.7 billion in cash and short-term investments, and around $37.5 billion in debt. The company also recorded the pension benefits at around $11.3 billion. Interestingly, Pfizer Inc. (NYSE:PFE) had a huge amount of interest-free loan from the government, which were deferred tax liabilities of nearly $21.6 billion.

At around $29 per share, Pfizer has around $209 billion in total market cap. The market values Pfizer at 8.1 times EV/EBITDA. The dividend is quite decent at 3.1%. I think Pfizer is quite a safe investment for investors with its strong and consistent cash flows, diverse patent protected drug portfolio, and the huge ability to fund R&D activities.

And his fourth biggest position

The same conclusion could be drawn for giant global healthcare company, Merck & Co., Inc. (NYSE:MRK). Indeed, Irving Kahn also owns more than 1 million shares of the company. As of December 2012, Merck & Co., Inc. (NYSE:MRK) was the fourth largest position, accounting for 7.7% of Kahn’s total portfolio. In the past ten years, Merck has also generated consistent positive operating cash flow and free cash flow. In 2012, while its operating cash flow was more than $10 billion, its free cash flow was more than $8 billion.

Page 1 of 2
Loading Comments...