Ensemble Fund
Annual Letter
October 31, 2019
The Ensemble Fund returned 23.76% for the fiscal year ending October 31, 2019. For comparative purposes, the S&P 500, which is the Fund’s benchmark, had a total return of 14.33% over the same time period.
The Fund began the fiscal year performing similarly to the S&P 500® Index until December 24th when the stock market bottomed after a material decline. From that point onward until the end of the fiscal year, the Fund generated significant outperformance. While the Fund did hold a more economically sensitive set of securities than the benchmark causing strong levels of performance during the market recovery, the large majority of the outperformance came from idiosyncratic, company specific performance drivers.
As we have discussed each year since launching the Fund, we believe that investors are currently overvaluing stable, low growth companies and undervaluing more economically sensitive, but still high-quality businesses. Therefore, our portfolio’s heavier exposure to more economically sensitive names is not the result of a particular economic forecast, but our simple observation that in looking for undervalued securities we have found them in more economically sensitive sectors due to the market conditions that have persisted in recent years.
During the fiscal year, we owned 27 different companies of which 23 generated a positive return for the Fund.
Significant detractors from the Fund’s total return included the following:
Significant contributors to the Fund’s total return included the following:
Much of the last fiscal year saw market moves primarily driven by changing economic outlooks as recession worries came and went and trade negotiations between the US and China were ongoing. While these are important issues that we monitor closely, we believe that investors are best served not by trying to guess how short-term macroeconomic and geopolitical events will unfold, but rather on how individual companies will perform over the long term despite shifting and uncertain economic and geopolitical conditions.
As we continue to manage the Fund in fiscal year 2020 and beyond, we will continue to seek to identify outstanding companies that exhibit three core characteristics:
Moat: We seek companies that have strong and persistent competitive advantages and offer products and services from within this moat that we believe consumers will continue to value over the long term.
Management: We seek companies that are managed by executive teams who have displayed strong talent for both creating economic value as well as allocating excess capital to the benefit of shareholders.
Forecastable: We seek companies that operate in industries and use business models that we believe make their financial results relatively forecastable over the long term and which we believe that our research team has the specific domain expertise to analyze as well or better than our competition.
Past performance does not guarantee future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be higher or lower than the performance data quoted. Performance data current to the most recent month end are available by calling 1-800-785-8165.
Investors should consider the investment objectives, risks, and charges and expenses of the Fund carefully before investing. The prospectus contains this and other information about the Fund. You may obtain a prospectus at www.EnsembleFund.com or by calling the transfer agent at 1-800-785-8165. The prospectus should be read carefully before investing.
An investment in the Fund is subject to investment risks, including the possible loss of the principal amount invested. There can be no assurance that the Fund will be successful in meeting its objectives. The Fund invests in common stocks which subjects investors to market risk. The Fund invests in small and mid-cap companies, which involve additional risks such as limited liquidity and greater volatility. The Fund invests in undervalued securities. Undervalued securities are, by definition, out of favor with investors, and there is no way to predict when, if ever, the securities may return to favor. The Fund may invest in foreign securities which involve greater volatility and political, economic and currency risks and differences in accounting methods. Investments in debt securities typically decrease in value when interest rates rise. This risk is usually greater for longer-term debt securities. More information about these risks and other risks can be found in the Fund’s prospectus. The Fund is a non-diversified fund and therefore may be subject to greater volatility than a more diversified investment.
Fund Fees: No loads; 1% gross expense ratio. Distributed by Rafferty Capital Markets, LLC Garden City, NY 11530.
Investors should consider the investment objectives, risks, and charges and expenses of the Fund carefully before investing. The prospectus contains this and other information about the Fund. You may obtain a prospectus on this website or by calling the transfer agent at 1-800-785-8165. The prospectus should be read carefully before investing.
Important Risk Information
An investment in the Fund is subject to investment risks, including the possible loss of the principal amount invested. There can be no assurance that the Fund will be successful in meeting its objectives. The Fund invests in common stocks which subjects investors to market risk. The Fund invests in small and mid-cap companies, which involve additional risks such as limited liquidity and greater volatility. The Fund invests in undervalued securities. Undervalued securities are, by definition, out of favor with investors, and there is no way to predict when, if ever, the securities may return to favor. The Fund may invest in foreign securities which involve greater volatility and political, economic and currency risks and differences in accounting methods. Investments in debt securities typically decrease in value when interest rates rise. This risk is usually greater for longer-term debt securities. More information about these risks and other risks can be found in the Fund’s prospectus. The Fund is a non-diversified fund and therefore may be subject to greater volatility than a more diversified investment.
Distributed by Arbor Court Capital, LLC member FINRA/SIPC.