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Holly LaFon
Holly LaFon
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David Winters' Wintergreen Fund 2018 Annual Shareholder Letter

Discussion of markets and holdings

March 07, 2019 | About:

Dear Fellow Wintergreen Fund (Trades, Portfolio) Shareholder,

For the fiscal year ended December 31, 2018, the Wintergreen Fund (Trades, Portfolio) (the “Fund”) Investor Class returned -20.18%, and the Institutional Class returned -19.92%. Notwithstanding the overall performance for the period, the Fund had positive 2018 returns from long-term portfolio holdings Union Pacific Corp., Birchcliff Energy Ltd. (which was sold during the year) and Bergbahnen Engelberg-Truebsee-Titlis AG, Reg. The Fund continued to utilize forward currency contracts, which had a positive impact on performance during the period. Securities that underperformed during 2018 included British American Tobacco plc, Consolidated-Tomoka Land Co. and Compagnie Financiere Richemont SA, Reg. Since inception on October 17, 2005, through December 31, 2018, the Fund’s Investor Class has a cumulative return of 63.79%, while the Fund’s Institutional Class has a cumulative return of 13.45% since its inception on December 30, 2011.

Keep moving forward, and if it’s time to go, it’s time.

- Stan Lee

In the Fund’s 2018 semi-annual report shareholder letter, we described one component of our sell discipline – selling a security when we believe it becomes fairly valued. Another important component of our sell discipline is to evaluate the actions of management; if there is a fundamental change in management’s decision, direction or focus, we carefully analyze the situation and may determine it is time to reduce or exit a position. An example of this occurred with long-time portfolio holding Altria Group, Inc. (“Altria”). For years, Altria satisfied Wintergreen’s three core investment principles: first, a business that has good or improving economics, and often generates sales and profits in multiple currencies and jurisdictions; second, a management team that is working for the benefit of all shareholders and not just for its own short-term compensation; and third, the security being available at a compelling price.

As a tobacco company, Altria (NYSE:MO) has long been regulated by the U.S. Food and Drug Administration (the “FDA”). The FDA has the authority to regulate tobacco products to protect public health and also to regulate nicotine and other ingredient levels in tobacco products. The FDA has not approved marijuana as a safe and effective drug for any intended indication, and the FDA is also responsible for regulating electronic smoking products. In this regulatory environment, we were alarmed by Altria’s decision in December 2018 to make a multibillion-dollar investment in a Canadian cannabis producer. Immediately following this investment, Altria announced it was making a $12.8 billion dollar investment in Juul Labs, the maker of an electronic device that has received considerable FDA attention due to its popularity among underage users. We found these management decisions a clear departure from the course of actions we had previously viewed as a conservative management team. As a result, the Fund reduced its investment in Altria in 2018 at a substantial profit for shareholders, and completely exited the position early in 2019.

The world as we have created it is a process of our thinking. It cannot be changed without changing our thinking. - Albert Einstein

Nestlé SA (“Nestlé”) (XSWX:NESN) remains a solid long-term portfolio holding of the Fund. Nestlé, the world’s largest food and beverage company, is highly respected and does business in 189 countries around the world. In 2017, management underwent a transition to a new CEO who was tasked with accelerating Nestlé’s ongoing restructuring and portfolio review. New CEO Mark Schneider was the first outsider hired as Nestlé’s CEO since 1922, and we believe that this fresh perspective has benefitted shareholders. Under Mr. Schneider’s leadership, Nestlé has made opportunistic acquisitions, including the purchase of the exclusive rights to sell Starbucks-packaged coffees and teas around the world, and divestments including its U.S. confectionary business and Gerber Life Insurance business.

Nestlé has increased focused on its Health Sciences division, and believes that this business segment has the potential to surpass confectionary sales as consumers are increasingly focused on healthier choices. Products like Boost Nutrition beverages and Carnation Nutrition Drinks have become familiar in grocery stores, but many others, while not household names, serve an increasingly important, and growing, customer base. For cancer patients, it sells Resource Support Plus, a high-protein, high-calorie supplement specifically formulated for the increased nutritional needs of cancer/oncology patients. For the obese there’s Optifast, a line of shakes, soups, and snack bars intended to be taken under the supervision of a doctor. Some of the products are regulated as “medical foods” by the FDA.

Nestlé’s pet care business, led by Purina, along with infant nutrition, coffee, and the previously mentioned Health Sciences business, continue to make significant contributions to the company’s organic growth. We believe all of these product lines help distinguish Nestlé from other well-known food and beverage companies – many of which are left with legacy brands that haven’t adapted over the years, and face dwindling sales. Combined with an ongoing commitment to returning capital to shareholders in the form of buybacks and a compelling dividend yield, we believe there continues to be many ways for Wintergreen shareholders to win by owning Nestlé.

We encourage you to read more about Wintergreen’s approach and to keep up to date with the latest Fund news at www.wintergreenfund.com.

Thank you for your continued investment in Wintergreen Fund (Trades, Portfolio).


David J. Winters, CFA

Portfolio Manager

The views contained in this report are those of the Fund’s portfolio manager as of December 31, 2018, and may not reflect his views on the date this report is first published or anytime thereafter. The preceding examples of specific investments are included to illustrate the Fund’s investment process and strategy. There can be no assurance that such investments will remain represented in the Fund’s portfolios. Holdings and allocations are subject to risks and to change. The views described herein do not constitute investment advice, are not a guarantee of future performance, and are not intended as an offer or solicitation with respect to the purchase or sale of any security.

About the author:

Holly LaFon
I'm a financial journalist with a Master of Science in journalism from Medill at Northwestern University.

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