April 20, 2022

Dear Fellow Shareholders:

Inflation, higher interest rates, and Vladimir Putin conspired to take the stock market off its all-time highs this quarter. We managed to stay slightly ahead of the downturn and used the opportunity to make a new investment. Despite the drama, we remain optimistic about the US economy and our stocks.

Total Returns as of March 31, 2022

1st Quarter1 Year3 Years5 Years10 YearsSince 9/30/10
Inception (A)
Bretton Fund-3.77%13.50%16.61%15.19%12.02%12.76%
S&P 500 Index (B)-4.60%15.65%18.92%15.99%14.64%15.01%

(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
American Express boosted performance by 0.8% due to an improved outlook by management and a rebound in spending and travel. Progressive and Berkshire Hathaway each added 0.6%.

Mortgage rates have shot up, and investors’ concerns about what that might do for the housing market sent NVR’s stock down in the quarter, taking off 1.4% from the fund. Ross and TJX each hurt performance by 0.9%.


Security% of Net Assets
Alphabet, Inc.12.0%
Union Pacific Corp.6.3%
AutoZone, Inc.6.2%
American Express Co.6.0%
The Progressive Corporation5.7%
Microsoft Corporation5.6%
UnitedHealth Group Incorporated5.5%
Visa, Inc.5.1%
Mastercard, Inc.5.1%
Bank of America Corp.4.9%
S&P Global, Inc.4.8%
Ross Stores, Inc.4.7%
NVR, Inc.4.3%
The TJX Companies, Inc.4.3%
JPMorgan Chase & Co.4.3%
Berkshire Hathaway, Inc.4.0%
Dream Finders Homes, Inc.3.2%
Moody's Corporation3.1%
PerkinElmer, Inc.2.9%
Armanino Foods of Distinction, Inc.1.3%

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

Canadian Pacific
We sold the last of our Canadian Pacific this quarter. We remain big fans of the railroad industry with its insurmountable barriers to entry and limited competition, and Union Pacific is our second largest holding. We thought Canadian Pacific paid too much for Kansas City Southern, and an opportunity presented itself that we liked better. Our overall return was 146%, an annualized 23.8% over the four and a half years we owned it.

Moody’s and the Power of Pairs
We tend to be drawn to businesses that have an almost unfair advantage. If you gave the world’s best entrepreneurs $150 billion, or roughly what Union Pacific is worth today, there is no way they’d be able to build a rail network remotely close to the size and scale of Union Pacific’s, which crisscrosses 32,000 miles across almost every state west of the Mississippi. They’d have to get the federal and local governments to use their powers of eminent domain to buy an unfathomable amount of property from land owners, and then they’d likely spend a couple decades building out those many miles of track and dozens of railyards. You couldn’t come close even with $500 billion.

Railroads compete with trucks for some types of goods, but Berkshire Hathaway’s BNSF is effectively Union Pacific’s only competition for large bulk goods like grain. When you only have one competitor, both parties tend to be pretty rational. Similarly, Visa and Mastercard compete with each other to win banks’ business, but as they’ve been in a stable duopoly for decades, one of them isn’t going to suddenly and capriciously upend their whole economic model to win a given deal.

S&P Global and Moody’s form a similar duopoly, and we now own both of them. Their primary business is rating bonds, and they’ve been doing it for over 100 years. Their combined market share is a bit over 80%, and it’s been that way for a long time. When corporations issue bonds, they want to pay the lowest possible interest rate, and if they choose to forgo paying Moody’s or S&P for bond ratings—or use a third-tier firm—it can send a signal to investors that something may be off with their creditworthiness, and they’d have to pay a higher rate. The only bonds issued in the US without a rating from a major rating agency are highly speculative with very high rates.

Like S&P Global—which we first purchased in 2020—Moody’s has diversified into the analytics business, providing software and data to companies like insurers, banks, and real estate investors. This revenue tends to be stable and recurring, which can balance out the more volatile rating fees. When rates are low, companies rush to issue debt—less so when rates are high. Moody’s share price has sold off as investors anticipate a weak issuance market in the coming years. We think the market overreacted and has given us an opportunity to buy a great business at a discounted price, which is our favorite kind of investment.

As always, thank you for investing.

Stephen Dodson            Raphael de Balmann
Portfolio Manager         Portfolio Manager