Bretton Fund Q4 2025 Shareholder Update

James Sterling February 18, 2026 9 min read

Dear Valued Shareholders:

Although the stock market fluctuates daily between exuberant optimism and cautious concern regarding a potential bubble in artificial intelligence technologies, we maintain that the broader market has not yet entered true bubble conditions. Instead, valuations appear reasonably elevated at present. With our emphasis on long-term investment horizons, we are comfortable bypassing the more speculative elements of the AI enthusiasm—some of which do exhibit bubble characteristics—even if it results in temporary underperformance during periods of market exuberance. We continue to identify attractive opportunities in undervalued sectors that we anticipate will deliver substantial rewards over extended periods.

Total Returns as of December 31, 2025

The following table outlines the fund’s performance metrics compared to the S&P 500 Index benchmark across various time frames:

4th Quarter: Bretton Fund 1.44%, S&P 500 Index 2.66%
1 Year: Bretton Fund 11.58%, S&P 500 Index 17.88%
3 Years: Bretton Fund 20.05%, S&P 500 Index 23.01%
5 Years: Bretton Fund 14.08%, S&P 500 Index 14.42%
10 Years: Bretton Fund 13.79%, S&P 500 Index 14.82%
Since Inception (9/30/10): Bretton Fund 12.77%, S&P 500 Index 14.58%

Performance figures cited here reflect historical results, which are not indicative of future outcomes. The returns on investments and the underlying principal value can vary, meaning that when shares are redeemed, they could be valued higher or lower than the initial purchase price. Recent performance data up to the latest month-end can be accessed through the fund’s official resources or by contacting our team at 800.231.2901. All reported returns incorporate fluctuations in share prices along with the reinvestment of dividends and capital gains distributions. The S&P 500 Index serves as a broad, unmanaged benchmark for U.S. equity performance, bearing no expenses and not being directly investable. The fund operates with an expense ratio of 1.35%.

Annual Performance History

Here is a year-by-year breakdown of the fund’s returns alongside the S&P 500 Index:

2025: Bretton Fund 11.58%, S&P 500 Index 17.88%
2024: Bretton Fund 20.27%, S&P 500 Index 25.02%
2023: Bretton Fund 28.91%, S&P 500 Index 26.29%
2022: Bretton Fund -12.56%, S&P 500 Index -18.11%
2021: Bretton Fund 27.76%, S&P 500 Index 28.71%
2020: Bretton Fund 8.44%, S&P 500 Index 18.40%
2019: Bretton Fund 35.39%, S&P 500 Index 31.49%
2018: Bretton Fund -1.94%, S&P 500 Index -4.38%
2017: Bretton Fund 18.19%, S&P 500 Index 21.83%
2016: Bretton Fund 10.68%, S&P 500 Index 11.96%
2015: Bretton Fund -6.59%, S&P 500 Index 1.38%
2014: Bretton Fund 9.79%, S&P 500 Index 13.69%
2013: Bretton Fund 26.53%, S&P 500 Index 32.39%
2012: Bretton Fund 15.66%, S&P 500 Index 16.00%
2011: Bretton Fund 7.90%, S&P 500 Index 2.11%
9/30/10 – 12/31/10: Bretton Fund 6.13%, S&P 500 Index 10.76%

Since the fund’s inception, cumulative returns stand at 525.55% for Bretton Fund versus 697.32% for the S&P 500 Index. These figures underscore our consistent approach amid varying market conditions, where we prioritize sustainable value creation over short-term market timing.

Fourth Quarter Performance Highlights

During the final quarter of 2025, Alphabet’s shares experienced significant upward momentum following the launch of its advanced AI chatbot, Gemini. This iteration markedly outperformed prior versions, meeting and even surpassing expectations while aligning with top-tier AI models in capabilities. Additional positive influences on the fund’s quarterly results included Ross Stores, which contributed 0.8%, American Express at 0.7%, and Bank of America adding 0.4%.

