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October 30th, 2014

Investing

Time-Tested Advice for Long-Term Investors

Andrew Feinberg

By Andrew Feinberg

Published August 18, 2014

Time-Tested Advice for Long-Term Investors

There is no family on Wall Street like the Kahns. Kahn Brothers, which was founded in 1978 and today manages almost $1 billion, has produced superb results. From the start of 2000 through the end of March 2014, its stock picks returned 11% annualized, beating Standard & Poor's 500-stock index by an average of 7.8 percentage points per year. Founder Irving Kahn is, at 108, the world's oldest money manager, and he still goes to the office three days a week. He scoffs at any thought of retirement. "Aside from my marriage and family, nothing in my life has been as interesting as this job," he says.

Reaching triple digits seems to be the norm in the Kahn family. Irving Kahn is the last of four siblings who all reached the century mark. The Albert Einstein College of Medicine is studying their genes.

The biggest influence on Kahn's investing life was Benjamin Graham, for whom Kahn served as a teaching assistant at Columbia University. "The main lesson I learned from Ben was the distinction between investment and speculation," says Kahn. "It's still the most important lesson an investor needs to know." Kahn named his third son Thomas Graham Kahn.

Longtime holding. The Kahns are ultra-patient value investors who often hold stocks for 20 years. They bought shares of New York Community Bancorp (symbol NYCB) in 1993 for a bit more than $1 apiece (adjusted for subsequent splits). Today, the bank trades at $16 and boasts a 6.3% yield.

The obsessive Irving used to read annual reports at the dinner table, says son Tom, 72, who runs Kahn Brothers day-to-day. Tom, who sits behind Graham's old desk, sounds less obsessive. "Ben Graham was very important to us, but he had a more formulistic approach than we do," Tom says. "We also think management is extremely important. We prefer to eyeball the CEO and take a read on his character."

Tom has already had two meetings with Mark Thompson, the CEO of the New York Times Co. (NYT), the firm's largest holding. "We get very good vibes from Thompson," Tom says. "He understands that the Times is a brand, like Coke or Nike."

Tom says the Times possesses an asset that many investors are unaware of. In 2019, the firm can buy back its share of the new Times building for $250 million. "That share is already worth a billion or a billion and a quarter," he says. What about growth? "The Times is a factory that produces high-quality journalism," Tom says. "There will always be a global demand for that."

What has the firm been buying lately? "We're nibbling on BlackBerry (BBRY)," says Tom. "[CEO] John Chen is a good man." The Kahns like the Canadian company's phone and network security business--arguably the best in the world--and the fact that the stock, at $11 a share, sells for close to the company's liquidation value.

Tom says nothing about BlackBerry's profits, which have been nonexistent since 2011. In fact, the subject of earnings seems to disgust him. "The obsession with earnings results is crazy," he says. "Does a company beat the number it helped make up? Who cares? The important question is, Do you have a good captain and is he steering the company in the right direction?"

Will Tom follow in his father's footsteps, the ones that lead to the office forever? Perhaps. Says Tom, "I have no plans to retire, but I'd like to work less and travel more."

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Andrew Feinberg, a contributing columnist for Kiplinger's Personal Finance, manages a New York City-based hedge fund called CJA Partners. His fund owns shares of BlackBerry and the New York Times Co.

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