April 17, 2018

Dear Fellow Shareholders:

The Bretton Fund’s net asset value per share (NAV) as of March 31, 2018, was $30.57, and the total return for the quarter –0.97%.

Total Returns as of March 31, 2018

1st Quarter1 YearAnnualized
3 Years
5 Years
Annualized Since
9/30/10 Inception
Bretton Fund–0.97%13.47%6.91%9.16%11.26%
S&P 500 Index–0.76%13.99%10.78%13.31%14.22%

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

Mastercard had the biggest impact on the fund this quarter, adding 0.8% to performance, while TJX added 0.3%, as both companies announced strong earnings.

Wells Fargo’s woes continued. On the last day of Federal Reserve Chair Janet Yellen’s term, the Fed placed an unusual penalty on the bank: Wells is prohibited from growing assets until the Fed gains more confidence in Wells’s internal controls. The impact of this is real, but how material will depend on how long the restriction is in place. Since Wells has an excess amount of low-yielding, liquid assets it can sell without drastically impacting the rest of its business, it should be able to keep growing its higher-yielding core loans while keeping total assets flat. It will also face legal and compliance expenses demonstrating improved controls to the Fed; some of these will be one-time expenses, but a larger compliance infrastructure is likely to remain.

The immediate financial impact of the growth restriction on this year’s income should be about 2%. It’s not the end of the world. The larger and less tangible impact is on the firm’s culture and its relationship with its regulators. A highly regulated company needs a healthy relationship with its regulators, and this punishment emphasizes that Wells is not there today. We think Wells is taking this as seriously as they can—the new chair of the board is Elizabeth Duke, a former governor on the Federal Reserve Board—and will be a better bank when this eventually passes, which management expects to take place by the end of the year. It is perhaps a sad commentary on the intersection of finance and politics that each large bank has its turn in the tumbril—Citi in the financial crisis, Bank of America with Countrywide, Goldman with Abacus and credit default swaps, JPMorgan with the London Whale—and right now it’s Wells’s turn. Its core franchise continues to perform well, and we feel the stock is just too cheap. Wells took 0.7% off the fund’s performance.

Carter’s and AutoZone hurt performance by 0.6% and 0.5%, respectively, as the environment for retail stocks was weak this quarter, though both companies announced solid earnings.


Security% of Net Assets
Alphabet, Inc.9.7%
Union Pacific Corp.6.7%
Bank of America Corp.6.6%
JPMorgan Chase & Co.5.5%
Ross Stores, Inc.5.5%
Mastercard, Inc.5.3%
American Express Co.5.0%
Wells Fargo & Company4.9%
Carter’s, Inc.4.7%
AutoZone, Inc.4.7%
Continental Building Products, Inc.4.6%
Berkshire Hathaway, Inc.4.5%
Visa, Inc.4.5%
The TJX Companies, Inc.4.5%
Canadian Pacific Railway Limited4.2%
PPG Industries, Inc.3.6%
HD Supply Holdings, Inc.3.6%
Discovery, Inc.2.3%
Armanino Foods of Distinction, Inc.2.2%
MEDNAX, Inc.1.8%
Verisk Analytics, Inc.1.4%

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

The fund didn’t initiate or eliminate any investments in the quarter. We added to positions in Alphabet/Google, Continental Building Products, Canadian Pacific, and TJX. We trimmed our Mastercard position a bit as the valuation got a little heady.

While the market’s valuation is higher than its historical average (which implies lower-than-average future returns), it’s not as high as it would have been without the tax cut. All things being equal, US companies’ earnings—and particularly our companies, which were disproportionately high payers under the previous tax system—will jump significantly this year, raising their underlying values, something we’re conscious of as we hunt for underappreciated investments.

As always, thank you for investing.

Stephen Dodson            Raphael de Balmann
Portfolio Manager         Portfolio Manager