2020

Dear shareholders,

The largest equity positions in the Vltava Fund portfolio as of the beginning of 2021 were in Berkshire Hathaway, Magna Corporation, Samsung Electronics, Sberbank and Crest Nicholson. Our portfolio is concentrated into investments we consider as offering the best combination of return and risk. Sufficiently attractive investment opportunities are quite rare, and therefore we strive to make the most of them. In the course of last year, there were more changes in our portfolio than usual. There are three reasons for this: large price swings in the markets during the year, a great inflow of new money to the Fund in the second quarter of the year, and our intention to modestly broaden the portfolio. At present, we hold 22 stock positions. The 10 largest of these make up about 77% of our portfolio.

At the beginning of 2021, the Fund’s portfolio was valued by the market at just under 12 times the earnings from the past 12 months. This means that in the last year the net profit of our companies was about 8.3% of their market capitalisation (i.e. that was the Earnings Yield, which is the inverse of the P/E). This, in our opinion, is a very attractive valuation in view of the quality and prospects of these companies, and particularly in comparison with the low interest rates.

Our estimate of the current fundamental value of the Vltava Fund portfolio at the end of 2020 is about 25% greater than the Fund’s present NAV. Through the year, the fundamental value of the portfolio should grow considerably again after last year’s decline, and particularly due to the anticipated substantial growth in profitability of the individual companies compared to 2020.

Development of the portfolio’s fundamental value is essentially influenced by three things: First, our estimates as to the fundamental values of the individual companies. Second, the passage of time itself because the fundamental value of a company develops over time and has a strong tendency to grow as more and more of its earned capital is reinvested. And third, our transactions as we exchange companies with lower potential for companies with higher potential. We cannot influence the prices of individual stocks, but we can choose which ones we invest into, and that is where we are fully concentrated. Long-term growth in the fundamental value of well-chosen stocks will also pull up their prices. This is one of the few things we can rely on.

In the past 12 years, that is to say since the Great Financial Crisis and at the same time since the change of our investment strategy to the one to which we adhere to the present day, Vltava Fund’s NAV has grown by 308%. The world’s stock markets have gained 196% during the same period.

In the next part of the annual report you will find, as usual, the quarterly letters to shareholders from the past year (together they illustrate our investments and opinions during that time) in addition to more detailed data, including complete historic results and audited financial statements.

We thank you for your support and patronage in past years, and look forward to our cooperation in the years to come.

Daniel Gladiš, February 2021

For more information

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