Friday, January 7, 2011

Karsan Value Funds: 2010 Q4 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 fourth quarter ended December 31st, 2010, KVF earned $0.55 per share, bringing the value of each share to $13.05.

Once again, the market was strong this quarter, providing a tail wind for many stocks in the portfolio. As such, most portfolios will have made money this quarter. But the true test of whether this (or any other) fund is adding value will take place over a period of several years and through both bull and bear markets. So far, the fund has only been in existence for 1.5 years.

In addition to the rising markets, the following developments contributed to this quarter's positive results:

1) Fund holding Acorn International increased significantly in price, allowing for a profitable exit, as discussed here.

2) Fund holding TSR Inc. also saw a significant price increase, allowing for another profitable exit, as discussed here.

Depressing the fund's performance this quarter was a change in the USD/CAD exchange rate. Had the USD/CAD exchange rate finished the quarter at the same level at which it started the quarter, earnings would have been $0.24 higher than they were.

Currency movements that have negatively affected results have been a continuing trend over KVF's short history; were the USD/CAD exchange rate to immediately return to the level at which it was when the fund opened 1.5 years ago, the fund would see a $1.15 rise in its per share value! (Of course, this may not happen soon, or ever for that matter.) Currency movements are likely to continue to play a significant role in results taken over short (e.g. quarterly) reporting periods. However, their contribution to performance over the long term is likely to be muted.

Looking forward, market sentiment appears strong, which suggests downside risks have increased: sentiment can turn in a hurry, which could result in a pullback. Nevertheless, there appear to be pockets of opportunity in the market. For a discussion of these apparent pockets, see the latest additions to the Stock Ideas page.

KVF's income statement and balance sheet are included below. Note that securities are marked to market value, and amounts are in $CAD:


Chris said...


How much do you have allocated to cash right now? The market scares me right now. Its attitude strikes me as ebullient but I think it ignores the risks from Europe/China and the states and municipalities. Do you think that stocks trading at a significant discount to intrinsic value will fair relatively better if sentiment turns negative?

Saj Karsan said...

Hi Chris,

I try not to make macro-economic bets because I'm not sure I can add any value doing that. Therefore, I stick to buying undervalued businesses, and expect that strategy to win out in the long-term even if there is short-term volatility along the way.

Chris said...

Yes I don't disagree but cash has the value of giving you the option to buy strong businesses for cheap when the market dives. Therefore I think it is important to have ample cash on hand to take advantage of this when following a value investing strategy. After all, it is when the market dives that finding cash is most difficult. The difficult part, I think, is determining what the proper amount of cash to hold is.

Anonymous said...

Where do you see what positions your fund currently holds? Or held at the end of your quarterly reports?

Saj Karsan said...

Hi Anon,

That info is not currently published.

Suhit Anantula said...


I am from Australia and I am interested in the currency risk aspect. How are you certain that the long term risk will be muted?

Saj Karsan said...

Hi Suhit,

I don't think I can summarize this well in a short comment. I'll try to put up a post on this subject.