2017 Q1 Shareholder Letter

April 25, 2017

Dear Fellow Shareholders:

The Bretton Fund’s net asset value per share (NAV) as of March 31, 2017, was $26.94. The fund’s total return for the quarter was 3.14%, while the S&P 500 Index returned 6.07%.

Total Returns as of March 31, 2017

1st Quarter1 YearAnnualized
3 Years
Annualized
5 Years
Annualized Since
9/30/10 Inception
Bretton Fund3.14%14.25%5.01%8.94%10.93%
S&P 500 Index6.07%17.17%10.37%13.30%14.25%

Performance data quoted represents past performance. Past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data current to the most recent month-end here or by calling 800.231.2901.

All returns include change in share prices, reinvestment of any dividends, and capital gains distributions. Indices shown are broad-based, unmanaged indices commonly used to measure performance of US stocks. These indices do not incur expenses and are not available for investment. The fund’s expense ratio is 1.50%.

Contributors to Performance

The three largest contributors to positive performance in the quarter were Alphabet/Google (+0.5%), Bank of America (+0.4%), and Visa (+0.4%). The largest negative contributors were AutoZone (-0.5%) and HD Supply (-0.2%).

Portfolio

Security% of Net Assets
Alphabet, Inc.7.7%
Union Pacific Corp.6.3%
Wells Fargo & Company6.3%
Bank of America Corp.6.3%
AutoZone, Inc.5.3%
MEDNAX, Inc.5.2%
JPMorgan Chase & Co.5.2%
American Express Co.5.1%
Ross Stores, Inc.4.9%
Mastercard, Inc.4.7%
Carter's, Inc.4.7%
HD Supply Holdings, Inc.4.6%
Berkshire Hathaway Inc.4.5%
Valspar Corp.4.0%
Continental Building Products, Inc.4.0%
Discovery Communications, Inc.3.8%
PPG Industries, Inc.3.7%
Visa Inc.3.6%
Armanino Foods of Distinction, Inc.2.1%
Verisk Analytics, Inc.1.3%
Cash*6.7%

*Cash represents cash equivalents less liabilities in excess of other assets.

This quarter we let go of two smaller investments that we lost confidence in. We sold out of industrial pump–maker Flowserve, recognizing a loss of 7.2%. Flowserve was hit hard by energy companies’ reduced capital spending in response to lower oil prices. We expected the company’s focus on maintenance, repair, and overhaul to allow it to maintain its cash flow through the downturn, but this did not happen. Even as oil prices have rebounded, expansionary plans aren’t as ambitious as they once were, and we didn’t see a return to previous demand levels on the horizon. Further, a number of seemingly abrupt management changes the past two years—a sudden retirement by the 54-year-old CEO, plus two CFO changes—didn’t leave us with a lot of faith in the business and the team in place.

The fund also exited Whole Foods as the company’s challenges didn’t appear to be as short term as we first thought or hoped. While its core base of shoppers continues to shop there, it’s had difficulties attracting the same caliber of customers to its new stores and had to reduce prices as the broader industry deals with deflation and tough competition. Our loss was 20.3%.

Though the market trades at a high valuation, essentially at its all-time highs, we were able to add to a handful of existing positions with weak share prices in the quarter, buying more Carter’s, Continental Building Products, and PPG Industries. As it’s been for the past couple of years, it remains challenging to find undervalued companies in this relatively frothy market. We did come close to a couple of new investments in the quarter, but ended up passing for various reasons. We do remain on the hunt for opportunistically misunderstood or underappreciated businesses.

As always, thank you for investing.

Stephen Dodson            Raphael de Balmann
Portfolio Manager         Portfolio Manager