Wednesday, July 1, 2009

The Fund

I am pleased today to announce the launch of Karsan Value Funds (KVF), a long-term oriented, value investment fund that I will manage. The fund will take equity positions in public companies which trade at discounts to their intrinsic values and where downside risk is low compared to upside potential.

As it can take many years for such companies to return to trading at their intrinsic values, the investment horizon of the fund is of a long-term nature. To that end, investors will be discouraged from short-term dispositions of their securities. Investors will also be unable to sell securities to anyone other than the fund, since new investors may not fully understand the partnership's strategy, and there are certain legal restrictions.

Although the fund will report financial results every quarter, emphasis will be placed on long-term returns, not quarterly results. The fund will likely start out with a capitalization of approximately $400K. As such, using a registered dealer, registering as a dealer, or issuing a prospectus will be prohibitively expensive in the initial year(s). Therefore, the fund's shares are not currently available to the public.

We look forward to providing more information and publishing the first set of results in the near future. Of course, I am always looking for new ideas. If you have any stocks you favour that you believe may fit the investing profile of the fund described above, I'd be happy to hear about them in the comments section. Happy investing!

36 comments:

Gulc Olympics said...

I'm interested in investing in your fund, I've followed your newsletter for maybe a few months now and I'm convinced that this would be a good investment. Can you reply to this comment on how one can invest in KVF?

Santosh Nair said...

Congratulations Sajid!! All the best with your new venture.

Here's a stock idea - Wilshire Bancorp (WIBC). They are a small but extremely conservative bank that caters to the Korean community.
Disclosure - I have a small position in WIBC.

Anonymous said...

congratulations!!!

I have not been leaving msgs these days, but I still come to your blog almost everyday... anyway,,,all the best to you!!!

008

Gold Projects said...

Congratulations, hey be prepare for next challenge

Dividend Growth Investor said...

Saj,

Congrats on launching your value fund. I would be interested in learning more about it.

Best Regards,

Dividend Growth Investor

Alexg said...

congrats and good luck... take a look at EGY

O&G Engineer said...

Good luck. Let us know more.

Ali (the CFA candidate who posted her a while ago)

Silver Forecasting said...

Nice amazing informative blog post, keep it update i really enjoyed very useful information......

Saj Karsan said...

Thanks for the well-wishes, everyone!

Gulc - Unfortunately, tough securities laws make it difficult to have a public offering for such a small company. There are some remote possibilities, however they may not work depending on your jurisdiction. Contact me by e-mail for more info.

For those that provided stock ideas, thanks for those. If I decide to invest, I will write up my thoughts.

PlanMaestro said...

Saj that is great news. It gives hope to some us that plan on following a similar path.

Could please blog the steps that you had to follow and how difficult it was?

And since you asked for tips, I would recommend you to check shipping stocks. Most of them are highly leveraged and dependent on spot prices. But some of them, a few of them, have long term charters and strong finances. I will not give names but you can get an intro in Dhando Investor with the stories of Frontline and Knightsbridge (page 123)

Also take a look to MLPs that have cut distributions. The market reaction has not been proportional to the sin.

Sivaram Velauthapillai said...

Good luck with your endeavour Saj. I have been following this blog on & off for a while and, I have to say that you are one of the most insightful value bloggers around. You seem like a good fundamental analyst and hopefully your skills will translate into profits for your fund. All the best.

Saj Karsan said...

Thanks, Sivaram!

longlake said...

best of luck. have a look at MGIC and ZCL.TO

disclosure: long both

longlake said...

oh ya, MGIC (not ticker MTG)

Saj Karsan said...

Thanks, Longlake!

Magic Software looks interesting. Excellent cash position relative to market price. If you're someone who is familiar with the enterprise software integration industry, you might see a great price here.

I looked at ZCL last year and I find it pretty fairly valued even at these reduced levels, though maybe things have changed in that time.

longlake said...

I think zcl is conservatively worth $6 and $8 at the high end, once the economy improves.

Anonymous said...

Saj, congrats. I am interested in investing in your fund. Is this a hedge fund, offshore, etc? Please reply. Thanks!

Robert Price

Saj Karsan said...

Hi Robert,

Unfortunately, I can't sell shares to the public, as it's a small fund and the securities laws in my jurisdiction make it expensive to become eligible. However, there are some exemptions; e-mail me if you would like more information.

Anonymous said...

