by Andrew Boord
Co-Manager, Fenimore Small Cap Strategies
Overall, worst-case scenarios are not happening. In some businesses, conditions are actually improving from the height of the pandemic (their performance may still be down year-over-year, but less so in recent weeks).
Time after time, we’re seeing impressive adaptability and ingenuity among many of the companies we hold or closely watch as they make it safe and easy for their customers to do business with them.
- Auto dealers are providing pickup and delivery for service appointments, solo test drives, and remote document signing services.
- A retail flooring chain is having its in-store designers use their iPads to host remote design appointments.
- Funeral homes and cemeteries are helping families plan arrangements and/or purchase cemetery plots remotely via Zoom.
- An in-home services and home warranty provider owns a camera-based software product that allows repair technicians to remotely see a problem appliance while the software automatically calculates dimensions and picks up model numbers. This eliminates the first home visit, so the technician can just visit once with the right parts already in hand. They are also licensing this software to two different real estate firms for remote home showings.
Similarly, certain companies are “going on offense” – at least to a limited extent:
- Several businesses – including banks, our in-home services and home warranty holding, and a supply chain software firm – have mentioned the opportunity to purchase weakened competitors.
- Some of our holdings, such as flooring stores and an accounting firm, see growth opportunities if weaker competitors do not survive.
- Strong retailers are seeing reasonably priced real estate opportunities as owners seek new solid tenants to replace struggling operators — and are willing to offer favorable prices. We think this could help our flooring stores and discount retailers.
- Our discounters are also prepared to seize opportunities when other retailers and manufacturers have an abundance of product they cannot sell and need to move it to off-price channels.
During our nearly 50 years of investment management, Fenimore has navigated multiple economic and financial market cycles and seen the U.S.A. continually persevere through a variety of challenges. This is due in large part to the types of enterprises we just described. That’s why we are always focused on optimizing our collection of quality holdings with what we believe are outstanding companies that meet our rigorous criteria — businesses that are prepared for the storms.
One of the key elements that our Research Team requires in an investment, and is especially vital during challenging days like these, is:
- A proven management team with a history of creating shareholder value and leading through difficulties, a team that is astute at allocating capital while being honest and ethical.
It is these managers who help their organizations adjust and advance during times of adversity. This is the type of leadership we have seen from our holdings in recent weeks as, overall, their performance has improved and they move toward better days ahead.
Remember, while we remain separated by social distancing requirements, our associates may be reached at 800-721-5391 or via email. Please contact us if we can be of assistance. Thank you.