My daily perusal of the SEC filings is turning up more 13F filings by folks who don't feel the need to hold the information until milliseconds before the deadline.
The vast majority of these will come in late next week and over the weekend but we have a few completed by the value and activist investors I most admire and steal from every chance I get.
Kahn Brothers is one such firm that files early almost every quarter. This firm has connections all the way to the birth of value investing. Founder Irving Kahn was a teaching assistant for Benjamin Graham at Columbia University. He is now 109 years old and still comes to work most days to search for safe and cheap stocks to buy for the firm's investors.
I looked first at what the value firm has been selling. They appeared to have trimmed a lot positions, but only a little in the final quarter of the year. I look at selling to gain ideas of what I may want avoid or consider selling myself if I own a particular stock. I also once again review the appeal and potential of value and patience.
As an example, the firm reduced its stake in SLM (SLM) a lender specializing in student loans by a little over 20%. Kahn Brothers started buying this stock back in 2010 at about $4.25. That was about half of book value at the time and the firm was selling the stock late in the year for about $9.50 for a compound rate of return of over 20%.
Kahn Brothers was also buying shares of IDT (IDT) back in 2010 at around $4.50 a share, which was about 60% of book value at the time. They reduced their position in the telecommunications by about 20% in the fourth quarter at prices averaging somewhere around $17 a share for a compounded annual return of roughly 35%.
They still hold more than 500,000 shares at today's price of $21, a return of 40% annually. The combination of value and patience works over time. Checking the leading deep value investors stock sales each quarter is a powerful reminder.
The firm did little buying during the third quarter. It should come as no surprise that two of the three stocks they bought were in the energy sector. Shares of Patterson UTI Energy (PTEN) have been hammered in the last six months as prices have fallen by 47%.
Patterson UTI is an onshore contract drilling with operators in the United States and Canada. Kahn Brothers came into the quarter owning 626,000 shares of the company and the outlook is frankly not pretty with the rig count declining quickly in its major markets.
Rather than panic and dump their shares, Kahn Brothers was a buyer as prices fell and they increased their stake by more than 40% to 890,000 shares.
I ran a quick check on the numbers and Patterson is a well-financed company that appears to have a margin of safety. They have very little debt with a debt to equity ratio of just .24 and earning are 11x annual interest payments. They are profitable and should be able to eke out earnings even under current conditions.
The company pays a dividend and the current yield is about 2.5%. The shares are trading at 97% of tangible book right now so I am nor rushing to buy it at this point. But if energy stocks continue to decline, I will consider adding it to my current mix of safe and cheap energy stocks.
The firm already owned 844,000 shares of BP (BP) at the end of October but added a few more as the price fell in the last quarter of the year. They were a big buyer of the stock in late 2013 and early 2014, and added an additional 1% as the oil rout took hold.
Kahn Brothers also made small additions to its position in BlackBerry (BBRY) in the quarter. They have been a pretty consistent buyer of the former cell phone leader. It appears that most of their buying was done on price swoons in the last quarter of 2013 and the summer of 2014 so their cost is likely under $8 a share. The firm increased its stake by 18% to 1.8 million shares.
Irving Kahn made his first investments before the crash of 1927, His first trade was a short of copper company before the crash and he has been using the principles of value investing to make money ever sense. He taught these lessons to his son Thomas, the current CEO, and the firm they started back in 1978 has continued to prosper.
When someone with knowledge gained from Ben Graham directly and over eight decades of experience, it just makes sense to pay attention.