You might want to take a look at Pizza Inn (PZZI). Very small cap (about $13 million market cap), easy to understand, reasonably priced, buying back large amount of its outstanding shares.
Jimmymac - Long PZZI

AKwon said...

hey saj, I found a company with a great balance sheet. Its QLT. It has more current asses-total liability than its market cap, and it just sold a division of its company for 230 mil. Of course its not 230 mil upfront cash. But factoring in even 1/4 of that they have more cash than its market cap. The only problem I see with this company is that it only had two drugs out in the first place, and the 230 mil came from selling one of there two drugs. Also their next drug in R&D is in phase I. It might take 7-10 years before this drug is profitable, if it even passes the first 3-4 stages. Also biotech's inventory isn't as simple as nuts and bolts so it could be outdated, and written off real fast. So I am pretty much torn, fearing all the contingencies of a bio tech company, loving it because of the strength of its balance sheet as well as its strong business plan. As a bio tech company they understand they will not beat Baxters, or Amgens, so it seems they are re-structuring to keep costs low then selling divisions off as they develop new products. I would definitely love to hear what you think.

Akwon said...

I must excuse myself for my previous post, I was wrong on a few accounts. It seems they have 2 others developments going on. Also I'm not sure if they have been selling part of their company because it is their business plan or because of the legal problem it had. As one can see how the unusual expense deteriorated their profits the past few years.

Saj Karsan said...

Hi Anon,

PZZI has excellent returns on equity, but it trades at a P/B of 4+, so it will have to continue to grow successfully to be worth a buy here. However, if you understand their advantage and believe they will continue to grow with those kinds of returns, it looks good.

Varun Kumar said...

How do you manage risk in this Fund, Futures and Options ?. Considering this is a "long term fund" DO YOU ACTUALLY NEED TO DO IT AT ALL ? you dont have the onus to mantain a positive eps , therefore i dont think u need to go for those weapons of mass destruction , do u ?

Saj Karsan said...

Hi Varun,

The Fund does not utilize futures or options to manage quarterly volatility, as the focus is on the long-term as you said.

Aaron said...

Hey Saj, I really enjoy reading your blog and have a fledgling blog of my own. I posted a stock idea that I think fits your strategy nicely and I would love to hear your thoughts/questions/criticisms.

Here is the link,

http://valueinvestorblog.wordpress.com/2009/12/07/asta-funding/

Worth noting that the 10-K is due out very soon (investor relations told me they are in their quiet period right now) and the stock was up 15% on friday. I've been following it for a few weeks now.

Aaron

Saj Karsan said...

Hi Aaron,

I'll try to take a look in the coming week and let you know if I find anything interesting.

-Saj

smanchur said...

Saj

I have an idea that might be worth looking at. Conn's Inc (CONN). The company has been using in store financing to make sales recently, leading to some concern. Let me know what you think.

smanchur said...

Saj

Another idea worth looking at is Matrixx Initiatives (MTXX). Very strong Balance Sheet trading at roughly a 25% discount to book value. Earnings have remained relatively strong even after the recall of its two major products. The concern is litigation about its nasal products which had been recalled in July. Well worth digging in to.

Saj Karsan said...

Hi smanchur,

I've discussed CONN here. Yeah MTXX might be interesting, but one would have to understand the prospects of the lawsuits quite well to be confident of a valuation.

smanchur said...

Saj

You've probably seen this idea floating around for a while now. TravelCenters of America (TA) is trading at a large discount to book value with strong current assets relative to current debt. Management seems to have cut costs in the last 12 months to help offset declining revenues. A slight up tick in vehicles traveling on the interstates should put this company back in the black. Even if this does not happen for a few quarters the balance sheet should be strong enough to withhold. What do you think?

Saj Karsan said...

Hi smanchur,

I'll take a look in the near future and let you know if I find anything interesting.

T. said...

any ideas on DVR, YTEC or SYY?

thanks!

Saj Karsan said...

Hi T.

I'll take a quick look sometime soon and let you know if I find anything interesting.

-Saj

smanchur said...

Saj

I am wondering what the best way to keep track of financial results is. I want to know the return I receive on individual stocks as well as my overall portfolio, including cash positions. Data fields would include symbol, quantity, purchase price, purchase date, current price, selling price, selling date, return, annual return, dividends, etc. I also want to compare these results to a benchmark, like the S&P 500. Any ideas? If there is a Microsoft Excel option that would be perfect. Please help.

Sheldon

Saj Karsan said...

Hi Sheldon,

I'm sure there is software for this purpose that you can purchase, but I can't really recommend any offhand. Myself, I have found Google Spreadsheets rather intuitive in this regard, but you have to do some of the work to set it up yourself, which I'm not sure if you're into.

Investment Advice said...

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