VICE FUND: SEPTEMBER 2023 – COMMENTARY LETTER
The Vice Fund ended the month of September with a return of -5.64%.
Market Review
September lived up to its reputation of seasonal weakness and higher volatility. U.S. equities declined and long interest rates had their largest quarterly surge since the Great Financial Crisis in 2009. Energy prices also surged, with WTI crude spiking 29%. Upcoming corporate earnings may drive volatility higher with the consensus expectations to be flat after three declining quarters.
The “Magnificent 7” mega-cap stocks that have driven the 2023 rally reveal a fragile market. To illustrate the importance of this small group of stocks year-to-date, the S&P 500 Equal-Weight Index is +1.8% versus the S&P 500 +13.1%. Further, it has been a tale of two markets even within sectors. For example, small-cap communications stocks are -15% on the year versus large-cap communications stocks +40% on the year. This high dispersion among stocks has become more correlated during the recent sell-off. We believe higher correlations can lead to larger downside risk.
The Vice fund followed global equities lower in the month. The primary driver has been the ongoing sell-off in military defense stocks, China’s economic fears spilling over to Macau casino stocks, and tobacco stock laggards. Most notably, Raytheon stock continues to move lower after an engine manufacturing flaw in its Pratt & Whitney unit. The fund benefited in 2022 from the rise of value stocks in relation to mega-cap tech stocks. 2023 has been a challenge for value stock investors. In fact, it’s been a challenge for any fund not invested in the Magnificent 7. However, we are investing for the long run. We believe Vice fund stocks are relatively undervalued for a variety of reasons – mainly 1) the premium placed on so-called ESG stocks and 2) the challenges facing growth stocks in a high-interest rate environment.
Sincerely yours,
Investors should consider the investment objectives, risks, charges and expenses carefully before investing. For a prospectus or summary prospectus with this and other information about the Fund, please call 1-800-MUTUALS or visit our website at www.USAMutuals.com. Read the prospectus or summary prospectus carefully before investing.
Standardized performance as of (9/30/2023) Fund Inception (02/01/2002)
| 1 Year | 5 Year | 10 Year | Since Inception | |
| VICEX | 6.60% | 0.20% | 3.79% | 7.36% |
| MSCI World Index | 21.41% | 6.99% | 8.11% | 8.44% |
Investor Class performance data quoted represents past performance; past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance of the fund may be lower or higher than the performance quoted. Performance data current to the most recent month end may be obtained by calling 1-866-264-8783. Returns over one year are annualized. The Gross and Net expense are 1.64% and 1.49%. Contractual fee waivers through 07/31/2024.
DEFINITIONS:
The MSCI All Country World Index Total Return (“MSCI ACWI TR”) captures large and mid-cap representation across 23 Developed Markets (DM) and 26 Emerging Markets (EM) countries.
SYMBOL: VICEX
