For the second quarter ended June 30th, 2024, KVF gained $8.51 per share, increasing the value of each share to $77.01. This represents a 16% pre-tax return, comparing well with the S&P 500’s 4% return, and the Russell 2000 and S&P/TSX’s low single-digit negative returns. Currency gains helped returns by $0.40 per share in the quarter.
Most of KVF’s $1.7 million in pre-tax gains this quarter can be attributed to just one stock. In 2020, while the financial markets were panicking, I bought shares of a little known Quebecois engineering/industrial company trading at a massive discount to its book value. Shares were trading for about $1 each, though I was kicking myself for not buying them at 50 cents just months earlier. Today, the shares trade for more than $15 each, having doubled this quarter.
Though I’ve been selling the shares all the way up, it still remains an outsized position for KVF because of its massive appreciation over the last few years. The sales were done to reduce KVF’s downside, but so far all they’ve done is reduce its upside! In fact, if I had just taken a massive vacation at the beginning of this quarter, KVF’s investors would have been much better off. The hope is that the proceeds from these sales have been or will be deployed in the next stock that goes this wild, but there are no guarantees there.
There are some small-cap stocks available at favourable prices at the moment, in my opinion. But valuations are nowhere close to being as attractive as they were in 2020; those valuations have fueled KVF’s remarkable returns since then, and are still paying off to this day as described above.
KVF’s income statement, balance sheet and pre-tax/post-fee returns since inception are included below (click to enlarge). Note that securities are marked to market value, and amounts are in thousands of $CAD:
