Zeke Ashton will be speaking at the upcoming Value Investing Congress taking place May 6th & 7th in Las Vegas. To learn more and for a special discount to attend, please visit www.ValueInvestingCongress.com/VIL.

Overall, we are satisfied with how the Fund’s long book performed in 2012, as it slightly out-performed the S&P500 despite being only 75-80% invested on average during the year. The biggest winner for the Fund in 2012 was Ancestry.com, and other major contributing positions were Tetragon Financial, Coinstar, Iconix, and Diamond Offshore Drilling.

The largest loss experienced in the portfolio in 2012 was due to our investment in Dell. Dell represents a bit of a unique experience for us, in that it is extremely rare for us to suffer a bad outcome by investing in a business at a low-single digit multiple to free cash flow that also has a very strong balance sheet. In reviewing our work on Dell, we think that our initial purchase decision was reasonably well supported by the available information, and at one point in early 2012 Dell was actually a large winning position for us. However, we believe that one of the problems with our valuation work on Dell was that we anchored heavily on the numbers produced by our discounted cash flow (DCF) model, which produced fair value estimates of $20+ even when using what we felt were pessimistic future cash flow projections.