Ensemble Fund Investor Letter – Second Quarter 2018
Below is the Q2 2018 quarterly letter for the Ensemble Fund (ENSBX). This quarter’s Company Focus is on L Brands (LB) and Prestige Brands (PBH). You can find historical Investor Communications here and information on how to invest here. Enjoy!
The performance of the Ensemble Fund (“the fund”) this quarter was solid and compared favorably to the broader market. The fund was up 5.04% vs the S&P 500 up 3.43%. Year to date, that brings our performance to up 7.07% vs the S&P 500 up 2.65%.
As of June 30, 2018
|2Q18||YTD||1 Year||Since Inception*|
*Inception Date: November 2, 2015
Performance data represents past performance. 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 on our website at www.EnsembleFund.com.
Our outperformance this year has been driven primarily by stock selection with eight stocks in our portfolio up 20% or more. The stocks range from FAANG member Netflix (4.5% weight in portfolio), a new position in a small pet insurance business called Trupanion (1.3% weight in portfolio), to global luxury companies Tiffany (no longer held in portfolio) and Ferrari (6.6% weight in portfolio), to the athletic shoe manufacturer Nike (4.5% weight in portfolio), to stable financial data processing businesses Mastercard (6.8% weight in portfolio) and Broadridge (5.5% weight in portfolio), to the airplane spare parts maker TransDigm (2.6% weight in portfolio). We’ve also benefited from avoiding certain sectors. The fund has had no exposure this year to the telecom, consumer staples, materials, utilities or real estate sectors. They collectively make up 17.2% of the S&P 500 and each of these sectors are down year to date. Most notably, consumer staples, the largest of those sectors is down 8.9% this year.
For the most part these strong stocks produced solid returns in the second quarter as well as the first. All of the companies, with the exception of Broadridge, achieved 10%+ gains in the most recent quarter. Apple (4.1% weight in portfolio) and Paychex (7.4% weight in portfolio) joined the fun as well posting over 10% appreciation.
Rather than any particular unifying trend driving these stocks higher, for the most part they all benefited from company specific results. While many investors focus on capturing market wide trends across their broadly diversified portfolios, at Ensemble our entire approach is oriented around the evaluation of individual companies.
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.
Upside Capture Ratio measures how much the security out or under performs during up-markets.
Downside Capture Ratio measures how much the security out or under performs during down-markets.
Return on Invested Capital (ROIC) is calculated by dividing NOPAT by Tangible Invested Capital. ROIC helps us understand if management is creating shareholder value. See below for definitions of NOPAT and Tangible Invested Capital.
Free Cash Flow Yield is calculated by dividing free cash flow the company is generating by the stock price. Free cash flow is the amount of cash generated by the business less cash needed to maintain the operations and capital expenditures of the business.
P/E (Price/Earnings) is calculated by taking the current price and dividing it by the earnings of the company. It’s a method of standardizing valuation to compare companies.
Fund Fees: No loads; 1% gross expense ratio.
Distributed by Rafferty Capital Markets, LLC Garden City, NY 11530.
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Past performance is no guarantee of future results. All investments in securities carry risks, including the risk of losing one’s entire investment. The opinions expressed within this blog post are as of the date of publication and are provided for informational purposes only. Content will not be updated after publication and should not be considered current after the publication date. All opinions are subject to change without notice and due to changes in the market or economic conditions may not necessarily come to pass. Nothing contained herein should be construed as a comprehensive statement of the matters discussed, considered investment, financial, legal, or tax advice, or a recommendation to buy or sell any securities, and no investment decision should be made based solely on any information provided herein. Links to third party content are included for convenience only, we do not endorse, sponsor, or recommend any of the third parties or their websites and do not guarantee the adequacy of information contained within their websites. Please follow the link above for additional disclosure information.