By Jason Zweig | Dec. 21, 2012 4:27 p.m. ET
Image credit: Hans Sebald Beham, “Patientia (Patience),” engraving, 1540; Rijksmuseum, Amsterdam
When you get the chance to learn from someone with 84 years of investment experience, you should take it.
The day before he celebrated his 107th birthday, I spoke with Irving Kahn, chairman of Kahn Brothers Group in New York and former research assistant to Benjamin Graham, the father of value investing.
Mr. Kahn’s eyesight and hearing have diminished, but his curiosity, common sense and grasp of market history are intact.
He personifies the virtues that Graham spelled out in his classic 1949 book, The Intelligent Investor, from which this column takes its name. Along with Warren Buffett, Mr. Kahn is one of the last surviving investors who learned directly from Graham.
Mr. Kahn’s portfolio is half in cash, but only because he has finally gotten to the age where he is fully “captive to my own conservative personality,” he said. Individual investors who avoid “doing things you know too little about” still stand a decent chance of outperforming professional investors, especially by sticking to smaller stocks, he told me.
Before I could even ask him a question, Mr. Kahn began peppering me with his own: Who is the new editor of The Wall Street Journal? What is its daily circulation? Who are its toughest competitors?
Mr. Kahn has a knack that more investors should develop: exploiting “structured uncertainty,” or serendipity, which the sociologist Robert K. Merton identified as a key to intellectual discovery.
Mr. Kahn began as a “runner,” or trading assistant on the floor of the New York Stock Exchange, for a small firm called Hammerschlag, Borg & Co. in 1928. After only one week on the trading floor, surrounded by people he considered “crazy,” he begged to be reassigned to the research department.
Mr. Kahn also worked evenings and weekends for H. Hentz & Co., a major brokerage of that era. In his spare time he regularly roamed the building in downtown Manhattan where Hentz was based. Day after day, working his way down one floor at a time, he knocked on the door of any office that had the lights on.
Once, a bookkeeper answered; he turned out to have access to the main profit-and-loss ledgers of H. Hentz & Co. Mr. Kahn asked if he could see them. One set of entries caught his eye: a string of investments that almost never lost money. All were made by “the Benjamin Graham joint account.”
Fascinated to find someone who traded so prudently and profitably, Mr. Kahn sought Graham out—and discovered he worked in the same office building.
He became Graham’s assistant, helping him teach his famous classes at Columbia University’s business school. The main thing he learned from Graham, said Mr. Kahn, is the strength to resist the temptation to trade for a quick buck: “Most of the time, he passed. He wouldn’t go in on anything unless he thought it had a much better chance of making more money than he stood to lose if he was wrong.”
A rule of thumb says that to find the percentage of your portfolio that belongs in stocks, you subtract your age from 100. By that logic, Mr. Kahn should have all his assets in bonds and cash (and a “short,” or negative, position in stocks).
Even so, he has half his personal assets in stocks. He has never invested with borrowed money. “If you command a lot of cash,” he told me, “you can be wrong and still not have to worry.”
He likes agriculture stocks—where, as he put it, “the sun does the work for you.” Also, he sees “a bad need for improved capital investment” in basic industries. Among his favorite stocks: Nam Tai Electronics, a Chinese maker of high-tech components, and Monsanto, the seed and herbicide giant.
In some ways, Mr. Kahn says, these are the good old days.
In the 1920s and early 1930s, when corporate financial disclosures were largely discretionary, “the fellows who owned the securities knew a lot more about them than you could,” he said. Despite the growing dominance of short-term trading, Mr. Kahn believes “it’s much better now” for investors who can be patient.
Discipline has been a key for Mr. Kahn. He still works five days a week, slacking off only on the occasional Friday. He reads voraciously, including at least two newspapers every day and numerous magazines and books, especially about science. His abiding goal, he told me, is “to know much more about the stock I’m buying than the man who’s selling does.”
What has enabled him to live so long? “No secret,” he said. “Just nature’s way.”
He added, speaking of unwholesome lifestyles: “Millions of people die every year of something they could cure themselves: lack of wisdom and lack of ability to control their impulses.”
You could say almost the same thing of investors.
Source: The Wall Street Journal