Meeting with Management: Getting Informed and Building Relationships
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By: William Preston, CFA®
Portfolio Manager – FAM Dividend Focus Fund
Ever since Tom Putnam established Fenimore in 1974, he has maintained the practice of getting out from behind the desk and meeting in-person with management teams, a key tenet of Fenimore’s research process.
Why do we do it? There are a few factors that support Fenimore’s longstanding belief that face-to-face meetings are a best practice including learning the business better, getting a bigger picture view and building relationships.
Today, our entire research team is responsible for conducting in-person meetings annually with our portfolio companies with the purpose of achieving the following:
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- Understanding the business better. Many companies communicate their investment thesis through scripted conferences and regulatory filings. However, our in-person meetings give us a much better feel for how the business is managed, how employees are treated and other intangibles, like a great culture, that truly make the business exceptional. These meetings also help increase our conviction to hold onto an investment when the markets become volatile or the stock begins to look expensive, a practice that has served us well throughout our history.
- Learning out of the office. While truer in the early days when there was no internet, getting out of the office often grants broader insights about the economy and market environment. Our research team interacts with businesses and management teams in a variety of settings, including at company HQs, store locations, warehouses, distribution centers, manufacturing facilities, industry trade shows and investment conferences, which help provide diverse perspectives.
- Building relationships over the long-term. In a world where it is becoming harder for active managers to differentiate themselves, by connecting in-person every year management teams often get an appreciation for Fenimore’s shared long-term investment horizon. This distinguishes us from many short-term investors and traders that are worried about quarterly earnings numbers as opposed to long-term value creation.
Fenimore’s trips to AHR Expo, an annual HVAC (heating, ventilation, an air conditioning) industry trade show, provide a great example of the in-person value we seek to create. Over the years, we have made a number of investments in the HVAC industry and this conference provides an efficient way for us to talk with all of our portfolio companies in this industry, as well as their competitors, suppliers, and customers.
At the last expo, we gained a better understanding of how powerful the tailwind of sustainability through reduced energy consumption will be for the industry. We also learned that several companies believed consolidation will continue, particularly as foreign companies try to buy their way into the US market to bypass the tremendous barriers to entry.
While the pandemic has temporarily changed the way we interact with management teams, the industry has done a great job adapting to a virtual world, which has enabled us to continue to have valuable face-to-face engagements with existing and potential investments. Most important, you can be assured that the Fenimore team is eager and planning to get back out on the road and resume in-person meetings as soon as possible.
It is this direct connection, and industry understanding that Fenimore has embraced for nearly 5 decades – a tradition we expect to remain for generations to come.