Barron’s features a wonderful article on Irving Kahn this weekend. Today is Mr. Kahn’s 100th birthday. Mr. Kahn served as served as the second teaching assistant to Benjamin Graham at the Columbia Business School after Leo Stern. He helped Ben Graham with some of the statistical work for his seminal book, Security Analysis.
He continues to relish in his work:
He's in the office every business day, reading scientific periodicals, annual reports and newspapers in search of undervalued stocks in the tradition of his friend and mentor, Benjamin Graham, widely considered the father of value investing.
The Kahn Brothers’ website conveys the essence of value investing:
“Kahn Brothers employs a bottom-up stock selection approach, and invests in undervalued equity securities that are usually out-of-favor in the market. We select securities one at a time based on assets, operating performance and long-term fundamental business prospects. Unlike many investment managers, our staff spends a considerable amount of effort evaluating the downside risk of every investment. We are long-term investors with a typical 3-5 year time horizon. If there are very few values to be found, we are comfortable holding cash.
Value Investing is a philosophy highly dependent on price. Security selection is therefore a process of identifying situations where companies trade at a significant discount to their liquidation or going-concern value. This discount, defined as the margin of safety, is critical in two respects. A large margin of safety component reduces the risk of capital loss. Further, superior returns often result when the marketplace recognizes the true value of the enterprise.
The market's recognition of value is often dependent on a catalyst - an event which corrects the margin of safety discount. The identification of potential catalysts is therefore an integral part of our research process. Without a catalyst, a prospective investment can remain underpriced indefinitely and thereby result in a mediocre return.
Kahn Brothers views investing as a combination of art and science. Each investment decision has both quantitative and qualitative aspects. While the former can be readily duplicated by a novice, the qualitative component is acquired only from decades of analyzing investment opportunities. A key element to outstanding investment performance is the discipline and patience to maintain principles that stand the test of time.”
Happy Birthday Mr. Kahn!