UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED

MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number  811-07360

Monetta Trust
(Exact name of Registrant as specified in charter)

1776-A S. Naperville Road, Suite 100

Wheaton, IL 60189-5831
(Address of principal executive offices) (Zip code)

Robert S. Bacarella

1776-A S. Naperville Road, Suite 100

Wheaton, IL 60189-5831
(Name and address of agent for service)

(630) 462-9800

Registrant's telephone number, including area code

Date of fiscal year end: December 31, 2019

Date of reporting period:  December 31, 2019

Annual Report

December 31, 2019

 

Beginning on January 1, 2021, as permitted by regulations adopted by the SEC, paper copies of the Funds’ shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the reports from the Fund (defined herein) or from your financial intermediary, such as a broker-dealer or bank. Instead, the reports will be made available on the Funds’ website (www.monetta.com), and you will be notified by mail each time a report is posted and provided with a website link to access the report.

 

If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the Funds by contacting your financial intermediary (such as a broker-dealer or bank) or, if you are a direct investor, by calling 1-800-MONETTA or by sending an e-mail request to info@monetta.com.

 

You may elect to receive all future reports in paper free of charge. If you invest through a financial intermediary, you can contact your financial intermediary to request that you continue to receive paper copies of your shareholder reports. If you invest directly with the Funds, you can call 1-800-MONETTA or send an e-mail request to info@monetta.com to let the Funds know you wish to continue receiving paper copies of your shareholder reports. Your election to receive reports in paper will apply to all funds held in your account if you invest through your financial intermediary.

 

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TABLE OF CONTENTS

Principal Risks:

Mutual fund investing involves risk. Principal loss is possible. The Funds may make short-term investments, without limitation, for defensive purposes, which may provide lower returns than other types of investments. The portion of the Monetta Core Growth Fund that invests in underlying ETFs that track the S&P 500^® Index (the “Index”) will be subject to certain risks which are unique to tracking the Index. By investing in ETFs, you will indirectly bear your share of any fees and expenses charged by the underlying funds, in addition to indirectly bearing the principal risks of the funds. The Monetta Core Growth Fund will invest approximately 50% of its net assets in funds that track the Index or other broad-based market indices that primarily include stocks of large capitalization U.S. companies, and your cost of investing will generally be higher than the cost of investing directly in the shares of the mutual funds that track an index, which will be subject to certain risks which are unique to tracking the Index. Growth stocks typically are more volatile than value stocks; however, value stocks have a lower expected growth rate in earnings and sales. Investments in smaller companies involve additional risks such as limited liquidity and greater volatility than larger companies. Please refer to the Funds’ prospectus for further details.

 

While the Funds are no-load, management and other expenses still apply.

 

Past performance is not a guarantee of future results.

 

Monetta Financial Services, Inc. (“MFSI” or the “Adviser”) is the investment adviser to the Monetta Funds. References to individual securities are the views of the Adviser at the date of this report and are subject to change. References are not a recommendation to buy or sell any security. Fund holdings and compositions are subject to change. MFSI and its affiliated officers, trustees and employees may, from time to time, have long or short positions in, and buy or sell, the securities of companies held, purchased or sold by the Monetta Funds. Current and future portfolio holdings are subject to risk. Please refer to the Schedules of Investments in this report for a complete list of Fund holdings.

 

Diversification does not assure a profit, nor does it protect against a loss in a declining market.

 

The S&P 500^® Index is a broad based unmanaged index of 500 stocks, which is widely recognized as representative of the equity market in general. It is not possible to invest directly in an index.

 

Earnings per share (“EPS”) is calculated as a company’s profit divided by the outstanding shares of its common stock. The higher a company’s EPS, the more profitable it is considered.

 

The forward price to earnings (“forward P/E”) ratio divides the current share price of a company by the estimated future (forward) EPS of that company.

 

Earnings growth is not a measure of the Funds’ future performance.

 

The Funds’ investment objectives, risks, charges and expenses must be considered carefully before investing. The summary and statutory prospectuses contains this and other important information about the investment company, and may be obtained by calling 1-866-964-4683, or visiting www.monetta.com. Read it carefully before investing.

