October 15, 2020

Dear Fellow Shareholders:

The market kept humming along in the third quarter as we began to see the light at the end of the coronavirus tunnel. A lot of us have adjusted to this weird “new normal.” Putting on a mask to enter a store is more second nature than something out of a post-apocalyptic movie. We’ve developed new routines around work, school, and seeing friends and family. The exact details of how an imminent vaccine brings this all to an end—the approval date, the effectiveness, which drug candidate—remain a mystery to everyone, but it is looking fairly likely that a vaccine with some degree of effectiveness will be in wide distribution around the middle of 2021.

Things won’t go back to normal right away. A pediatric version of the vaccine won’t be available until later, which means many schools won’t go back to being unmasked and un-distanced for a while longer. Larger school districts might have trouble fully opening up by fall of 2021. Municipalities and states with more restrictive rules might not let the most high-risk activities operate without restrictions until overwhelming evidence of herd immunity. Travel, hospitality, and entertainment might take years to recover, and a few industries, such as movie theaters, may never recover.

But there’s an end in sight, and the market has reacted accordingly.

Total Returns as of September 30, 2020(A)

3rd Quarter1 YearAnnualized
3 Years
5 Years
Annualized 10 Years and
Since 9/30/10 Inception
Bretton Fund8.84%7.60%12.89%11.45%11.24%
S&P 500 Index (B)8.93%15.15%12.28%14.15%13.74%

(A) All returns include change in share prices and, in each case, include reinvestment of any dividends and capital gain distributions. The inception date of the Bretton Fund was September 30, 2010.

(B) The S&P 500® Index is a stock market index based on the market capitalizations of 500 leading companies publicly traded in the US stock market, as determined by Standard & Poor’s, and captures approximately 80% coverage of available market capitalization.

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 1.35%.The fund’s principal underwriter is Rafferty Capital Markets, LLC.

Contributors to Performance
Homebuilding is supposed to be kind of a boring business. You buy land, build houses, and sell them. It’s not complicated. We think NVR has built a better mousetrap by achieving economies of scale in its markets and using option agreements for land instead of buying land outright. But at its most basic level, it builds and sells houses. Since our initial purchase in July 2018 for ~$3,000 per share, the share price has twice gone on white-knuckled roller-coaster rides. The first time was in late 2018 when higher interest rates were supposed to dampen housing demand. The stock dropped to a low of $2,100 that fall, when we purchased more shares, and then slowly recovered, doubling to over $4,000 at the beginning of this year. Then the pandemic brought everything to a halt, including—ostensibly—home buying. But perhaps unexpectedly, demand for new homes, particularly those in the suburbs that NVR specializes in, surged dramatically in the ensuing months as families moved out of cities. NVR once again round-tripped from the low $2,000s to well over $4,300. The irony of it all is that actual homes sold by NVR maintained a relatively steady pace throughout all of this.

This is a long way of saying that NVR was our best performer in the quarter, its stock price increasing 25% and adding 1.1% to the fund’s performance. Other top contributors were Union Pacific, Mastercard, and Progressive, which each added around 1%.

The only laggard was Armanino Foods, which took off 0.2% from performance. Its pesto sauce business has been hit hard by the pandemic as many restaurants remain closed, but we think it’ll recover post-vaccine.

We also held about 6% of the fund in cash, which caused some drag as the market rallied. We expect to put this capital to work opportunistically.


Security% of Net Assets
Alphabet, Inc.9.6%
Mastercard, Inc.7.3%
Union Pacific Corp.6.9%
The Progressive Corporation6.0%
Microsoft Corporation5.8%
NVR, Inc.5.6%
Visa, Inc.5.3%
Canadian Pacific Railway Limited5.2%
American Express Co.4.8%
AutoZone, Inc.4.7%
The TJX Companies, Inc.4.7%
Ross Stores, Inc.4.6%
JPMorgan Chase & Co.4.6%
UnitedHealth Group Incorporated4.6%
Bank of America Corp.4.3%
Berkshire Hathaway, Inc.3.7%
S&P Global Inc.3.3%
Discovery, Inc.2.0%
Armanino Foods of Distinction, Inc.1.2%

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

Although we’ve owned Carter’s since the fund’s inception in 2010, we sold off our position this quarter. In 2010, Carter’s was a well-recognized brand in a lucrative niche (baby clothes), but was under-distributed and had a long runway ahead of it. The company has since built out a fleet of stores and expanded internationally, doubling revenue in the process. But much of the low-hanging fruit has been achieved and growth has slowed. Our overall gain was 24%, 5.5% on an annualized basis.

We did not initiate any new positions in the quarter; however, we added a bit to our existing positions in American Express, Bank of America, JPMorgan, and UnitedHealth. We remain cautiously optimistic about our bank holdings. While rates are low and defaults are up, the banks are still generating extraordinary earnings. JPMorgan is on track to generate $55 billion in net interest income even with rates near zero. Similar to the years right after the financial crisis, banks are once again bargains, and we expect to do well once the economy normalizes.

While it’s going to take a little longer to get there, and the next six months will likely be tough from a public health perspective, we do think the end of the pandemic is in sight.

As always, thank you for investing.

Stephen Dodson            Raphael de Balmann
Portfolio Manager         Portfolio Manager