Karsch Capital Up 5.6% Till Q3, Gains From Long AAPL & Short FB

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Karsch Capital Management, founded by Michael Karsch, gained 1.3 percent in last quarter, which takes the year to date returns to 5.6 percent through the three quarters of 2012. Overall, the fund profited from longs but detracted in short positions. The losing short positions were in hedges, retail and industrial companies. KCM launched a UCITS fund in the beginning of October. The total assets under management of KCM are in the range of $2.2 billion.

In longs, Karsch Capital profited from eBay Inc (NASDAQ:EBAY), Express Scripts Holding Company (NASDAQ:ESRX), Apple Inc. (NASDAQ:AAPL), Tyco International Ltd. (NYSE:TYC) and Kansas City Southern (NYSE:KSU). In the short portfolio, the performers included, Facebook Inc (NASDAQ:FB), Best Buy Co., Inc. (NYSE:BBY), Li & Fung Limited (HKG:0494), TD Ameritrade Holding Corp. (NYSE:AMTD) and Banco Santander (Brasil) SA (NYSE:BSBR). The under-performing long positions were, BEAM Inc (NYSE:BEAM), Citrix System, Inc. (NASDAQ:CTXS), and Humana Inc. (NYSE:HUM).

Karsch has gained in its long only strategy, which has returned 63 percent since inception (2006), while the S&P 500 has gained 30 percent in the same period. The performance will rank KCM in the top of Morningstar’s five-year performers.

In the quarterly investor call, Michael Karsch discussed his bearish thesis on quick service restaurants, like McDonald’s Corporation (NYSE:MCD) and Chipotle Mexican Grill, Inc. (NYSE:CMG). These companies have also reported poor earnings in the last quarter. Both restaurants are facing tough competition from peers like, Burger King Worldwide Inc (NYSE: BKW), The Wendy’s Company (NASDAQ:WEN), and Dunkin Brands Group Inc (NASDAQ:DNKN).

He also talked about the higher standard of service and product quality provided by US cable broadband services, which is posing difficulty for companies like AT&T Inc. (NYSE:T)’s and Verizon Communications Inc. (NYSE:VZ). Moreover ring bell operator companies are losing market share to cable companies. In this respect, KCM favors Comcast Corporation (NASDAQ:CMCSA), Time Warner Cable Inc (NYSE:TWC), Charter Communications, Inc. (NASDAQ:CHTR), and Cablevision Systems Corporation (NYSE:CVC).

Karsch also talked about the considerable growth potential of AIA Group Ltd (HKG:1299), especially after American International Group, Inc. (NYSE:AIG) sold most of their stake in AIA. KCM bought AIA Group Ltd (HKG:1299) stock when AIG sold it. The fund also holds a position in AIG, although the size was reduced to some extent recently. KCM may add to the position in the event of the public offering from American International Group, Inc. (NYSE:AIG), expected later this month. KCM also holds a position in Capital One Financial Corp. (NYSE:COF) and believes that the stock is undervalued and the company has a lot of potential, which was evident in the recent earnings report that exceeded Krasch’s expectations.

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