 

Opinions expressed are those of the fund managers and are not intended to be a forecast of future events, a guarantee of future results, nor investment advice.

 

Distributor: Quasar Distributors, LLC.

January 31, 2020

 

Dear Fellow Shareholders:

 

I am pleased to enclose your Fund’s annual report for the year ended December 31, 2019.

 

To the surprise of many investors, the stock market had a banner year in 2019, posting its biggest gain since 2013, as the S&P 500^® Index rose 31.49%. The stock market was buoyed by moderate economic growth, low inflation, better-than-expected corporate earnings and an accommodative Fed that cut rates three times during the year. All the S&P 500^® sectors posted double-digit gains in 2019, with the Technology and Health Care sectors performing the best, while the Energy sector trailed all other sectors with a gain of 11.8%. It is interesting to note that two stocks, Apple and Microsoft, accounted for 14.8% of the S&P 500^® Index return.

 

During the year, the market climbed the proverbial “wall of worry” as concerns around global economic growth, disruptive trade wars and tariffs, geopolitical factors and impeachment issues dominated investors’ concerns. In spite of these headwinds the market hit 19 all-time highs during the year.

 

As stock prices trended higher, investors expressed increasing concern over valuation levels. The market ended the year trading at a forward price/earnings (P/E) multiple of 18.4X earnings. Although this P/E ratio is above average, it is well below the prior multiple peak level of 24X reached in the year 2000. Also, in terms of price appreciation, over the past five years ended December 31, 2019, the S&P 500^® Index is up 61%. Comparing that appreciation to the 5-year 89% gain prior to the 2007 peak, and the 210% gain prior to the 2000 peak, suggests the market has more room to run.

 

Market Outlook 2020

 

The stock market outlook for 2020 looks bright to start the New Year. Stock market bulls believe that business investment, corporate earnings and global economic growth will trend higher in 2020. The anticipated growth is supported by accommodative Fed policy, higher consumer spending, low unemployment and higher wage growth. Stock market bears highlight risks associated with stock valuations, geopolitical uncertainties, trade/tariff negotiations, Brexit outcome and the upcoming U.S. elections. We continue to be generally optimistic about the prospects for equity returns in 2020. The U.S. economy remains strong, global markets are improving, company earnings are poised to surprise and there appears genuine progress on trade talks and various geo-political issues. The Presidential election outcome will be the marquee event, later in the year, which could lead to a shift in sector leadership and asset classes’ attractiveness.

 

Although we expect positive returns in 2020, it would appear unlikely that the markets will exceed the returns realized in 2019. We expect market gains to roughly mirror earnings per share growth, assuming no increase in market multiples. However, as long as the business cycle expands, the opportunity for excess returns is possible as earnings catch up with valuations. Typically a late-cycle expansion period has ended with investor euphoria and a stock price melt-up.

 

It is important to remember that bull markets do not end of old age. They typically end from imbalances in the economy as reflected in slower economic growth, excess inventory levels, higher inflation and a tightening Federal Reserve monetary policy. We can never know in advance just what will start a market correction, but it is these declines that create mispriced assets and attractive buying opportunities.

 

Following is information summarizing each Fund’s performance, specific holdings that enhanced or detracted from performance, top security holdings and investment strategy.

 

We thank you for being a valued shareholder and providing us with the opportunity to help you achieve your long-term investment goals.

 

Respectfully,

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. The total returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 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 1-800-MONETTA or visiting www.Monetta.com.

 

The hypothetical graph above compares the change in value of a $10,000 investment in the Monetta Fund and the S&P 500^® Index, for the 10-year period ended December 31, 2019, with dividend and capital gains reinvested.

 

The Monetta Fund was up 28.30% for the year ended December 31, 2019. The Fund return lagged that of its benchmark index, the S&P 500^® Index, which appreciated 31.49%. The variance of Fund performance to the benchmark was primarily due to specific holdings that failed to meet earnings expectations, resulting in double-digit price declines. Specifically, securities detracting from Fund performance included Baidu, Inc., Ulta Salon Cosmetics & Fragrance, Inc. and Wynn Resorts Ltd. These securities were sold to cut losses quickly with the proceeds reinvested in companies with more revenue and earnings stability.

