Karsan Value Funds (KVF) is a value-oriented fund, as described here. 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 second quarter ended June 30th, 2013, KVF earned $1.64 per share, increasing the value of each share to $15.72. This was an excellent quarter both in absolute and relative terms, as KVF handily outpaced the declining Canadian market and the low single-digit gains of the S&P 500 over the same period.
Contributing to the fund's recent gains were strong returns from GameStop, Ridley, Cisco, Manhattan Bridge Capital and Microsoft (discussed here, here, here, here and here, respectively). As a result of the changes in prices of these companies, the fund no longer holds positions in any of these firms.
Currency gains also contributed meaningfully to results. Had the CAD/USD exchange rate finished the quarter at the same level at which it started the quarter, earnings per share would have been lower by 44 cents. Currency effects are likely to continue to play a significant role in short-term (e.g. quarterly) periods, but are unlikely to be a material factor in the long-term.
Many of the fund's positions have appreciated significantly over the past three quarters, while new opportunities for investment have not presented themselves at the same rate. At the same time, your portfolio manager is likely to be buoyed by overconfidence thanks to strong recent results. All of these factors can contribute to a lowering of standards (i.e. margins of safety) within the portfolio.
While I am not immune to these biases, I am cognizant of them, which is the first step towards ensuring the standards of the portfolio are maintained. Further steps include spending a lot of time turning over rocks and a willingness to question the validity of negative sentiment, in order to find the deepest value opportunities out there.
The good news for investors is that a great deal of my personal net worth is in this fund, so our interests are aligned in ensuring that preservation of capital is not sacrificed in exchange for chasing poor risk-adjusted returns.
KVF's income statement and balance sheet are included below (click to enlarge). Note that securities are marked to market value, and amounts are in thousands of $CAD (except share and per-share amounts):