Mutual Fund Commentary

Intrepid Capital Fund

4Q 2022

January 1, 2023

“This Too Shall Pass”
-Abraham Lincoln

Dear Fellow Shareholders,

I am pleased to report a successful 4th quarter result in what was a difficult period for financial markets, with the S&P 500 Index off 20% and the Nasdaq off 33% for the calendar year. In addition, bond indexes exhibited their worst results in the last 50 years! The fund was not immune but was able to close the year with a 4.96% return in the fourth calendar quarter to finish 2022 with a return of -12.28%.

The bond market had carnage inflicted on it by the rapid increase in rates, courtesy of the Federal Reserve, and offered negative returns of 12-15% in 2022. There is now a much more compelling reason to invest in the bond market today as risk-free Treasuries as short as a 6 month maturity offer roughly 4.5%. I would argue that this is still less than the most recent reading of inflation at 6.5%, providing a negative “real return” of -2%, but a compelling offer compared to what has been non-existent returns for cash for years.

I have to believe that – after a year when some larger and better known “balanced” funds were off 18-19% – that we are closer to the end than the beginning of market volatility. As I mentioned in the paragraph above, there is now the opportunity to earn 4-5% on cash reserves and low double digit returns in the corporate bond markets. Many of these opportunities were not present this time last year.

In the 4th calendar quarter of 2022, the markets rallied strongly off favorable news on slowing inflation numbers in mid-October. Equity indices did fall in December but I think much of it was driven by year- end tax loss selling, leading the subsequent rally we have seen in prices since the New Year. Many indicators we look at show that the worst of the year-over-year inflation numbers may be behind us at this point.

The Federal Reserve is scheduled to meet in early February and at this point the market anticipates a smaller increase in the Fed Funds rate than the more recent ones.

Once again, we at Intrepid Capital will be on the look-out for where there might be a disconnect between “price” and “value,” particularly around some of the upcoming announcements from the Federal Reserve and governmental release of inflation numbers, which can cause sharp swings in the prices of both stocks and bonds.

Thank you for your continued support. If there is anything we can do to serve you better, please don’t hesitate to call.

Thank you for your investment.




Mark F. Travis, President
Intrepid Income Fund Co-Portfolio Manager

Mutual Fund investing involves risk.
All investments involve risk. Principal loss is possible. The Fund is subject to special risks including volatility due to investments in smaller companies, which involve additional risks such as limited liquidity and greater volatility. Investments in debt securities typically decrease in value when interest rates rise. This risk is usually greater for longer-term debt securities. Investments by the Fund in lower-rated and non-rated securities present a greater risk of loss to principal and interest than higher-rated securities. The Fund may invest in foreign securities which involve greater volatility and political, economic and currency risks and differences in accounting methods. The risks of owning ETFs generally reflect the risks of owning the underlying securities they are designed to track. ETFs also have management fees that increase their costs versus the costs of owning the underlying securities directly.
The S&P 500 Index is a broad-based, unmanaged index of 500 stocks, which is widely recognized as representative of the equity market in general. The Bloomberg US Gov/Credit 1-5Y TR Index measures the performance of U.S. dollar-denominated U.S. Treasury bonds, government-related bonds, and investment-grade U.S. corporate bonds that have a remaining maturity of greater than or equal to one year and less than five years. The Bloomberg (BBC) Combined Index consists of an unmanaged portfolio of 60% common stocks represented by the S&P 500 Index and 40% bonds represented by the Bloomberg US Government/Credit 1-5 Yr Index. You cannot invest directly in an index.
Duration is an approximate measure of the price sensitivity of a fixed-income investment to a change in interest rates, expressed as a number of years. Basis point is a standard financial measure for interest rates. One basis point equals 1/100th of 1%. The Cboe Volatility Index, or VIX, is an index which measures the market’s expectation of price fluctuation of the S&P 500 Index over the next 12 months.
Opinions expressed are subject to change, are not guaranteed and should not be considered investment advice or recommendations to buy or sell any security.
The Intrepid Capital Funds are distributed by Quasar Distributors, LLC.
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