Ensemble Fund

Annual Letter

October 31, 2023

The Ensemble Fund (the “Fund”) returned 3.32% for the fiscal year ended October 31, 2023. For comparative purposes, the S&P® 500 Index, which is the Fund’s benchmark, had a total return of 10.14% over the same time period.

The Fund outperformed the S&P® 500 Index from the beginning of the fiscal year through early-February. The Fund then underperformed the market through the end of the fiscal year most notably due to the Fund’s ownership of First Republic Bank, which experienced a run on their deposit base due to customer fears in the wake of the collapse of Silicon Valley Bank.

During the fiscal year, we owned 23 different companies. Nine of our holdings generated negative returns, while 14 generated positive returns.

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

  • First Republic Bank (0%* weight in the Fund): First Republic declined 89.84%, detracting 7.23% from the Fund’s performance, prior to our sale of the stock. The company was subsequently taken over by the FDIC with equity owners receiving zero value. First Republic did not suffer from credit quality issues, and their regulatory capital ratio requirements stayed in compliance. However, after the collapse of Silicon Valley Bank, the other large regional bank in the San Francisco Bay Area, depositors pulled their money out of First Republic triggering the bank to fail.
  • Illumina (3.36%* weight in the Fund): Illumina’s stock price declined 52.18% during the Fund’s fiscal year, detracting 47% from the Fund’s performance. Illumina’s acquisition of GRAIL, a company with a novel technology for the early detection of cancer, triggered so many regulatory concerns and questions about management judgement, that a successful activist campaign resulted in the removal of the CEO and board chair. The new CEO has made it clear that he took the job to focus on Illumina’s core, and globally dominant, genetic sequencing franchise and will reverse the acquisition of GRAIL as quickly as possible. We believe that once the GRAIL debacle is behind the company, they will still control one of the most important technologies that exists today. We continue to believe the company is worth far more than the fiscal year end stock price implies.
  • Masimo (3.33%* weight in Fund): Masimo fell 35%, contributing -2.22% to the Fund’s relative performance. Like Illumina, Masimo also made a large acquisition that shareholders view as a bad decision. Like Illumina, an activist has taken a significant stake in the company and successfully won seats on the board. Masimo’s core set of patient monitoring sensors remain a mission critical and competitively dominant technology in hospitals. While we believe that the company’s large acquisition enables them to bring their hospital focused sensors into the home in a way that can create tremendous value for shareholders, we also believe that should the activist succeed in simply reversing the acquisition, even at a loss, that Masimo’s core business is worth far more than the fiscal year end stock price implies.

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

  • Netflix (7.31%* weight in fund): Netflix gained 41.05% during the Fund’s fiscal year, adding 2.77% to the Fund’s performance. While the stock remains below its all time high set in 2021, the bear case concerns of 2022 that the company’s growth had ended for good have been shown to be misplaced. With the rollout of their advertising supported version of Netflix, along with their efforts to make all Netflix households pay for access (rather than using a friend’s password to watch for free), the company has returned to growth. We believe Netflix’s best days are still ahead of it as the world continues its inevitable march to streaming TV as the primary way that all households consume quality video content.
  • Alphabet (7.93%* weight in Fund): Alphabet rallied 29% during the Fund’s fiscal year, contributing 2.72% to the Fund’s performance. After suffering through the 2022 digital advertising recession, the first since 2009, Alphabet’s advertising business returned to double digit by the end of the Fund’s fiscal year. In addition, worries that Google Search faced a near term threat from OpenAI or other large language model artificial intelligence programs faded as Google reminded the world that it is one of the foremost AI research organizations in the world.
  • Ferrari (4.69%* weight in fund): Ferrari generated a return of 54.39% during the Fund’s fiscal year, contributing 2.59% to the Fund’s performance. Ferrari exhibited resiliency of demand through the economic turmoil of late 2022 and 2023, much as they have showed solid demand in past periods of economic disruption. In addition, the company’s first four door SUV (although Ferrari insists it shouldn’t be called an SUV!) hit the market to resounding demand with the company halting the acceptance of new orders after the sold out production through the end of 2024

The inflationary conditions that plagued 2022 and the first part of 2023 began to fade over the balance of the Fund’s fiscal year, even while employment and economic growth remained robust. While a recession is still certainly possible in the near future (this is of course always the case in economics), the Federal Reserve has signaled they believe they are likely done raising interest rates and inflation has faded even without the big increase in unemployment that so many economists thought would be required. As we go into 2024, we will remain vigilant in monitoring the specific industry and company end markets that our portfolio holdings serve, while remaining optimistic that a full blown economic recession may be avoided.

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

* Portfolio Information as of October 31, 2023.

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.

The Ensemble Fund’s prospectus contains important information about the Fund’s investment objectives, potential risks, management fees, charges and expenses, and other information and should be read and considered carefully before investing. You may obtain a current copy of the Fund’s prospectus by calling 1-800-785-8165. Distributed by Arbor Court Capital, LLC.