Dear friends,
I’m delighted to announce that Jag Sriram has joined the fund as a Senior Vice President. Jag will primarily work as an analyst, but will also be in charge of most of the fund’s administrative matters. Before he joined the fund, Jag worked at a private equity firm, and before that as a credit analyst. I have known Jag for four years and know that he has been a passionate value investor at heart for many years. I’m confident that Jag will have a positive impact on the fund’s performance and development. We also moved to new offices at 60 W. Broad Street last month, and I sincerely hope that you will come and visit us here soon.

Olesen Value Fund earned 0.3% net in May vs. 2.2% for the MSCI All-Country World Index and 2.3% for the S&P 500 (INDEXSP:.INX).

Olesen value fund

Olesen Value Fund accumulated two new investments

In May we started accumulating two new investments:

One is a small European company with an excellent position in the industry it operates in, which is generating high margins and returns on capital. The stock trades under 11x adj. trailing earnings, which I think is too low for this above-average business. The true earnings have been obscured by non-cash write-downs and poor performance in a non-core business segment. I think this segment will be divested or curtailed, which should cause the market to better appreciate the value of the business and lead to a higher stock price. As we are still accumulating this investment, I have to keep its identity confidential for now.

The other new investment is a capital structure arbitrage, which involves buying a security and selling short a different security issued by the same company. In this case, my analysis indicates that the gain on the short position will most likely fully offset the loss on the long position in the event the company becomes financially distressed. If the company survives, I think the gain on the long position will be many times greater than the loss on the short position. Given this highly favorable asymmetric risk-reward profile, I think this is a very attractive position. Due to the difficulty of borrowing the securities for the short position, I cannot share the name of this company with you until after we have exited the position.

Olesen value fund summary

Olesen Value Fund: Investment Philosophy

  • Seek to generate substantial capital appreciation over the long term, with minimal risk of loss
  • Define risk as permanent loss of capital; tend to view volatility as opportunity, not necessarily a risk
  • Value investing philosophy, using a bottom-up approach
  • No leverage

Olesen Value Fund: Fund Manager

  • The fund has $30 mil. in assets and is managed by Christian Olesen
  • Virtually 100% of my net worth, except for my cash reserves, is invested in the fund
  • Previously worked as analyst/trader for Xaraf Management, a group within Paloma Partners, a Greenwich, CT-based hedge fund with approx. $2 billion in AUM
  • Graduated from Wharton (Finance, Accounting) and holds the CFA designation