Friday, July 5, 2019

Karsan Value Funds: 2019 Q2 Results

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, 2019, KVF gained $1.09 per share, increasing the value of each share to $26.60. KVF outperformed the TSX and Russell 2000 indices, and was in line with the S&P 500 this quarter.

This was a good result in the face of a strong Canadian dollar, as currency headwinds reduced returns by $0.45 per share. Currency movements can have a material effect on any one quarter's results, but are not likely to be a significant factor over the long term.

KVF sold all of its shares of Beazer Homes (as discussed here), Game Digital (which received a buy out offer), and TClarke (improved business conditions), as a result of strong price gains. Offsetting these gains were losses in Francesca's, where KVF exited its position due to the fact that the turnaround was not working out.

Value stocks in general now appear very cheap relative to growth stocks. In the past, this has worked out well for value stocks (at least, on a relative basis), but there is no guarantee that it will again. The persistently low interest rate environment may be contributing to the premium prices for companies trading at high multiples. When inflation will return and encourage rates to rise along with it is anybody's guess, however.

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:

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