Ensemble Fund

Annual Letter

October 31, 2021

The Ensemble Fund (the “Fund”) returned 45.21% for the fiscal year ended October 31, 2021. For comparative purposes, the S&P 500® Index, which is the Fund’s benchmark, had a total return of 42.91% over the same time period.

The Fund began the fiscal year outperforming the S&P 500® Index up until the end of February. The Fund then underperformed the market through the middle of June at which point it trailed its benchmark by 2.85%. From mid-June onward, the Fund outperformed as interest rates rose, and we believe our portfolio of high-quality companies is well positioned to manage higher interest costs, higher wages, and inflated input costs given their competitively advantaged business models and strong pricing power that allows them to raise prices as needed to offset increased costs.

During the fiscal year, we owned 24 different companies of which all but one generated a positive return for the Fund.

Significant detractors from the Fund’s total return included the following:

  • Nintendo (3.7%* weight in the Fund): Nintendo declined 17.1% during the Fund’s fiscal year. As the company lapped the strong results during the initial phases of COVID driven shelter in place orders, sales of the company’s Switch gaming console reported year over year declines. However, while Switch sales in the most recent quarter declined 22% vs the prior year, they remained up a remarkable 109% above the same quarter in the two years prior. We believe that Switch sales will return to growth and that the market is misinterpreting the recent decline in Switch sales as the beginning of a permanent decline in the Switch sales cycle.
  • Mastercard (7.6%* weight in Fund): Mastercard ended the Fund’s fiscal year trading up 16.81% for the year, but slightly below the price it traded at on the eve of COVID. However, the company is reporting revenue more than 10% above pre-COVID levels with a much more robust growth outlook given rapid increase in consumer spending as well as a the COVID driven shift of spending from cash and checks to digital payments. We believe the stock is under pressure primarily due to the perceived threat of emerging Buy Now, Pay Later (BNPL) payment companies. However, we do not believe these companies represent a material threat to Mastercard’s competitive positioning or growth outlook, although we are following the development of the BNPL industry closely to monitor for risks to our Mastercard thesis.
  • Masimo (4.8%* weight in the Fund): After being featured last year as one of the Fund’s largest performance contributors, Masimo’s stock took a breather returning “just” 26.68% for the year. The company benefited from strong demand for its non-invasive pulse oximetry technology during periods of elevated COVID hospitalizations. As emergency rooms have stopped being over capacity, Masimo has seen demand cool, but is still above pre-pandemic trends. Importantly, Masimo increased its installed base during the pandemic, and we believe both their core pulse oximeter platform as well as new sensing products leveraging their core technology and deep trust with hospital partners, provides very long duration growth opportunities irrespective of COVID driven demand volatility.

Significant contributors to the Fund’s total return included the following:

  • Alphabet (5.9%* weight in Fund): After lagging its big tech peers in the prior year, Alphabet’s stock screamed higher this year, returning 83.21% for the fiscal year. This strength was driven by the company’s robust revenue growth as global businesses pivoted to online ads to drive both eCommerce sales and “omnichannel” (leveraging both online and physical stores to meet customer needs) efforts. With consumer spending surging, the economic sensitivity of the advertising end market has added to Alphabet’s strong secular growth rate to the extent that recent results demonstrate that COVID actually accelerated the company’s growth rates measured against 2019, pre-COVID results.
  • First Republic (5.7%* weight in Fund): While a low and flat yield curve has pressured First Republic’s net interest margin, the stock ripped higher by 72.31% this year. This performance was driven by the company’s high net worth customers making record large additions to checking and savings account balances, wealth management assets growing sharply and a newly invigorated housing market driving demand for home loans. The company’s focus on the San Francisco Bay Area, in the midst of an explosion of technology related wealth, is driving growth at levels far above most peers, even as the company’s notoriously conservative lending practices remain intact.
  • Charles Schwab & Co (4.4%* weight in Fund): Our best performing stock, returning 101.98% during our fiscal year, Charles Schwab & Co is benefiting on the one hand from strong investor engagement, growth in assets under management, and synergies from its merger with TD Ameritrade, while also seeing its multiple expand as investors begin to price in a higher net interest margin in future years as inflation worries rattle fixed income markets. While the stock now trades more than 60% above where it traded on the eve of COVID, we believe the stock entered COVID at an extremely cheap valuation and has only more recently started to trade back towards more reasonable levels.

The economic expansion that played out in 2021 was the strongest expansion since WWII. Our portfolio of competitively advantaged companies, many of which benefit from economically sensitive business models, saw rapid growth in revenue and earnings. As global supply chains struggle to keep up with surging demand and employers battle for scarce labor to support their growth, competitive advantages will be even more important than in normal times.

You can read more about our views on the economy and markets, as well find in depth profiles of our portfolio holdings, in our quarterly letters posted to, as well as by following the Intrinsic Investing blog, published by Ensemble Capital Management, the Adviser to the Fund, at


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 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.