Dear Fellow Shareholders:

It may not feel like it, but with this strong first quarter, the major stock market indices and the Bretton Fund once again reached all-time highs, just a couple short years after the previous highs in late 2021. While we never know what the market will do next, we are optimistic about our collection of businesses.

Total Returns as of March 31, 2024

1st Quarter1 Year3 Years5 Years10 YearsSince 9/30/10 Inception
Bretton Fund11.41%37.40%13.98%15.65%11.85%12.98%
S&P 500 Index (B)10.56%29.88%11.49%15.05%12.96%14.14%

(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 broad-based 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 at here or by calling 800.231.2901.

All returns include change in share prices, reinvestment of any dividends, and capital gains distributions. The index shown is a broad-based, unmanaged index commonly used to measure performance of US stocks. The index does not incur expenses and is not available for investment. The fund’s expense ratio is 1.35%.

Contributors to Performance
The largest contributor to performance this quarter was Progressive, adding 1.8% to the fund as it managed to both increase prices and add a lot of new customers. Progressive was one of the first to increase prices in response to higher accident rates, and as others are now doing the same, customers are finding Progressive’s rates competitive again. Average premiums grew 11% and policies in force grew 7%, leading to 19% growth in revenue from premiums. Equally important, that premium revenue now more amply covers its higher underwriting costs.

AutoZone boosted margins as it was still able to push through price increases while costs stabilized. The stock added 1.3% to fund performance. Dream Finders Homes added 1.2% and continued to see strong demand for new homes.

S&P Global and Revvity each shaved off 0.1% from the fund. UnitedHealth, which stumbled from both a debilitating hacking incident and disappointing Medicare reimbursements rates, took off 0.2%.

UnitedHealth Group
As the country’s largest healthcare company, UnitedHealth touches just about every aspect of our healthcare system. It’s still mostly known for its health plan business, which covers more Americans than anyone else, even though it has also grown to become one of the largest providers of actual medical care—doctors, urgent care, surgeries, etc.—through a division known as Optum that now earns as much for the company as its plans business. Optum includes a wide range of health-related businesses: pharmacy benefit management, medical practice consulting, software, analytics for drug development, and a comparatively small division called Change Healthcare that serves as the primary payments clearinghouse for medical providers.

An attack in February by a cybercriminal group shut down the Change Healthcare payments platform, cutting off cash for almost a month to thousands of medical practices. UnitedHealth has since paid a ransom to the hackers, restored the network, and provided $6 billion in interest-free loans/advances, but the general consensus is that it did not exactly cover itself in glory in a moment of crisis. Communication was poor, and the company’s reaction time was slow. This debacle is expected to cost at least $1.5 billion, a lot of money, but only less than 0.5% of the company’s market value. It’s disappointing and embarrassing, but we don’t expect the cyberattack and its repercussions to have an ongoing impact on the company’s economics.

What will have a greater impact is the lower rates from serving Medicare patients. Each year, the Center for Medicare & Medicaid Services (CMS) updates how much it pays providers for the over 10,000 types of procedures it covers, from brain surgery to stitches, and it announced in March that this year’s rate would decline by 1.25%. This was harsher than the market was expecting, and healthcare stocks got dinged up. It isn’t great for UnitedHealth, but this is also where the company’s size and diverse lines of business come into play. UnitedHealth has a lower cost structure than its competitors, and CMS can’t reduce its rates so low that providers stop accepting Medicare patients. If some providers get squeezed out, UnitedHealth is in a position to take advantage of that.

Also, Medicare and Medicaid are inching away from the traditional fee-for-service model, where a provider receives a payment for each procedure it does and is thus incented to encourage procedures, to a so-called “capitated” model, where a plan provider gets a flat fee for each member in its plan and then covers all the medical costs itself. This gives providers a strong incentive to keep patients healthy by emphasizing preventative care and diligent follow-up after major procedures. The results so far are promising for both reducing costs and improving health, and we expect these kinds of plans to grow. Being both a provider of health plans and medical services—the vast majority of healthcare providers are one or the other—UnitedHealth is in a great position for this shift. They have insights into both sides of the business and can more easily coordinate care. With a relatively low valuation and high expected earnings growth, we are bullish on the stock.

Portfolio as of March 31, 2024

Security% of Net Assets
Alphabet, Inc.9.13%
The Progressive Corporation7.27%
AutoZone, Inc.6.63%
NVR, Inc.5.88%
Dream Finders Homes, Inc.5.73%
Microsoft Corporation5.67%
American Express Co.5.53%
Ross Stores, Inc.5.36%
JPMorgan Chase & Co.5.06%
Bank of America Corp.5.03%
The TJX Companies, Inc.5.02%
Mastercard, Inc.4.75%
Visa, Inc.4.49%
UnitedHealth Group Incorporated4.48%
S&P Global, Inc.4.16%
Union Pacific Corp.3.97%
Moody's Corporation3.43%
Berkshire Hathaway, Inc.3.32%
Armanino Foods of Distinction, Inc.1.60%
Revvity, Inc.1.22%

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

As a reminder, the Bretton Fund did not issue any capital gains distributions last year. While it’s not our primary goal—our main goal is shareholder returns—we do try to minimize the taxes we distribute to our shareholders. Those with taxable accounts did not receive a 1099-DIV from us this year.

Since the fund’s inception, our custodian bank has been US Bank, but we’ve recently switched to Huntington Bank, which is a better fit for a fund of our size. There’s no impact on shareholders, though those of you with IRA accounts directly with us may have already received a letter announcing the change.

If you have any questions about this, or anything else, feel free to reach out to us.

As always, thank you for investing.

Stephen Dodson            Raphael de Balmann
Portfolio Manager         Portfolio Manager