Kahn Brothers’ Top Stock Picks: Merck & Co. Inc. (MRK) Overtakes Citigroup Inc. (C) as Top Holding

Kahn Brothers Group is a New York-based hedge fund firm founded by Irving Kahn, Thomas Graham Kahn and Alan Kahn in 1978. Irving Kahn, the firm’s founding chairman who passed away last year at the age of 109, served as Benjamin Graham’s teaching assistant at Columbia Business School in the 1930s. Therefore, Kahn Brothers’ investment philosophy strongly leans on Graham’s original “discount to net asset purchase” model. The New York-based asset manager, currently overseen by co-founder Thomas Graham Kahn, seeks to invest in out-of-favor equity securities that trade at undervalued or attractive price levels. Although value investing hasn’t yielded great results in the past several years, this investment philosophy will definitely show its full power once again in the foreseeable future. With that in mind, let’s have a look at Kahn Brothers’ five largest equity holdings at the end of the March quarter.

At Insider Monkey, we track around 730 hedge funds and institutional investors. Through extensive backtests, we have determined that imitating some of the stocks that these investors are collectively bullish on can help retail investors generate double digits of alpha per year. The key is to focus on the small-cap picks of these funds, which are usually less followed by the broader market and allow for larger price inefficiencies (see more details about our small-cap strategy).

#5. New York Community Bancorp Inc. (NYSE:NYCB)

– Number of shares owned by Kahn Brothers as of March 31: 2.71 Million

– Value of Kahn Brothers’ holding as of March 31: $43.15 Million

Kahn Brothers reduced its stake in New York Community Bancorp Inc. (NYSE:NYCB) by 39,511 shares during the March quarter to 2.71 million shares, which were valued at $43.15 million at quarter-end. The multi-bank holding company agreed to acquire Astoria Financial Corp (NYSE:AF) in the final quarter of 2015, which will cause the company to exceed the $50 billion threshold for a Systemically Important Financial Institution (SIFI). As a result, the soon-to-be combined company will be subject to stricter capital requirements, liquidity requirements, dividend limits, among other things. Under the terms of the October deal, Astoria shareholders will receive one share of NYCB common stock and $0.50 in cash for each Astoria share. Shares of New York Community are down 10% since the beginning of 2016, which has pushed its dividend yield to 4.64%. David Harding’s Winton Capital Management reported owning 3.13 million shares of New York Community Bancorp Inc. (NYSE:NYCB) in its 13F for the March quarter.