Q1 2023 Quarterly Commentary


Q1 2023 Quarterly Commentary

Thomas G. Plumb, CFA
Lead Fund Portfolio Manager
President, CEO, Chairman

March 31, 2023

Dear Fellow Shareholders,

The Plumb Balanced Fund (PLBBX) for 1st quarter ending March 31st, 2023, finished up 8.33% and beat our blended benchmark by 2.39%. Our largest weighted Information Technology sector was up 31.53% vs the 18.92% Information Technology sector of the S&P 500 benchmark, resulting in most of our outperformance. Although fortunately we did not own any regional bank stocks, in March the failures of Silvergate, Silicon Valley Bank, and Signature Bank. caused our bond holdings in regional financials to be much more volatile than in a normal fixed income environment. Additionally at the end of March, we started a small position in Charles Schwab with most bank stocks being materially down with the idea of a buying opportunity.

Our top attribution contributors were comprised mostly of our traditional large growth stocks in Nvidia, MercardoLibre, Apple, Microsoft, and Alphabet (Google). Our bottom attribution detractors were Western Alliance Bank Bond maturing in 6/1/2030, Schlumberger, Amalgamated Finance Bond maturing in 11/15/2031, Merck, and VSE Corp.

The Plumb Equity Fund (PLBEX) finished up 15.67% and resoundingly beat our blended benchmark by 8.33% for the 1st quarter ending March 31st, 2023. Our top contributors were Nvidia, MercardoLibre, a new holding named e.i.f., Apple, and Microsoft. Our bottom attribution detractors were Schlumberger, Intuitive Surgical, Raytheon, Constellation Brands, and VSE Corp.

It was nice to see our technology holdings snap back after a difficult 2022 for the sector. During the quarter, a small company named OpenAI launched ChatGPT with a partnership with Microsoft and became extremely popular and newsworthy for the general population. Creating Artificial Intelligence models on a GPU semiconductor chip is not that new, but the power of making the inferences and getting ones questioned answered on GPUs, such as what Nvidia makes, has been the new game changer. We at the Plumb Funds have long seen this as a secular macroeconomic trend and part of the efficiency and productivity enhancements the global community needs as we fight inflation and environmental changes.

Overall, the Plumb Funds philosophy is to focus on growth companies with secular macroeconomic drivers. Currently, we are directing our efforts on Software as a Service (aka SaaS or Application Software), payment processing, e-commerce, and increasingly faster semiconductor chips. We believe we are in the early stages of a technological renaissance that Klaus Schwab named the Fourth Industrial Revolution in 2016. The Fourth Industrial Revolution is a way of describing the blurring of boundaries between the physical, digital, and biological worlds. We believe we will all be better for it.

Thomas G. Plumb

The Fund’s investment objectives, risks, charges, and expenses must be considered carefully before investing. The prospectus contains this and other important information about the investment company, and it may be obtained on www.plumbfunds.com or by calling 1- 866-987-7888. Read it carefully before investing.

Performance data quoted represents past performance and does not guarantee future results. Investment returns and principal value will fluctuate and when sold, may be worth more or less than their original cost. Performance current to the most recent month-end may be lower or higher than the performance quoted and can be obtained by calling 866-987-7888.

Past performance does not guarantee future results.

Plumb Balanced Fund Standardized Performance

Plumb Equity Fund Standardized Performance

Opinions expressed are those of the author as of March 31, 2023, and are subject to change, are not intended to be a forecast of future events, a guarantee of future results, nor investment advice.
Earnings growth is the annual rate of growth of earnings from investments.

Mutual fund investing involves risk. Principal loss is possible.

It is not possible to invest directly in an index

The fund may invest in small and mid-sized companies which involve additional risks such as limited liquidity and greater volatility. The funds invest in foreign securities which involve greater volatility and political, economic and currency risks and differences in accounting methods. Because the funds may invest in ETFs, they are subject to additional risks that do not apply to conventional mutual funds, including the risks that the market price of an ETF’s shares may trade at a discount to its net asset value (“NAV”), an active secondary trading market may not develop or be maintained, or trading may be halted by the exchange in which they trade, which may impact a fund’s ability to sell its shares. The fund may also use options and future contracts, which have the risks of unlimited losses of the underlying holdings due to unanticipated market movements and failure to correctly predict the direction of securities prices, interest rates and currency exchange rates. The investment in options is not suitable for all investors. The Plumb Balanced Fund will invest in debt securities, which typically decrease in value when interest rates rise. This risk is usually greater for longer-term debt securities.
Fund holdings are subject to change at any time and should not be considered a recommendation to buy or sell any security. For a list of current fund holdings, please refer to the individual fund’s holding page. Plumb Balanced Holdings: plumbfunds.com/funds/plumb-balanced-fund/. Plumb Equity Holdings: plumbfunds.com/fund/plumb-equity-fund/

Diversification does not assure a profit nor protect against loss in a declining market. Dividends are not guaranteed and may fluctuate.

The Standard and Poor’s 500, or simply the S&P 500, is a stock market index tracking the stock performance of 500 of the largest companies listed on stock exchanges in the United States. It is one of the most commonly followed equity indices.

The information technology (IT) sector includes companies that produce software, hardware or semiconductor equipment, and companies that provide internet or related services.