Bretton Fund commentary for the first quarter ended March 31, 2025.
Dear Fellow Shareholders:
We don’t talk much about politics for a good reason: people tend to overstate its impact on the stock market. The central tendencies of the economy span multiple administrations and often defy party labels. The North American Free Trade Agreement (NAFTA) was part of Ronald Reagan’s first campaign, was largely negotiated by George H.W. Bush, and was signed by Bill Clinton. Interest rates peaked under Reagan and declined for 40 years. Nixon instituted price controls, and Carter deregulated transportation. The economy marched on.
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To the extent we think about government policy, we tend to focus on the areas that immediately impact our companies: UnitedHealthcare is sensitive to Medicare rates, Google and Visa are vulnerable to antitrust actions, Union Pacific is impacted by labor relations law. While the broader direction of politics is fascinating, it’s rarely directly applicable to our investments.
We have had this luxury because for most of the past 80 years—ever since the Bretton Woods Conference that not so coincidentally gave us our name—the broader plumbing of the economy has been stable. Now we find ourselves in the unusual position where the country that has benefited the most from that system—us—wants to unwind it.
It might be worth taking a minute to reflect on the strangeness of the fixation on an equally balanced exchange of goods. Broadly speaking, Europe sends us low-margin cars and we send them high-margin internet services. Europeans are not getting the better end of the deal, let alone getting any sort of “surplus” because cars are heavier. We should not try to even things out by instead producing less software and more cars. The average American family has a much higher standard of living than the average European one. We should always be taken advantage of so kindly.
It’s a similar story with China. An iPhone is designed in Cupertino. The best jobs in the phone’s ecosystem—the engineering jobs and marketing jobs and design jobs—are at the mothership. The other interesting jobs—the sales jobs and Genius Bar jobs and tech support jobs—are scattered near the customers, who are predominantly in the developed world. The Chinese are so eager to participate in this value chain that they occupy themselves assembling the phones in conditions the vast majority of Americans would not want to work in, all for a tiny sliver of the bill of materials.
For a bit of context, bear in mind that when color televisions launched in 1954, they cost just under $1,300 at a time when the median family income was $4,200. An iPhone 16 Pro, assembled in China, costs $999 today, even as the median household income in the US surpasses $80,000. We walk casually with supercomputers in our pockets because of global trade; were it not for trade, we would neither have cheap products nor our relatively high incomes.
The current administration has made frequent U-turns, seemingly attempting to balance two opposing goals: imposing high tariffs and preventing a stock market crash. The White House announced wide-ranging tariffs, saw the market panic, denied a report it was considering a pause, and then said it was indeed pausing the tariffs. This all took place within a week. The US announced new tariffs against China, China retaliated, the US announced more tariffs against China, China retaliated, the US announced a tariff exemption for electronics, and China announced export restrictions on rare earths. That also took place within a week.
We don’t pretend to know what will happen next or how it will end. Initiating a trade war and undoing the most successful economic machine in human history will reduce everyone’s wealth. Americans do not want this to happen and will understandably be quite mad if it does. The trade war and tariff threats will end at some point, if only after we have tried everything else. As the economist Herb Stein noted, “If something cannot go on forever, it will stop.”
We would like to believe we have invested in franchises that are more durable than the average company, have a measure of pricing power to push costs onto others, and are cash generative so that they do not need the capital markets to fund themselves. Though if the pie shrinks enough, our slices of ownership will not go unharmed. For the time being, we are looking through the turbulence to find new investments in companies that are impacted by the market drama but have long-term potential. History has taught us, and Stein reminds us, this won’t last forever.
Total Returns as of March 31, 2025
| 1st Quarter | 1 Year | Annualized 3 Years | Annualized 5 Years | Annualized 10 Years | Annualized Since 9/30/10 Inception (A) | |
|---|---|---|---|---|---|---|
| Bretton Fund | -1.02% | 6.85% | 11.72% | 19.05% | 11.78% | 12.50% |
| S&P 500 Index (B) | -4.27% | 8.25% | 9.06% | 18.59% | 12.50% | 13.75% |
(A) 1 Year, 3 Years, 5 Years, 10 Years, and Since Inception 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
Alphabet had the largest impact on the fund this quarter, taking 1.8% from the fund. Technology stocks were hit hard in the market pullback, and while Alphabet fared better than the likes of Apple and Nvidia, it wasn’t spared in the selloff. Ross Stores took off 0.7% and NVR 0.6%.
On the other side of the ledger, Progressive continues to put up great numbers, both in terms of policy growth and profitability. It added 1.5% to the fund and has overtaken Alphabet as our largest holding. We suspect it was also helped by being perceived as being less directly impacted by tariffs or a recession. People still have to buy car insurance in a bad economy. Similarly, people still have to replace car parts when they fail. AutoZone’s stock reflected this sentiment and added 1.1% to the fund. Visa added 0.6%.
Portfolio as of March 31, 2025
| Security | % of Net Assets |
|---|---|
| The Progressive Corporation | 8.75% |
| Alphabet, Inc. | 8.24% |
| AutoZone, Inc. | 7.06% |
| Visa, Inc. | 5.77% |
| American Express Co. | 5.75% |
| JPMorgan Chase & Co. | 5.45% |
| The TJX Companies, Inc. | 5.30% |
| UnitedHealth Group Incorporated | 4.94% |
| Bank of America Corp. | 4.87% |
| Mastercard, Inc. | 4.76% |
| NVR, Inc. | 4.63% |
| Microsoft Corporation | 4.45% |
| S&P Global, Inc. | 4.37% |
| Ross Stores, Inc. | 4.10% |
| Eagle Materials, Inc. | 4.03% |
| Berkshire Hathaway, Inc. | 3.70% |
| Moody's Corporation | 3.58% |
| Dream Finders Homes, Inc. | 3.56% |
| Union Pacific Corp. | 3.36% |
| Revvity, Inc. | 1.08% |
| Cash* | 2.25% |
*Cash represents cash equivalents less liabilities in excess of other assets.
The fund did not add or eliminate any positions in the quarter. As always, thank you for investing.
Stephen Dodson
Portfolio Manager
Raphael de Balmann
Portfolio Manager
Bretton Fund
