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41 Madison Ave., 29th FLNew York, NY 10010T: 347.403.1970info@khromcapital.com
April 25, 2011Dear Partners:In the first quarter of 2011, our Partnership returned 6.5%, or 5.2% net of fees. Furthermore, this gainoccurred with less than full exposure, since on average 31% of our assets were held in cash.
S&P 500
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K.I.F., grossK.I.F., net
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2008
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-31.1% -32.6% -32.6%2009 26.5% 91.9% 82.9%2010 15.1% 23.8% 18.6%2011 YTD 5.9% 6.5% 5.2%
Cumulative ReturnSince Inception6.2%70.5%53.8%
Annualized Return Since Inception 2.0%18.9%15.0
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2008 performance only includes 3/1/08 to 12/31/08, due to fund launch date of March 2008.
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Performance data of the S&P 500 Index is included to facilitate comparisons between the Partnership’s returns and overall market  performance. Due to the differences among the Partnership’s investment strategies and the securities that compose the S&P 500 Index,the General Partner cautions potential investors that no such index is directly comparable to the Partnership’s investment strategy. S&P 500 index performance results include the reinvestment of dividends.
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The results portrayed above are intended to show the investment performance that would have been experienced by a single limited  partner of the Partnership who remained invested throughout each annual or partial year period shown, after the reinvestment of interest, dividends, and other earnings, and the deduction of costs and the profit allocation that the “General Partner” would haveaccrued as of the end of each year. Results are based on the Partnership’s internal books and are subject to adjustment following theaudit of its financial statements. Future investments may be made under different economic conditions and in different securities and using different investment strategies than were used during the time discussed herein. It should not be assumed that future investors will experience returns, if any, comparable to those of the Partnership discussed herein. The information given above is historic and should not be taken as any indication of future performance. ______________________________________________________________________________________________________________ 
"All We Want Are the Facts, Ma'am"
We sure will give it to you this quarter. At the end of this letter, we provide Partners with a detailed write-up on our new investment, Investors Title Company (ITIC). Some Partners enjoy a brief summary; othersrelish the full scoop. This time we cater to the latter party. (The write-up starts on page three.)Aside from new investments, the notable positions we closed closed during the quarter were:-1
Khrom Capital Management LLCwww.khromcapital.com
 
Closed SecurityL/SAvg. EntryPriceAvg. ExitPriceIRRComments
Aspen InsuranceL$28.95$29.44+9%We started building a position in Aspena seeminglyquality insurance company that traded at a sizablediscount to book value. In addition to the discount, asoft insurance market is eventually followed by a hardone, which would be a boon for Aspen. However, after observing we could develop no edge on thisinvestment, we decided to allocate our resourceselsewhere.Friedman IndustriesL$6.76$9.81+359%Friedman has processed steel at a profit for twodecades. It buys coil inventory from steel producers,cuts it to the specs that a customer orders, and makes amarginal profit by marking up the finished product byan average of 10%. Friedman at our purchase priceamounted to getting its 3 factories (one of which was brand new) and 154 acres of land for free. Friedmanalso stood to produce substantial earnings in relation toits market cap the moment steel orders picked back up.Investors soon realized this; Friedman paid anextraordinary dividend; the share price popped up andwe exited.Full House ResortsL$3.08$4.42+949%Discussed in 2010 Q4 letter.PHI, Inc.L$14.90$19.37+37%Discussed in 2010 Q2 letter.U.S. Treasury BondsSN/AN/A+31%A fine asymmetrical investment. Not much room o probability for interest rates to go lower, but plenty for the reverse. However, given our large cash balance that built up during the quarter, we thought it imprudent to pay the few hundred basis points to keep this short.
* * *There is no equation that determines the best place to allocate capital. Investment basics are welldocumented–P/E, P/BV, ROE, etc. The great investors, however, were exceptional not because they knewarithmetic better than anyone else. It is why many consider investing an art.“An art,” philosopher Dr. Binswanger wrote, “is a method, one not reducible to a formula...[it] requiresholding a wide context, selecting essentials, and monitoring success or failure in order to find ways toimprove performance—vs. that which does not. The former is an art; the latter is a rote procedure.”We think the best investments are found through the fundamental analysis of specific investmentopportunities, and not mechanical number crunching or habitual following of others.As always, my interests continue to be aligned with yours, with my entire net worth invested in thePartnership. I look forward to writing to you again next quarter.Yours truly,Eric E. Khrom 
Managing Partner 
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Khrom Capital Management LLCwww.khromcapital.com
 
Investors Title Company
(NASDAQ:ITIC)
 Buy the Stock–Get the Business for Free
We offer as an investment opportunity a company with a $70 million market cap. The big kicker: no onehas yet realized that it has around $75 million in “excess cash” that can be taken out of the company. Thatimplies the business operations–which produce $6 to $14 million a year–can be purchased by investorsfor free.This business has barriers to entry, which helped produce a multi-decade record of profitability.Management owns a significant amount of shares. Furthermore, according to a recent SEC filing, wegather management bought back over 6% of the company’s stock in the 2011 first quarter.On the face of it, it seems to be an insurance company. Look deeper, however, and you will not call itinsurance. Instead, you will realize this is a business that provides an essential service whose need willnot disappear anytime soon.
IS TITLE INSURANCE “INSURANCE?”
Imagine after purchasing real estate, you later find out that there is a prior lien against it. Or a tax judgement, or a street and sewer assessment, or maybe an utility easement. Or you learn that the deed wasforged, or executed by spouses without the other spouse’s signature. In any of these events, as a buyer of real estate, you would stand to lose money or the entire property.That is why real estate buyers purchase title insurance (and why mortgage lenders require it). It eliminatestheir risk of loss on a purchased property that later turns out to have a title defect, lien, or encumbranceagainst it.Property issues such as the above are common, occurring in some form in 1 out of every 3 residential realestate transactions. Title agents and insurers seek to identify all the issues and eliminate them before thedeal closes.In title insurance, the majority of the premium is used to pay for this upfront process. If done right, most(though never all) title issues are resolved beforehand. This is why a title insurer’s income statement looksopposite to that of companies in different lines of insurance:Typical Insurance Company: $100 Premium ($85) claim losses ($10) SG&A expensesTitle Insurance Company: $100 Premium ($10) claim losses ($85) SG&A expensesThough the above is a rough and general illustration, it points out the drastically different nature of titleinsurance. Rather than being insurance, it is more so a service: the company makes sure a property title isclear, and then it provides a guarantee that it is.Typical insurance companies assume risk. Title insurance, on the other hand, seeks to identify risk andeliminate it from coverage. Because of this risk elimination, the number of claims for title insurers arerelatively few. (And it is cheaper to incur those few claims rather than expend the additional resources toeradicate all claims.)This allows an investor to analyze title insurers more as a business selling a service rather than a guess oncurrent reserves vs. future claims.
INVESTORS TITLE COMPANY
In 1972, Allen Fine founded Investors Title Company (ITIC) in North Carolina. At that time, the title-3
Khrom Capital Management LLCwww.khromcapital.com

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