Friday, January 2, 2015

Karsan Value Funds: 2014 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, 2014, KVF gained $0.26 per share, increasing the value of each share to $19.36. It was not a great quarter, however, as portfolio returns were negative; returns were propped up by currency movements that boosted the overall portfolio by $0.35 per share.

As such, KVF underperformed both the S&P 500 and the Russell 2000 this quarter, while slightly outperforming the S&P/TSX. Still, it was a good year overall as KVF returned 16% for the year, which is slightly above the S&P 500's return for the year, and well above the single digit returns of the S&P/TSX and Russell 2000.

Detracting from returns this quarter was a permanent loss of capital in a small-cap stock to remain unnamed for now. I believe management of this company made misleading statements, which formed part of the basis for KVF's investment. Unfortunately, legal recourse does not appear feasible as the potential upside from a favourable judgment from a company of this size does not compensate for the time/expense associated with pursuing one. I have made some changes in process so that the chance of such a mistake reoccurring is reduced.

Offsetting these losses were gains in the shares of Hammond Manufacturing (as discussed here), in which KVF no longer holds any shares.

Finding value in the market has become more difficult as prices continue to advance. As a result, KVF's portfolio continues to shift towards smaller and more international names in order to maintain risk and upside potential levels. While prices of energy/oil names took a beating this quarter, outside of exceptional circumstances KVF will continue not to invest in this sector because margins of safety are difficult to ascertain with a reasonable degree of certainty.

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):


Nat Hunt said...

Congrats on a good year, Saj, and good luck in 2015.

Josh Maher said...

Congrats on the progress Saj! Looking forward to an even better 2015.

Anonymous said...

Hey Saj,
congrats on the performance!
After >5 years I'd be very interested in the annual and cumulative performance figures ... do you mind sharing?

Saj Karsan said...

Thanks guys!

Anon, yes I have posted all the results here:

You should be able to calculate anything you want from that.