 

Securities holdings that enhanced Fund performance included: MasterCard, Inc. – Class A, Advanced Micro Devices, Inc. and Apple, Inc., representing 6.70%, 2.43% and 3.77%, respectively, of the December 31, 2019 portfolio net assets.

 

As we progressed through the year, we gradually shifted to a more concentrated portfolio, emphasizing larger-capitalization growth companies with more consistent earnings and stability. New purchases during the year reflecting this shift include Lockheed Martin Corp., AT&T, Inc. and Walmart, Inc., representing 2.50%, 1.88% and 1.91%, respectively, of the year-end portfolio.

 

As we enter 2020, we believe the market will trend higher, but we have not ruled out the possibility of some sort of market pullback or correction. We expect investors to react to heightened political/economic uncertainties resulting in elevated levels of volatility. A key variable affecting the markets will be the outcome of the upcoming Presidential election. However, we do not envision any long-lasting market correction but rather more moderate pullbacks reflecting a continuation of this secular bull market, which we believe could last for many more years. Our investment focus in 2020 will be on companies with high-quality earnings and solid balance sheets, while trimming or avoiding those companies whose relative price strength lags that of the market suggesting extended valuation levels.

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. The total returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 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 1-800-MONETTA or visiting www.Monetta.com.

 

The hypothetical graph above compares the change in value of a $10,000 investment in the Monetta Core Growth Fund and the S&P 500^® Index, for the 10-year period ended December 31, 2019, with dividend and capital gains reinvested.

The Monetta Core Growth Fund was up 32.58% for the year ended December 31, 2019. The Fund return exceeded that of its benchmark index, the S&P 500^® Index, which rose 31.49%. The Fund benefited from its holding in exchange traded funds (“ETF”s) that track the index returns and also from the excess return opportunities by investing in large-capitalization growth stocks with solid and improving profitability. Longer term, the Fund’s annualized return since inception, December 12, 2006, is 11.54%, which compared favorably to the 8.82% return of the S&P 500^® Index over the same time period, ending December 31, 2019.

 

Specific security holdings that enhanced Fund performance during the year included: MasterCard, Inc., Microsoft Corp. and Alphabet, Inc. – Class C, representing 5.92%, 6.25% and 5.30%, respectively, of the December 31, 2019 portfolio net assets. The Fund generally benefited from its holdings in the technology sector, which was the top-performing sector in 2019.

 

Detracting from Fund performance were investments in Qualcomm, Inc., Illumina, Inc. and Schlumberger Ltd., all of which were sold during the year. These companies did not meet or exceed analyst expectations and generally provided lackluster guidance.

 

Solid performance of the Fund’s core holdings resulted in a low Fund annual portfolio turnover rate of 6.7%.

 

As we enter 2020, we believe the Fund is positioned to benefit from its well-diversified and cost-effective ETFs holdings and investments in quality growth companies in the technology and financial sectors. The ETF investments provide ballast to long-term Fund performance, while the investments in quality growth companies provide the opportunity to exceed market returns. We continue to believe that the secular bull market that began in 2009 will continue into 2020 as corporate earnings continue to trend higher. The marquee event that will impact market performance later this year will be the outcome of the Presidential election.

As a shareholder of a mutual fund, you incur ongoing costs, including investment advisory fees; distribution expense (Monetta Core Growth Fund); and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Funds and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the most recent semi-annual period, July 1, 2019 - December 31, 2019.

 

ACTUAL EXPENSES

The table below provides information about actual account values and actual expenses. The Example below includes, but is not limited to, investment advisory fees, distribution expense, accounting, custodian and transfer agent fees. However, the Example below does not include portfolio trading commissions and related expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled “Actual Expenses Paid During Period” to estimate the expenses you paid on your account during this period.

 

HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES

The table below also provides information about hypothetical account values and hypothetical expenses based on the Funds’ actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Funds’ actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Funds and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

 

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the hypothetical information is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs may have been higher.