Friday, October 9, 2009

Karsan Value Funds: 2009 Q3 Results

Karsan Value Funds (KVF) is a value-oriented fund, as described here. Though many readers have expressed an interest in investing, due to securities regulations the fund is not open to the public at this time. Should that change in the future, there will be an announcement on this site.

For the third quarter ending September 30th, 2009, KVF earned 79 cents per share, bringing the value of each share to $10.82. The markets had a very strong quarter, buoying funds of all types, therefore these earnings should not be considered particularly exceptional. The true test of whether this fund is adding value will take place over a several-year period that includes both bear and bull markets.

Hindering performance this quarter was the weak US dollar, which reduced the value of KVF's US investments as measured in Canadian dollars (which is KVF's reporting currency). Had the US dollar closed this quarter at the same value at which it opened the quarter, earnings this quarter would have been 38 cents per share higher. As explained previously, there are no plans for KVF to hedge its currency positions, and as a result currency movements can have a material effect on quarterly results, but are not likely to be a significant factor over the long term. While the weak US dollar has hurt this quarter's results, it has allowed KVF to buy US stocks with a strong Canadian dollar, which will likely help results over the long term.

Aiding results this quarter were exceptional price run-ups in two stocks in which the fund now no longer holds any positions: LCA-Vision and Twin Disc.

Looking ahead, the market run-up has increased the downside risk and reduced the upside potential of the indices. However, in my opinion KVF still holds several securities at exceptional prices. Hopefully I am correct and the fund will benefit from these price discrepancies in the coming quarters.

KVF's income statement and balance sheet are included below. Note that securities are marked to market value.


Ankit Gupta said...

Maybe this is asking too much, but you might want to separate the marketable securities from cash and risk free investments so that people can get a sense of how invested you are, what kind of returns you see on invested capital, etc.

Saj Karsan said...

Yeah, I understand where you're coming from, but as a private fund there is no such requirement and so this is done on purpose for several reasons.