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Bread and Butter Fund Semi Annual Report

September 16, 2011 | About:

James Potkul's $1.5 million Bread and Butter Fund (BABFX) is one of the smallest value funds I've ever come across. Fortunately for us, Mr. Potkul doesn't let the fund's size prevent him from writing some of the most straightforward shareholder letters in the business. In his most recent report, he discusses his dour view of the U.S. stock market and explains why he thinks his fund's top holdings are well-positioned to protect the purchasing power of his investors' dollars.

Bread & Butter Fund follows a contrarian value investing strategy and tends to hold onto positions for the long haul. For the most part the fund has lived up to its name by focusing on large-cap value stocks with insurance conglomerates, consumer staples and energy stocks as key components. The fund has a 23% cash allocation and 35% in its top five holdings.


Here is an excerpt

The Fund is focused on securities that are undervalued and that can protect your purchasing power against a devaluing dollar and higher inflation. A number of the Fund’s top holdings are priced at attractive levels including Loews Corp, Newmont Mining, Berkshire Hathaway, Philip Morris International, Tyson Foods, Chesapeake Energy and Coeur D’Alene Mines. Below is a brief discussion of each company.

Loews Corp. is a holding company which owns majority stakes in publically traded companies such as CNA Financial, Diamond Offshore and Boardwalk Pipeline Partners along with wholly owned subsidiaries such as Highmount Energy and Loews Hotels. As cash flows to the holding company, a fortress like balance sheet continues to grow with cash of $4.3 billion. This cash hoard gives the company the flexibility to make acquisitions, fund internal expansion or buyback shares. Currently, the share price is trading at a big discount to the sum of all these parts making it an attractive security.

Tyson Foods is a producer and processor of poultry, beef and pork and is one and two in its market categories. The company’s share price has been dormant for two decades and I do think this is about to change. This sleeping giant is taking the necessary steps to get this powerhouse franchise on the right track. Tyson has been paying down debts, which has led to a recent credit rating improvement to investment grade. Capital allocation of cash has improved as it is being invested to upgrade the efficiency of operations and to share buybacks. In addition, industry dynamics look robust as supply has been curtailed leading to stronger pricing while the company has excellent prospects to expand its

business in some of the emerging markets.

Rating: 4.2/5 (11 votes)


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