Oct 17

Portfolio Manager Commentary — Wal-Mart Stores, Inc. (WMT)

The most controllable determinants of investment returns are the level of valuation at which investors choose to initiate their investment and the level of valuation at which they choose to terminate their investment. Once you choose to initiate your investment at a rich level of valuation, you require a rich terminal valuation at some point in the future — and the good fortune to sell at that point — in order to achieve an acceptable long-term return.

— John Hussman, Weekly Market Comment, August 13, 2012

For a PDF of this commentary, click here.

We thought Hussman’s comments were worth mentioning in conjunction with our recent investment decision to sell the Fund’s position in Wal-Mart (WMT).

Wal-Mart was an original position in the Fund initiated on July 1, 2010 and we accumulated shares between July 1, 2010 and December 2, 2011 at prices between $48.30 and $58.45. The Fund’s average price for these purchases of WMT was $54.26. In our opinion, the company’s business model remains exceptional. Given the recent surge in WMT’s stock price, we no longer carried a margin of safety in our investment position. We therefore decided to sell the Fund’s position in WMT. We believe it is prudent to allocate that capital to other potential investments that offer a more attractive margin of safety.


The Castle Focus 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. 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. You may obtain a current copy of the Fund’s prospectus by calling 1-877-743-7820. Distributed by Rafferty Capital Markets, LLC-Garden City, NY 11530, Member FINRA.

The risks associated with the Fund, detailed in the Prospectus, include the risks of investing in small and medium sized companies and foreign securities which may result in additional risks such as the possibility of greater price volatility and reduced liquidity, fluctuations in currency exchange rates, and political, diplomatic and economic conditions as well as regulatory requirements in foreign countries. There also may be risks associated with the Fund’s investments in exchange traded funds, real estate investment trusts (“REITs”), significant investment in a specific sector, and non-diversification.

Wal-Mart Stores, Inc. (WMT) represented 3.24% of Fund assets on May 23, 2012, the day prior to the Fund’s first sale of WMT.  As of September 30, 2012, WMT represented 0% of the Fund’s assets.

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