Yes and Not Yes

Barron’s interviewed Irving Kahn in October 7, 2002. Kahn was then 96 years old and still running an investment management firm in New York (right now he’s still alive at 102). Also, Kahn was one of the oldest active investors and among the few who sold stocks short before the 1929 Crash.

At the time this article was published, the markets were still feeling the effects of the tech bubble burst. The S&P 500 was down about 32% ytd and down about 49% from the last peak. I believe that some of Kahn’s picks from 2002 are back in the same position they once were. The same stocks might also be suitable for purchase for the same or similar reasons. So here are some select quotes from the ‘02 interview and my short comments.

Irving, for instance, is a nuclear-power proponent, arguing that it will continue to play a vital role in electricity generation around the world. This led the Kahns to an investment in USEC, the leading supplier of enriched uranium to the nuclear industry. The formerly government-owned USEC now trades under 7, below its book value of more than $11 a share.

USEC (USU) eventually rose to the lower 20s by mid 2007. Right now, USEC trades at 4.05, which is far below its current book value of approximately $12 a share. Its trading at a deeper discount that it was over six years ago.

Irving also likes Seaboard, a thinly traded conglomerate run by the secretive Bresky family that trades at about 220 a share, a little more than half its book value of $363 a share. Seaboard has a large hog operation in rural Oklahoma and also owns Seaboard Marine, one of the largest cargo operators in the Caribbean and South America. The company amounts to a Cuba play because it’s poised to benefit if U.S. trade relations with Cuba are normalized.

“You have to think of Seaboard as an investment in a private company and not pay attention to the stock quote,” Tom says, adding that he thinks the company is worth at least double its current price.

It turned out that Seaboard (SEB) was worth way more than double its price. Seaboard appreciated rapidly, reaching a price of 1,800 in 2005. Seaboard eventually peaked at around 2,700 in 2007 and is now trading at 1,036 with a price to book ratio of 0.89.

Alan [Kahn] is partial to American National Insurance, a low-profile Texas life insurer whose thinly traded shares are around 70, a discount to their book value of $110. “American National is a wonderful statistical bargain,” he says. The stock trades at 14 times projected 2002 profit and yields 3.5%. Alan thinks the controlling Moody family eventually will sell it. “This is a stock that could double or triple overnight, but they aren’t going to tell you ahead of time when that will happen,” he observes.

Right now, American National (ANAT) is trading at 67 with a book value of 127. That’s a 52% discount.

I hope these old ideas are helpful for the present. As always, do your own due diligence.