Frank Value Fund Q4 2025 Letter To Shareholders (FNKIX)

Core Insights - The Frank Value Fund Institutional Class (FNKIX) achieved a return of 12.29% in 2025, outperforming the Russell Midcap Value Index which returned 11.05% [2] - Since integrating catalyst-unlocking value into its strategy in January 2022, the fund has produced a total return of 61.3%, significantly outperforming both the Russell Midcap Value ETF (23.5%) and the S&P 500 ETF (51.8%) [2] - For the three years ending December 31, 2025, the fund ranked in the top 11% of its Morningstar category, Mid-Cap Value [2] Performance Analysis - The fund's performance in 2022 was positive at 4%, while the S&P 500 and Nasdaq fell by 18% and 33%, respectively [3] - The current valuation of Microsoft (MSFT) is $3.6 trillion with expected free cash flow of $75 billion in 2026, yielding about 2% [3] - In contrast, Garrett Motion (GTX), a top holding, is expected to generate cash flow seven times relative to its purchase price, yielding 14% [3] Market Context - The S&P 500 and other index holders face opportunity costs as undervalued companies like Garrett Motion offer higher shareholder yields through dividends, repurchases, and debt reduction [5] - The Frank Value Fund currently has a dividend yield of about 2%, which is double that of the S&P 500 [5] - Seven holdings in the fund are repurchasing more than 5% of their shares outstanding annually, indicating strong capital return strategies [5] Future Outlook - Low valuations allow the fund's holdings to repurchase more stock, potentially transforming consumer staples companies into double-digit earnings growers [6] - The current market setup is reminiscent of previous years leading into downturns, suggesting a potential slowdown in large index gains in 2026 [6]