On the downside, AutoZone emerged as the primary detractor, with disappointing margin results stemming from elevated product costs, which subtracted 1.5% from overall performance. Investments tied to the housing sector also faced headwinds: Dream Finders Homes detracted 1.2%, Eagle Materials 0.5%, and Progressive impacted returns by 0.5%.

Key Contributors to 2025 Full-Year Performance

Alphabet delivered an exceptional performance throughout 2025. The stock reached a low point in April, trading just below $143 per share amid fears that emerging AI tools like ChatGPT would eclipse Google’s dominance, compounded by regulatory pressures from the Department of Justice threatening its core search operations. By year-end, however, shares had more than doubled to $314, unlocking approximately two trillion dollars in additional market value. Without foresight into future events, our conviction stemmed from Alphabet’s unparalleled assets: superior global computing infrastructure, vast repositories of search and internet data, the dominant YouTube video platform, cutting-edge autonomous driving technology via Waymo, and numerous other strengths. These positioned the company for greater recognition than the market afforded in its weaker moments. While we do not foresee another doubling in 2026, the trajectory remains promising.

Robust conditions in consumer credit and banking sectors propelled American Express and JPMorgan Chase, contributing 1.9% and 1.6% to fund performance, respectively. TJX Companies, a key off-price retailer, added 1.5% through steady gains.

The year’s most notable setback came from UnitedHealth Group, which detracted 1.1% due to unanticipated surges in healthcare costs for its policyholders. We delve deeper into UnitedHealth later in this letter. Housing-related holdings also pressured returns amid elevated interest rates and subdued consumer sentiment that stalled the real estate market: Dream Finders Homes subtracted 1%, Eagle Materials 0.8%, and NVR 0.5%.

Tax Considerations

In 2025, the fund distributed long-term capital gains amounting to $1.228486 per share, equivalent to approximately 1.5% of the fund’s net asset value. Investors should consult their tax advisors for personalized implications.

Portfolio Composition as of December 31, 2025

The fund’s allocations reflect a diversified yet concentrated approach to high-conviction opportunities:

Alphabet Inc. 14.58%
American Express Company 6.97%
JPMorgan Chase & Co. 6.30%
The Progressive Corporation 6.20%
The TJX Companies Inc. 5.88%
UnitedHealth Group Incorporated 5.84%
Bank of America Corporation 5.65%
AutoZone Inc. 5.53%
Ross Stores Inc. 5.09%
Visa Inc. 5.09%
Microsoft Corporation 5.05%
Mastercard Inc. 4.36%
NVR Inc. 4.10%
S&P Global Inc. 3.96%
Eagle Materials Inc. 3.89%
Moody’s Corporation 3.46%
Berkshire Hathaway Inc. 3.07%
Dream Finders Homes Inc. 2.38%
Cash 2.60%

Financial Sector Overview

American Express benefited from sustained card usage among its clientele, who continue to make timely payments despite competitive pressures in the premium segment. The Platinum Card maintains strong appeal with its premium fees offset by substantial rewards. Earnings per share rose 15%, driving a 26% stock return.

Major banks thrived amid expanded lending activities, lighter regulatory burdens, and persistently elevated interest rates. JPMorgan Chase and Bank of America saw share returns of 37% and 28%, respectively, supported by earnings per share growth of 11% and 19%.

Progressive experienced a normalization after several robust years, with shares declining 3% even as earnings per share surged 48%, reflecting market adjustments.

Ratings firms S&P Global and Moody’s capitalized on heightened bond issuance by corporations and governments, boosting earnings per share by roughly 27% and 31%. Stock returns were more tempered at 7% and 10%.

Technology Sector Insights

Alphabet led the technology holdings with a 65% return, rebounding dramatically from mid-year troughs. Search ad engagement has not only held steady but accelerated post-ChatGPT, enabling innovative monetization of its core assets. Businesses like YouTube, Google Cloud, and Waymo remain in nascent monetization phases. Earnings per share grew 34%.

