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 fourth quarter ended December 31st, 2013, KVF lost $0.05 per share, reducing the value of each share to $16.73. In each of the four quarters previous to this one, KVF had outperformed both Canadian and US markets; that streak came to a halt this quarter.
Still, 2013 was a great year for the fund, with KVF having returned 38% after taxes and other costs. This level of return is not likely to persist, as the strong tailwind provided by the broad market (the S&P 500 returned 30% while the TSX gained 10%) is unlikely to repeat.
The fund's underperformance this quarter was due to two main factors. First, what I believe was a poor decision on my part to invest in Aeropostale, as further discussed here.
Second, a few companies in the portfolio saw their shares fall after issuing their interim reports. In most of these cases, I view the problems faced by these companies as either temporary or unrelated to their intrinsic values. Therefore, in some cases, more shares of these companies were added to KVF's portfolio due to the increased attractiveness of the prices of these issues.
Mitigating the underperformance this quarter were price gains in Best Buy, InfoSonics and Nortech (as described here, here and here, respectively), in which KVF no longer owns any shares. Also mitigating the loss this quarter were currency gains; 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 35 cents.
As the US market has continued its ascent, over time KVF's portfolio has shifted towards non-US (especially Canadian) companies. This is not on purpose or the result of a macro-economic call; it's just easier to find value outside of the US as a result of that country's strong share price gains. This shift will act as a drag on KVF's relative performance (and likely already did, throughout 2013) if the US market continues its outperformance of late. But that's okay; the fund's focus is on capital protection and appreciation over the long-term.
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):