Our 2019 first quarter performance for the Institutional share class was +19.34% compared with the S&P 500 Total Return of +13.65%. For the trailing twelve months ending March 31, 2019, performance for the Institutional share class was +20.92% compared with the S&P 500 Total Return of +9.50%.
As is typical for the Fund, recent performance results from seeds planted long ago. Looking ahead, we remain focused on the long term.
You might notice that even by our standards, portfolio turnover has been low recently. This means broadly: we have been pleased with the holdings in the portfolio and have little reason to change things around. We continue to search for new opportunities.
Our top performers during the quarter were American Tower (AMT, Financial), Moody’s (MCO, Financial), Mastercard (MA, Financial), Ubiquiti Networks (UBNT, Financial), and Visa (V, Financial). We believe each of these businesses continues to build economic value at a very respectable pace. As it turned out in the first quarter, market prices rose at a breakneck pace and much faster than the companies created economic value. Our conclusion is that during both the Q4 dip and the Q1 rebound, the market produced large swings in share prices based almost wholly on sentiment. We try to look beyond these short-term movements and keep our eye on long-term fundamental value.
The only two detractors from performance this quarter were Markel and Berkshire Hathaway. At Markel (MKL, Financial), we believe investors are disheartened by a rare annual decline in book value per share (-4% in 2018), as well as uncharacteristically moderate trailing 5-year compound annual growth rate (CAGR) in book value per share (+7%). Markel earns returns on insurance and investment. Both sides of the house had challenges in 2018. We remind ourselves of the excellent team there working on shareholders’ behalf, and we believe it is likely that long- term growth at Markel may be better than the 2013-2018 period suggests. As for Berkshire, it is a small position and we saw no material developments during the period.
Net inflows to the Fund increased in December. Cash and equivalents have increased to 10% of the portfolio as of March 31, 2019. This is higher than recent periods but not at all unprecedented for the Fund. We believe that we will again find prudent opportunities to invest this cash.
In closing, from the fourth quarter of 2018 through the first quarter of 2019, we have witnessed an outburst in market price movement—first down and then up—although little has changed from a fundamental perspective. We remain fully focused on the long term. We thank you again for your continued support.
Chuck, Tom, & John