Microsoft achieved a 17% stock gain, underpinned by 16% earnings per share expansion across diverse segments including Office productivity tools, Azure cloud services, AI initiatives, Xbox gaming, and Windows. This diversification enhances resilience.

Visa and Mastercard sustained momentum from rising consumer expenditures and the ongoing transition from cash to digital payments, posting 13% and 10% returns with 14% and 15% earnings per share increases.

Consumer Sector Analysis

Off-price retailers TJX and Ross Stores rebounded strongly from inflation challenges post-Covid, with shares advancing 31% and 21%, respectively, and earnings per share up an estimated 10% and 3%.

AutoZone grappled with tariff-related pressures, resulting in a 1% decline in earnings per share and a modest 6% stock return. Given the sector’s consolidation and historical pricing power, we view this as transitory, pending passthrough of elevated costs.

Homebuilders NVR and Dream Finders Homes initially weathered 2022’s rate hikes due to reduced existing-home competition. However, as that buffer waned, persistent high rates sidelined buyers, yielding a challenging year. Existing home sales hit record lows relative to total volume. NVR and Dream Finders shares fell 10% and 27%, with earnings per share dropping 18% and an estimated 29%.

Pent-up housing demand persists, evidenced by elevated prices, constrained inventory, subdued new construction, and ongoing household formation. The market thaw’s timing is uncertain, but we expect strong recovery for these positions.

Industrial Sector Update

Eagle Materials, producer of cement and wallboard, mirrored housing weakness, with earnings per share up marginally 2% but shares down 16%.

Berkshire Hathaway marked the transition from legendary CEO Warren Buffett after decades of extraordinary stewardship. Irreplaceable as he is, the portfolio of businesses and current valuation remain attractive, supporting an 11% stock return.

Healthcare Sector Review

UnitedHealth Group endured a tumultuous 2025. Early in the year, a February disclosure revealed a Department of Justice probe into its Medicare Advantage coding practices. A March victory in a longstanding case from the Obama era highlighted the disparity between initiating and prevailing in such matters.

April brought sharper challenges: membership across insurance and Optum services proved sicker and costlier than projected, eroding margins in this precision-dependent industry. A May leadership change, reinstating former CEO Stephen Hemsley, signaled systemic modeling issues requiring extended remediation. By August, shares plummeted from $510 to under $240. Hemsley’s strategy emphasized pruning unprofitable accounts, with full stabilization projected into 2026, yet the franchise’s earnings potential shone through.

Subsequently, in January 2026, the government’s preliminary 2027 Medicare Advantage rate notice cited 4.97% cost growth but implemented offsets for a mere 0.09% net adjustment. As a draft subject to revision through April and effective October, negotiations will ensue. Nonetheless, mismatched 5% cost escalation against flat revenues is untenable long-term. With Medicare Advantage’s popularity—enrolling 35 million beneficiaries—major alterations face scrutiny. UnitedHealth’s competitive edges position it for navigation of these hurdles, though risks are markedly heightened.

Positions Exited in 2025 and Realized Returns

Revvity: -5.9% IRR
Union Pacific: 13.0% IRR

Detailed Exit Analysis: Revvity

Our entry into what was then PerkinElmer followed the Covid era, aligning with medicine’s renaissance: biologics expansion, personalized therapies, AI-driven drug discovery, and mRNA delivery. Revvity’s consumables for research and diagnostics appeared ideally situated. Regrettably, management deployed Covid testing proceeds into costly acquisitions while offloading its reliable food testing unit, then faltered amid pharma spending slowdowns and FDA budget cuts. We realized an overall -28.5% return, equating to a -5.90% internal rate of return, with significant opportunity costs.

As ever, we express our sincere gratitude for your continued trust in our stewardship.

Stephen Dodson, Portfolio Manager

Raphael de Balmann, Portfolio Manager